Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Otter Tail Corporation, 2021st quarter Earnings Conference call. At this time, all participants' lines are in a listen only mode.
After the speakers presentation, there will be a question and answer session. That's good questions weren't, especially when it's press star one on your telephone. Please be advised that todays conference is being recorded if you for any further assistance. Please press star Zero, Oh, now I turn the conference over to the speakers today from Otter tail Corporation. Thank you.
Please go ahead.
[laughter] well good morning, everyone and welcome to our call. My name is Loren Hanson and I manage otter tails Investor Relations area.
Last night, we announced our first quarter 2020 earnings results are complete earnings release and slides accompanying this call are available at our website that otter tail dot com.
According to the call will be available on our website later today.
With me on the call today are Chuck Macfarlane Otter tail corporations, President and CEO and Kevin Mobe Otter Tail Corporation, Senior Vice President and Chief Financial Officer.
Before we begin and watch remind you that we will be making forward looking statements. During this call.
Got it on slide two these statements represent our current judgment or opinion of what the future holds they are subject to risks and uncertainties that may cause actual results to differ materially. So please be advised about placing undue reliance on any of these statements.
Forward looking statements are described in more detail in our filings with the Securities and Exchange Commission, which we encourage you to review.
Otter tail Corporation disclaims any duty to update or revise our forward looking statements due to new information future events or developments or otherwise.
For opening remarks, I will now turn the call overture Otter tail corporations, President and CEO Mr. Chuck Macfarlane.
Thank you Lauren good morning, everyone.
Welcome to our first quarter 2020 earnings call.
Before I begin my prepared remarks, I would like to recognize all those are been impacted by covered my team and extra thanks to the medical personnel in first responder, serving our communities.
Otter tail Corporation to supporting all well locations, we serve with collective efforts to mitigate the spread of covert 19.
Our business continuity plans, but the health and safety of our employees in our communities at the forefront.
And are designed to help ensure continued electric reliability and operational excellence across our companies.
Our press release outlines actions we've taken today.
Currently 21% of our employers are working remotely.
Well only 12 confirmed cases of cobot 19 across the corporation.
We will remain diligent in our cautionary health and safety efforts. We continue to monitor this dynamic of that and how it's going to impact the economy and our electric in manufacturing platforms.
Well all of our operating companies have been deemed critical infrastructure businesses. Some of our locations had been impacted more than others.
Please refer to slide seven as I began my comments.
We're in 60 cents a share this quarter compared with 66.
Since a share for the first quarter of 2019.
The primary reasons for the decline our electric segment earnings declined seven cents, primarily due to a nine cents of unfavorable weather.
Manufacturing segment earnings were flat quarter over quarter. However, we estimate the impact on the last half of March from covert 19 reduced our earnings per share by a penny.
The plastic segment earnings increased five cents, primarily due to strong volumes.
And our corporate costs were negatively impacted by four cents, primarily due to losses on our investments related to corporate owned life insurance.
And investments held at our captive insurance company associated with the volatile equity markets in March.
In light of the covert 19 outbreak and uncertainty regarding the extent and duration of efforts to mitigate the virus. We're revising our 2020 diluted earnings per share guidance to be in the range of $2 to $2.25 from the previous guidance of $2.22 to today.
I was 37 cents per share.
Slide eight list the major impacts and mitigation responses to cope with 19.
Impacts to the utility include lower commercial and industrial sales, particularly in oil pumping and ethanol production.
This was slightly offset by increased residential usage.
We have provision for anticipated increasing bad debt expense and waived late fees.
Additionally, any significant delay in major utility capital projects due to supply chain or worker health issues would reduce rider revenues.
We have undertaken significant on m. reductions and filed for deferred accounting for Kobin night gene related impacts.
We're also seeing significant volume reductions in our manufacturing segment, primarily driven by declining sales volumes and forecasts at BTD.
BTD has implemented rotating furloughs and reduced on I'm expenses to mitigate this volume drop.
Additionally, after a first strong first quarter in the plastic segment, we anticipate declining volumes for the remainder of the year.
Lower PVC prices and lower pipe sales prices may negatively impact margins.
[noise] Otter tail power experienced Corbett nine dean related impacts on commercial and industrial load starting in April.
The relative bps sensitivities by customer class are listed on slide 14.
We estimate an overall utility sales impact for 2020 related to covert 19 is a negative eight cents.
Most of this decline is associated with lower expected oil pumping and ethanol production load.
What was ongoing impacts are included in our revised guidance.
Otter tail power along than many other utilities is temporarily suspended disconnects related payments and waived late payment fees for residential and small business customers. During this pandemic.
It is expected to this will have a negative two cents.
EPS impact.
Otter tail power continues to grow through capital investments in generation and transmission projects.
As shown on slide 15 rate base is expected to grow by an annual rate of over 8% between 2019 and 2024 in a constructive regulatory environment.
On Slide 18, Lemaire Court wind Energy Center, which started construction last August.
Remains on budget, but is slightly delayed.
More than two thirds of all civil work and project foundations are complete.
The project has received Minnesota, and North Dakota renewable resource rider eligibility.
And South Dakota phase in rider recovery.
Well risks associated with supply chain and construction labor has increased due to covert 19.
We expect beginning commercial operation by the end another year.
It is estimated at this project will cost approximately 258 million and will generate enough energy to power more than 65000 homes.
This is the largest capital project in Otter tail power history.
On Slide 19 story is station construction remains on time and on budget.
We awarded the general work contract in the fourth quarter last year.
Story will be a 245 megawatt natural gas combustion turbine.
It will complement our wind generation by providing a reliable backstopping the windows employing.
And it will have flexible operating options and low CEO to emissions.
We expect invest approximately 158 million on this project and even with increased covert 19 construction labor risk, we anticipate who will be online near year end 2020.
In August we began construction on the second phase of the South Dakota transmission project.
A new 43 mile hundred 15 kv transmission line from Lake Norden to a story of South Dakota.
Phase two engineering is 90% complete.
Attained a 100% of the project easements and upset approximately 28 of the 43 total miles of structures.
We anticipate to energize the line in mid 2021.
As shown on slide 21, we have the opportunity to add approximately 45 million of rate base associated with new generator interconnection upgrades.
As proposed by the MISO generator interconnection process.
So one is an election by the transmission owner in this case otter tail power.
To fund the initial network upgrades associated with new generator interconnections.
To date FERC has approved 23 of 33 facilities service agreements or Fscs.
Between interconnection customers.
And otter tail power, we have another four FSC as filed with FERC.
And MISO is preparing an additional six.
Otter tail will fund and earn a return on and a return of the capital costs of these network upgrades over a 20 year period.
From these interconnection customers.
Now turning to our manufacturing segment.
BTD or contract metal fabricator has been significantly impacted by covert 19.
They have now cut back on operating levels and implemented temporary rotating furloughs of nearly 55% other workforce.
Over the second quarter.
As BTD has implemented been impacted by customer plant shutdowns across all end markets. It serves.
Additional cost cutting measures may be taken at BTD, depending on the linked and severity of the market softness for its products.
Feel plastics is in CIT supporting future market softness and has taken steps to reduce workforce hours and implemented hiring freeze.
Today, our plastic segment has not seen a major impact on their business.
However, recently announced resin price decreases are expected to put downward pressure on operating margins.
Resin prices are declining as our PVC pipe prices.
And distributors are reducing inventory.
We have decreased production in our Fargo plant in response to reduce demand.
Additional cost cutting measures may be taken by our PVC pipe manufacturing companies, depending on the link and severity of the reduced demand for PVC pipe as the impact of Cobot 19 continues to develop.
And looking forward, we continue to enhance our balanced electric generation mix, we anticipate that by 2022 otter tail power customers will receive 30% of their energy from renewable resources and our carbon emissions will be at least 30% below 2005 levels all.
While keeping.
The average residential rates nearly 30% below the national average.
Growing investor concern about companies generating more than 25% of revenues from thermal coal.
It's a shrink to know that otter tail corporations percentage of revenue from coal assets as well below that threshold.
The percentage of consolidated revenues from our coal assets was 14% in 2019.
And is projected to the glide did.
Two declined to 11% by 2022.
We continue to X execute on our strategic objectives to grow our businesses achieve operational and commercial excellence and develop our talent.
And we maintain our long term target of 5% to 7% annual EPS growth.
For 2019 base.
I'll now turn it over to Kevin for the financial perspective.
Thanks, Chuck and good morning, everyone.
Let me start with an overview of our first quarter results and please refer to slide 26, as I discuss the quarter.
Our electric segment net earnings decreased two and a half million dollars quarter over quarter.
Key drivers of this were $5 million decrease in retail revenues due to milder weather between the quarters as evidenced by a 19.6% decrease.
In heating degree days.
Weather negatively impacted earnings by nine cents, a share compared to the first quarter 2019.
There was a million dollars decrease in retail revenue in South Dakota related to the first quarter 2019 reversal of a refund provision recorded in 2018.
As part of the 2017 tax cuts and jobs Act.
The South Dakota rate case settlement agreement eliminated the refund requirement.
The decrease in retail revenues were partially offset by.
Increased Minnesota in North Dakota, renewable resource rider revenues related to the Mirror Court Wind Energy Center project.
Increased retail revenues.
From increased kilowatt hour sales to industrial and other customers. This is apart from the weather related decrease in retail kilowatt hour sales.
Increased revenues for the generation cost recovery writer in North Dakota in conjunction with the construction of a story of station.
And increased revenues from the South Dakota phase in writer in conjunction with your story is station and Mirror Court projects.
Other items impacting electric segment earnings were increased on M. expenses related to increased labor and employee benefit related costs and higher depreciation expense associated with rate base additions in 2019, and lower income tax expense.
Net earnings for the manufacturing segment were flat quarter over quarter.
Items impacting their results were.
BTD revenues decreased $10.2 million due to 9.8 million dollar decline in parts sales.
Two as major end markets.
$7.1 million and the decrease sales relates to lower material costs passed onto the customer.
The balance primarily representing lower sales volumes.
The decrease sales volumes approximately two and a half million is attributable to cobot 19 related production curtailments that occurred in the last half of March.
Our scrap revenues were also down due to a 20% decrease in scrap metal prices and a 15% decrease in scrap sales volumes.
These decreases in parts and scrap revenues were partially offset by an increase in tooling revenues.
Lower cost of goods sold resulted from decreased sales volumes and lower material costs passed on to customers.
Our decreased gross margins were partially offset.
By lower operating interest and income tax expense.
And then total Btds earnings decreased $200000.
We estimate the cobot 19 issues that developed in the last half of March impacted Btds first quarter earnings by approximately a penny a share.
This relates to reduce sales as customers started to invoke temporary plant shutdowns, which caused loss labor productivity and cost related to personal protective equipment and the payment of healthcare premiums for furloughed employees.
T O plastics revenues increased $800000 due to increased horticultural sales.
The increased revenues were more than offset by higher cost of goods sold driven by increased production and increase rental costs from additional warehouse space.
Operating income was also favourably impacted during the quarter due to the receipt of insurance proceeds from the settlement of the March 2019 partial collapse.
Items resulted in 300000 dollar increase and Telus quarter over quarter earnings.
Our plastic segment earnings increased $1.7 million due to an increase in pounds of pipe sold.
Offset by a slight decrease and pipe sales prices.
Our first quarter 2019 sales volumes were negatively impacted by poor weather conditions across our sales territory.
Our cost of goods sold increased $3.9 million due to the increase sales volumes for 4.7% decrease in the cost per pound of pipe sold more than offset lower pipe sales prices, resulting in an 8.4% increase in gross margins.
Our corporate costs were negatively impacted by four cents, primarily due to losses on our investments related to corporate owned life insurance and investments held at our captive insurance company that were associated with the volatile equity markets in March.
In looking at our liquidity needs. Our modeling continues to show we have sufficient liquidity under our credit facilities.
Based on current assumptions of how cobot 19 is expected to impact our business.
We do have a risk tolerance metric in place to maintain a minimum of 50 million of liquidity based on the current line limit of the Otter tail Corporation credit facility.
This facility also has an accordion feature to upsize to $290 million subject to certain terms and conditions.
Got or tail power company credit facility can also be upsize to 250 million based on certain terms and conditions.
We did upsize the Otter tail Corporation credit facility to $170 million in October of 2019.
And we don't have any debt maturities due until December of 2021.
We also positioned ourselves well from a liquidity standpoint.
Going into 2020 with early execution of our financing plan given our increased capital spend.
In 2019.
We completed $175 million private placement of debt for Otter tail power company.
The 100 million was funded in October of 19.
35 million funded in February of 2020.
And the remaining 40 million will fund in August 2020.
We have raised $30 million or approximately 39% of our equity needs through the first quarter of 2020 before the impact of cobot 19 on the equity markets.
We would expect to issue additional equity of 40 to 45 million for the balance of 2020.
To the extent the markets take awhile to recover we have ample liquidity in our credit facilities to support our capital plans.
Let's now move to our business outlook on slide 33, and I'll review the expected impacts on our operating companies from Covidien 19 in the assumptions around our updated guidance.
Our current assumptions are based on expectations, the second quarter will be negatively impacted.
We then expect to see gradual recovery is efforts across the country result in a flattening of the infection rate curve and employees are able to safely returned to work while maintaining safe work practices.
We can anticipate or customers demands for our products to increase and our plans to run at higher levels of capacity in the third and fourth quarters.
Our assumptions are based on information published by the Institute for Health metrics and evaluation.
Which is an independent population health Research center at the University of Washington.
No Cobot 19 state by state Us analysis from the.
Jeremy.
Some states could relax some aspects of social distancing measures in early may if robust containment strategies are implemented.
Our assumptions are also based on economists view that call for a significant drop in second quarter GDP.
Followed by a significant year over year increases in the third and fourth quarters.
Covert 19 pandemic and related impacts are without precedent.
Therefore, while we believe our assumptions are reasonable in the reports on which they are based are reliable. They may prove to be an accurate if our assumptions are not correct and we experience a prolonged economic impact from cobot 19, our outlook will need to be revised accordingly.
All of these actions have resulted we're all these items have resulted in actions taken across the corporation to reduce workforce, mostly through furloughs in our contract metal manufacturing business.
And to reduce general and administrative expenses, including reducing pay for employees officers and directors and delaying planned wage increases.
We continue to review if additional actions may be appropriate throughout the corporation.
As a result is above mentioned items, we are revising and widening our 2020 diluted earnings per share guidance range.
Mainly due to the anticipated effects of the cobot 19 outbreak in the measures put in place to slow as spreads.
We now expect our 2020 diluted earnings per share to be in the range of $2 to $2.25 compared to our previously announced guidance of $2 and 22 to $2.37.
Our 2020 diluted earnings per share guidance also includes four cents of dilution associated with the planned issuance of common equity under our aftermarket offering program.
And dividend reinvestment and employee stock purchase plans to help fund construction projects at Otter tail power company.
It is important to note that our electric and plastic segments guidance remains largely unchanged.
Our revision to the guidance.
Revisions to the guidance are driven by covered 19 impacts on our manufacturing segment.
The following items contributed to our revised earnings guidance for 2020.
We are maintaining the upper end of the original guidance for our electric segment third widening the range to reflect added risks related to the impacts of cobot 19.
Our 2020 guidance includes capital spending on the Mayor Court in a story of station rate based projects of 178 million and $81 million respectively.
The Mirror Court project has rider recovery mechanisms in all three state jurisdictions.
The story of station project as rider recovery mechanisms and South and North Dakota.
The project earns AFUDC in Minnesota.
And is expected to be recovered through a rate case.
In Minnesota and has already been approved in our integrated resource plan.
Increased revenues related to 22 million of anticipated spending for self funded generator interconnection agreements.
And there are no planned generation plant outages for 2020.
Planned outage costs totaled $3.1 million in 2019.
Additional items expected to positively impact our 2020 electric earnings include the recent decision by the Minnesota Supreme Court ruling and Otter tail power companies. They were related to the incremental returned earn on for jurisdiction transmission lines.
The estimated impact of this decision is an increased to 2020 earnings of five cents a share.
Going forward the positive impact of this decision on an annual basis as a penny a share.
We are updating our Minnesota transmission cost recovery writer filing with new rates incorporating the results of the decision in order to reverse the regional Minnesota Public Utilities Commission order.
We have also implemented eight cents a share of cost reduction efforts to mitigate the impact of cobot 19.
New above items are offset by the impact of unfavorable weather during the first quarter of 2020.
And the assumption of normal weather for the remaining months of the year.
Whether favourably impacted our 2019 earnings by eight cents a share compared to normal.
Increased expenses.
Caused in large part by a decrease in the discount rate used for the pension plan and a lower rate used for our long term rate of return slide 34, and our business outlook section provide further sensitivity around our pension assumptions.
Higher depreciation and property tax expense due to large capital projects being put into service.
Increased interest costs related to the issuance of the 175 million dollar debt financing.
That was completed in October of 2019.
And reductions in commercial and industrial demand related to the negative impacts of cobot 19.
As some customers in our jurisdictions have had to either completely shut down or curtail operations given reduced demands for their products and services.
We also expect to incur increased costs costs of bad debts.
Personal protective equipment and the loss of late fee revenue.
The total estimated impact of these items ranges from eight cents to 12 cents a share.
We now expect net income from our manufacturing segment to be lower than 2019, and lower than our original 2020 guidance.
This is based on an estimated reduction in manufacturing segment earnings of 15 cents a share from the midpoint of our original guidance to the midpoint of our updated guidance. This is due to the effects of and our response to the covert 19.
Break.
Backlog for the manufacturing segment of approximately 127 million for 2020.
Compares with 165 million a year ago.
Material price deflation is driving backlog down by $8 million and the remaining $30 million decrease in backlog is volume driven.
We are maintaining our guidance range for the plastic segment in spite of the expectations resin prices will be decreasing over the second quarter.
This decline in resin prices could put downward pressure on sales prices of PVC pipe, which in turn could impact operating margins.
We also expect the volume of pounds sold in 2020 will be down 3% to 6% as a result of concerns.
Opened 19 could have on planned 2020 infrastructure projects.
Yes, and we are revising our original guidance range for corporate costs net of tax primarily due to the significant decline in the stock market related to covert 19, and the impact on our investment in corporate owned life insurance and investments held at our captive insurance company.
Wow, we have implemented mitigation efforts to lower our corporate labor in non labor costs, we don't expect to fully recover the drop in value of these investments before the end of the year.
We are in a challenging business environment, and we will weather the storm.
There is uncertainty as to how long the disruption of economic activity could last and we won't be immune to its effects. Our short term focus is to take the necessary actions to position our companies to be resilient through these challenges.
Our long term focus remains on executing our strategic initiatives to grow our business and achieve operational and commercial excellence.
Otter tail power company plans to gross rate base in very supportive regulatory environments at an 8.2% compounded annual growth rate over the next five years driven by investments in renewable and natural gas generation technology and infrastructure in transmission projects.
Overtime, the electric utility will provide approximately 75% of our overall earnings.
The manufacturing and plastic segments will also provide organic growth over the long term.
These two segments are expected to provider on 25% of our earnings over time.
We expect to be able to deliver total shareholder return of 8% to 10% over the long term.
This consists of two components first earnings per share are expected to increase of 5% to 7% growth rate.
Secondly, our current dividend yield is approximately 3% looking forward, we would expect to grow the dividends along with earnings per share growth of 5% to 7%.
At a compound 5% to 7% compounded annual growth rate and maintaining a dividend payout ratio between 60% to 70%.
And our company is on solid footing. So we have a strong balance sheet, we have ample liquidity to support our businesses and we have investment grade corporate credit ratings.
We're now ready for your questions.
As a reminder to ask a question you need to press star one telephone.
Again that star one on your telephone to ask a question.
Your first question comes from the line of Chris Ellinghaus with Seibert Williams.
Hey, guys how are you.
Rich.
That's correct.
As you are describing the guidance see you're you're expecting some sort of gradual improvement in Q3 in Q4.
Kevin.
Are you not anticipating any any kind of impacts from the beginning of flu season in the fourth quarter.
The Chris we're we're our improvements in Q3 in Q4.
Our expected in large part and.
Manufacturing for BTD as it relates to what we're seeing from our customers and what they are announced what initially what there are now it's temporary plant shutdowns were now what we're seeing them, but now says they bring back their plants up up not necessarily default.
Production, but they're starting to bring them back up online.
And so as we're looking out we know Q twos going to be a tough quarter because of the temporary plant shutdowns that we're starting to be implemented in the last part of March and April early may.
And then as that are bringing their plants up we're basing our assumptions based on one the economist view of a recovery in the third and fourth quarter and then based on what we're seeing from our customers.
Typically I would say our fourth quarter still will be down.
Based on our assumptions and what we're seeing from the economy.
We're not assuming a full recovery back to where we were it's just a bounce back from where the second quarter was.
As expected to be excuse me.
Okay. So some some improvement over where you think the second quarter level is that not normal.
Right Okay.
The.
The idea of of a filing of Minnesota case in November.
Spoken to the commission to see with their attitude is towards the filing at that sort of time in the economy.
Hi, Chris. This is Chuck you know we are in weekly communication with all of our commissions on covert related items and including reliability, but also.
Discussions on bad debt and.
In a lost late fees those no disconnects those types of issues.
And our current plan is.
And we have not received counter feedback is to continue to plan on filing in Minnesota.
In November of this year.
Okay.
I just wanted to see if you had gotten any kind of adverse.
Response on that concept.
You talk about in the plastic segment.
Some lower volumes and some potential margin contraction or is that.
Sort of level that you're thinking about.
Is that.
Looking at your guidance with really no change to the plastic that offset by first quarter.
Can you just give us a little more color on.
The way you describe it seems a little more.
Negative Dan is reflected in the guidance numbers.
Hi, Chris Thanks.
We we do have roughly baked in here, there's five cents of uplift.
From the strong first quarter results.
And then we're seeing through these reduced volumes and potential pressures on margins I guess it be another five cents.
Reduction.
To bring us back to the Midpoints of that of the era of the range.
Okay. So the net net or it's neutral based on a risk for the year offsetting the first quarter.
Right Okay.
Okay.
This is maybe outside the scope of.
Today, but.
What is your general.
Thought process on how the Covidien 19 pandemic slips into 2021 are you anticipating.
2021, having adverse impacts as well at this point.
You know, Chris say as we look to 2021 based on.
The current assumptions we have in place.
Certainly would expect that.
Particularly in the manufacturing side that there isn't going to we're not going to see an immediate bounced back.
From 2020 to where we would have probably originally thought 2021 was going to be we would see a recovery, but not back to where we were.
We have good rate base investments in place at the utility and.
I think theres going to be our current view would be theirs in manufacturing theirs.
Impacts from Covidien too.
2021.
That will continue to monitor just as we come back as quickly as we would expected, but that's kind of what our current views would be right now.
Okay. Thanks, I appreciate the color.
Your next question comes from the line, how Brian So what's the Delta.
Hi, good morning.
And Brian.
Hey, just any first of all thank you for the detailed assumptions and updated guidance.
Just on.
BTG sales degradation.
Are you seeing double digit percentage decreases.
Through through the end of this year and or any margin assumptions you could provide.
Brian This is Kevin the the impact from our original budget guidance in terms of revenues were seeing a 15% reduction.
From the original guidance that we came out with in.
February as it related to BTD to what we now have baked in for our updated guidance here and that is across all of our end markets.
That we're seeing that which has been based on.
As I mentioned earlier these temporary plant shutdowns that we've been monitoring across our entire customer footprint for for BTD and then of course.
In addition to that we are seeing.
Continued pressure on scrap pricing.
And the impact there and then just the fact that the plants aren't as.
Ill busy we're seeing the negative impact from applied labor and overhead as well we were able to implement roughly seven cents of cost mitigation efforts in the manufacturing segment to help compensate for the coal that items in the lower scrap which gets us to that 50.
Okay.
Sorry.
15 cents reduction from midpoint to midpoint.
Okay. So it's a 15 cents per share reduction from the midpoint that wasnt, 50%.
Decrease in volumes well.
Two numbers that are used they both happened to be 15 got one was a 15% reduction in revenue.
At.
Largely driven at BTD.
From what we added in the original plans to today and then the impact of coal bid in manufacturing segment is a net 15 cents a share from the midpoint to midpoint.
Got it okay and.
Just.
Onto the.
Electric side.
It looks like based on your guidance assumptions that you provided you're able to offset pretty much all of the.
Covidien packed related sales.
Degradation at any incremental bad debt expense et cetera, or those own EM.
Cuts sustainable.
You know post 2020.
Hi, Brian. This this is Chuck.
There are made up of.
Utility normally does annual wage increases in April.
Those have been.
Frozen at last year's number for the non Union employees at this point.
And we have taken a.
Fairly significant reduction in outside contractor and consultant.
Costs.
Some of which are aligned clearance. So we would anticipate that a lot of these costs would have to be put back in 2021.
Okay got it and you mentioned on on the ATM.
Of four cents.
As if that's incremental to your corporate expense outlook, but I thought that ATM 40 to 45 million was already in place.
And expected.
Throughout.
2020 is it just reflection of the decline in stock price or am I missing something there.
Oh, it's that was all baked into our original guidance, you're correct and we're just reaffirming that thats still in there that's nothing new it's just an affirmation of what the.
Expected impact I mean, we said in the first during the February call that the guidance anticipated five cents a dilution. This is just an update to that the dilution is on its now instead of five we expected to be about four.
Okay got it is not in addition to what we're doing.
Okay understood and then just.
Americorps.
Commentary earlier, it's still on schedule.
Before year end 2020, but it might slip into 2021 and the way to kind of put that in context in terms of earnings. It just means that the recovery on the rider mechanism is just kind of get stretched out or.
Longer.
Period or window of time until that's operational.
Yeah, Brian the the extension you are correct, if it's a capital investments delayed it runs through our rider sort of as automatic tracker mechanism on the investment.
We still anticipate that.
The project will be completed before the end of the year and that it will be PTC qualified.
You know mid.
Fourth quarter so.
But you are correct the earnings impact would be a delay in capital investment flowing through.
Rider that reduces revenue.
Alright, and then just.
What's really the downside risk in the manufacturing is it extended stay at home provisions and non essential business closures.
Extends past.
Kind of assumed in your guidance or is it a prolonged recession post.
Lifting of the various provisions that we have across the country.
Yes, Brian it's could be a combination of both I mean, we.
To the extent that the.
Customers temporary plant shutdowns.
That have occurred and now as they start to bring those back up to the extent theirs.
A an event that causes those to go back into shutdown mode, there would be downside risk.
To our.
Forecast.
And of course, if there is ultimately a prolonged recession that would cause us to have to make adjustments as well.
Okay, and then just kind of unrelated topic I'm, just curious with the plastic subsidiaries that you have.
Have you pursued the the idea of providing products and ore supplies.
Two.
The health industry response efforts in terms of ERP or anything like that or Thats, just totally way off.
Ryan This is Chuck our.
Plastics are Thermoforming plastics company is making.
They shields for.
PB for.
Yeah.
Hospitals and and other.
Places just just a normal other plant production. So we are.
Doing that.
Already.
Got it okay, great. Thank you very much.
Brian This is Kevin maybe just to add.
Two year earlier question Im I think Thats and you see that we have a 9% range in our guidance for some manufacturing segments.
Which is clearly wider than the the other segments in the corporate cost Center and Thats you know as we look at.
That segment, we certainly have recognized there is risk here to the.
To the plan in terms of where we're at and what potential things could still create downside risk. So we've tried to reflect.
That in our current guidance range, but to the extent and based on our current assumptions as we've we've talked about but to the extent that we did see.
Changes in those assumptions driven through customers and having extended plant shutdowns or those types of things are an extended recession.
That that could certainly impacted guidance.
Got it thank you very much.
Your next question comes from a line of Sophie correct with Keybanc.
Hi, good morning.
Okay.
Can you guys, maybe give us some color on how your volumes is shaping up across.
Different customer classes sandals too.
The way.
Maybe how your rate structure is set up like are you seeing potential to offset some of the volume loss to.
Hi, guys nice to residential or is it just not visibility of service territory.
Thank you.
Hi, sorry, this is Chuck.
Just I'll give you a couple of things April just for April sales, and we really view that the majority of the.
We did not see significant electric impacts in the in the last half of March but on.
For April.
And our residential or commercial and our industrial or effectively us.
Page 14 of the presentation.
Nearly a third residential third commercial third industrial.
We knew that our residential sales port April were up approximately 3%.
Commercial was down five.
And industrial was down 15, and within industrial I would.
Comment that a majority of that are key components of.
Oil pumping and ethanol production, which are both.
Packed and by the.
Reduction in driving and.
Petroleum usage so.
If you look out.
For a full year.
We anticipate that overall residential will be up half a percent over what we had budgeted.
Small commercial will be down.
3% to 5%.
2020, and industrial will be down in the 10 to 12 rain, 12% range.
Much smaller margins on the industrial.
As a reminder, if you like to ask a question you want me to press Star one on your telephone once again, that's star one telephone to ask a question.
There are.
Other questions I'll like to turn the call that to the company Ceos, Chuck Macfarlane for closing remarks.
Thank you for your questions and your interest in Otter tail Corporation.
Well, our short term focus has shifted the mitigation efforts of covert 19 related impacts our long term focus remains on executing our growth strategies that are expected to increase shareholder value.
The utility our strategy is to continue to invest in rate base growth.
Opportunities utility is complemented by well run strategic manufacturing and plastic pipe businesses, which provide organic growth from new products and services market expansion and increased efficiencies.
In light of the recent covert 19 outbreak and uncertainty regarding the extent and duration of efforts to mitigate the transmission of the virus. We're revising our 2020 diluted earnings per share guidance to be in the range of $2 to $2.25 from the previous guidance of 222 to $2.
For some 37 cents. Thank you for joining our call. We appreciate your interest in Otter tail Corporation and look forward to speaking with you next quarter.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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