Q2 2020 Black Hills Corp Earnings Call
Good day, ladies and gentlemen, and welcome to Black Hills Corporation second quarter 2020 earnings Conference call. My name is lists and I'll be your coordinator for today.
At this time, all participants ARNA listen only mode.
Following the prepared remarks, there will be a question and answer session.
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I would now like to turn the presentation over to Mr. Jerome Nichols director of Investor Relations, a Black Hills Corporation. Please proceed sir.
Thank you Liz good morning, everyone. Welcome to Black Hills Corporation second quarter 2020 earnings Conference call you can find material for our earnings call. This morning at our website at Www Dot Black Hills Corp, Dot com under the Investor Relations heading.
Leading our quarterly earnings discussion today are been Evans, President and Chief Executive Officer, and Rich Kinzley, Senior Vice President and Chief Financial Officer.
Our earnings discussion today.
Some of the comments, we make may contain forward looking statements as defined by the Securities and Exchange Commission and there are a number of uncertainties inherent in such comments.
Although we believed that our expectations and beliefs are based on reasonable assumptions actual results may differ materially.
We direct you to our earnings release slide two of the Investor presentation on our website and our most recent form 10-K and form 10-Q filed with the Securities and Exchange Commission robust to some of the factors that could cause future results to differ materially from our expectations I will now turn.
On the call over 10, one Evan.
Thank you drew good morning, everyone and thank you for joining us today.
Turning to slide four since the onset, though the pandemic in the United States almost five months ago. Our team has continued to execute exceptionally well, while adhering to best practices within a rapidly changing landscape.
Regardless of the uncertainty we were all facing we remain more confident than ever in our team our business model and our strategy.
We believe black hills is especially well positioned to successfully navigate the pandemic and the journey ahead for a number of reasons first our utilities are comprised of critical infrastructure operated by our team through a customer focused culture that improves lives with energy for our customers and our communities while also.
So generating predictable and growing returns for our shareholders.
Second Black Hills operates a primarily in states with constructive regulatory environments that support timely recovery mechanisms in reasonable returns. In addition, our operations across eight states provide geographic and regulatory diversity that reduces risk and provides a greater range of opportunity.
These.
Third our capital allocation plan is balanced and during the second quarter, we continue to invest free cash flow from operations into organic growth initiatives that will create long term value at the same time, we continue to reward our shareholders with a healthy and growing dividends, we're proud of our track record of increasing or.
Annual dividends for the past 50 years.
Fourth we continued to strengthen our balance sheet, reflecting our commitment to maintaining an investment grade credit rating.
And while this is certainly not a complete list I'll add that we have an experienced engaged and committed team of leaders across our company dedicated to the long term success of our business and doing well for all of our stakeholders.
Moving to slide six for an overview of our second quarter results are the strength of our customer focused strategy was on full display. This quarter. We successfully managed through cobot 19 challenges to provide safe and reliable service to our customers. While also advancing our key strategic initiatives and deliver.
And solid financial results.
First and foremost the safety of our customers and co workers has always been a top priority and has become even more critical during this health crisis.
We deployed all the safety equipment protocols and processes recommended by the CDC to keep our coworkers and communities healthy at the same time, we maintained our relentless focus on reliability to ensure that customers would have the uninterrupted and sufficient power and gas needed. During these stay at home times and we deliver.
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While we primarily serve rural territories that had been less impacted by this pandemic relative to large urban areas many of our customers still face new hardships.
We remain true to our values to help those with financial difficulties. During these trying times, we have deepened our relationships with our customers and communities through a variety of financial assistance programs and donations to local nonprofits.
During the second quarter, we continue to execute plans that address the long term needs of our customers, while balancing that with our commitment to deliver strong results to shareholders.
To that end, our 2020 capital investment plan remains on schedule.
And at the same time, we enhanced our strong financial position and delivered solid quarterly results.
At quarter end, our disciplined financial strategy provided us with excellent flexibility liquidity and access to capital.
Further bolstered our liquidity a june with a 400 million dollar debt issuance, taking advantages of the low interest rate environment.
We also delivered solid financial performance in line with our expectations for the second quarter.
Rich will cover the earnings drivers and covert 19 impacts in detail, but a high level I'm pleased to report that each of our business segments reported better financial results relative to last year's second quarter.
I'm proud of the resilience that our team has demonstrated and our ability to deliver a key initiatives in the face of new challenges.
During the quarter, we reached a settlement for the Y. Gen. One FERC application to fulfill a 60 megawatt capacity need for a while you're coming electric customers, adding clarity to our long term outlook.
We advanced efforts on utility consolidation and requested recovery of investments in Nebraska.
We continued to make progress on responsibly integrating renewable energy into our energy mix for customers in Colorado.
South Dakota and Wyoming.
And in Colorado, we are working hard with our communities and regulators.
We are encouraged by a favorable vote of confidence from the club low community in me regarding our franchise and the recently announced strategic alignment of our leadership structure in Colorado.
Overall, we delivered solid second quarter results, while building the foundation for long term growth.
Now five months into this health and economic crisis, we are cautiously optimistic that our customers and communities are gradually recovery.
Slide seven summarizes recent highlights across our business lines, starting with the gas utilities.
Colorado gas implemented a small reduction in rates, resulting from the February 2019 rate review.
We continue to invest to meet the needs of our Colorado customers.
We are planning to file a new rate review this quarter.
On June 1st Nebraska gas filed a rate review requesting to consolidate customer rates into a single state wide structure.
And also to align to safety and integrity writers across the consolidated utility.
We are requesting $17.3 million, an additional annual revenue.
The 10% return on equity and 50 50 capital structure to recover investments made to improve our customers experience.
It's been at least 10 years since the legacy Black Hills energy utility in Nebraska had his last rate review, which reflects solid customer satisfaction and growth.
And the efficient management that our team brings to work every day.
Our renewable advantage program took a critical step forward this quarter.
The request for proposals in Colorado benefits customers and further supports our clean energy goals.
By integrating additional cost effective renewable energy.
This program is made possible due to our investments are reliable and modern natural gas fired generation, which allows us to add more intermittent renewable energy to our system.
In our 120 day report to the Colorado Public Utilities Commission.
The preferred bid as a 200 megawatt solar project to be constructed in public County, Colorado by 2023.
The project goals are to save customers, an estimated $66 million over 15 years, while providing strong local economic impact.
And increasing our Colorado renewable nameplate capacity mix to more than 50% by 2024.
Construction on our core E tail wind project in Wyoming remains on schedule and on budget, reflecting our team's strong project management skills, regardless of headwinds.
The $79 million 60 megawatt wind energy project is expected to begin serving customers in South Dakota, and Wyoming by year end through our renewable ready subscription program.
In Wyoming, we are pleased with a settlement agreement that will allow our Wyoming electric utility to continue serving customers with reliable and cost effective energy and capacity generated by our Wyoming based Y. Gen. One power plant through 2032.
Hey, FERC judge certified the settlement on July 10, and we anticipate a final decision by year end with the new contracts starting in 2022.
On May five deployable, Colorado community resounding, we voted in favor of retaining Black Hills energy as their electric service provider.
We're pleased with this outcome and are working alongside club low for a successful and thriving future.
Moving to corporate I'll cover some of the highlights that rich will address in more detail, we filed a new shelf registration at dividend reinvestment and stock repurchase program and renewed our at the market equity offering program.
On July 27, our board approved a quarterly dividend of 53 in one half since the current annualized rate of $2.14 in 2020.
Represents 50 consecutive years of dividend increases one of the longest track records in our industry.
We enhanced our strong liquidity position during the quarter and also had our triple B plus corporate credit rating affirmed by S&P.
We ended the quarter was $770 million in liquidity, which demonstrates our strategy of maintaining a solid capital structure and investment grade credit rating.
And finally for this slide we aligned our gas and electric utilities management structure in Colorado under a single state leader advance Crocker.
We also brought Nick Wagner onboard and Colorado, who is a former commissioner with the Iowa Utilities Board and served as a 2019 president of New route.
We're excited to have his leadership skills and regulatory experiences both in Colorado and companywide.
Vance and Nick will make a great team as we partner with our Colorado stakeholders.
I'll now turn it over to rich Kinzley for a financial update rich.
Thanks, Lynn and good morning, everyone I'll start on slide nine as Lynn noted, we delivered solid financial performance that met our expectations for the quarter second quarter EPS as adjusted was 33 cents up from 24 cents last year.
While our segments reported higher operating income compared to the same quarter last year, driven primarily by new rates at our gas utilities and favorable weather at both our electric and gas utilities.
We also benefited from earnings on new wind assets in our power generation segment.
Tons sold at our mining segment and lower consolidated operating expenses.
We estimate whether favourably impacted EPS by two cents compared to normal and by six cents compared to Q2 2019.
If you recall results at our utilities for the second quarter last year were tempered by unseasonably wet and cool weather conditions.
Results for the second quarter of 2020 included negative coal that impacts of approximately three cents per share inline with our expectations.
Net income increased 44% quarter over quarter, while EPS increased 37% quarter over quarter. The difference driven by dilution from additional common shares outstanding from our equity issuances in 2019 and earlier this year.
Well second quarter results meeting, our expectations and cobot impacts trending as we expected we reaffirmed our EPS guidance of $3.45 to $3.65 for 2020.
Earnings guidance assumptions are shown in more detail in slide 40.
On slide 10, we reconcile GAAP earnings to earnings as adjusted non-GAAP measure, we do this to isolate special items and communicate earnings that we believe better represent our ongoing performance.
This slide displays the last five quarters in demonstrates the seasonality of our earnings we didnt experience any special items in the second quarter. This year.
Slide 11 is a waterfall chart illustrating the primary drivers of our earnings results from Q2 2019 to Q2 2020.
All amounts on this chart or net of income taxes.
Ill add more detailed by segment on slide 12, but at a high level, our electric utilities gross margin benefited from favorable weather, which was partially offset by a writer true up.
Gross margin at our gas utilities benefited from new rates favorable weather in mark to market gains on gas commodity contracts.
We estimate the electric utilities margins were negatively impacted from cobot by 1.1 million after tax due to lower commercial sales, partially offset by higher residential sales.
We estimate our gas utility margins were negatively impacted from co bid by approximately $700000 after tax.
Our nonregulated margin increased over the prior year due to earnings on new wind assets that are power generation segment and higher tons sold that are mining segment, which was driven by mine mouth plant outages experienced in Q2 last year.
Total AUM decreased over 4% compared to the prior year driven by effective cost management this quarter and certain nonrecurring expenses in the second quarter over the prior year.
Cobot related costs from sequestration of essential employees and higher bad debt expense accruals were largely offset by avoided costs related to travel training and outside services.
Depreciation increased as a result of additional plant placed in service.
Interest expense increased due to higher debt balances, resulting from new debt issued to fund our capital investment program.
Other income expense was unfavorable to the prior year as we had additional expense for our non qualified benefit plans in the second quarter. This year related to strong stock market performance.
Ill note that in the first quarter. This was nearly exactly the opposite due to the stock market decreasing substantially at the end of the first quarter.
On Slide 12 segment operating income results for the second quarter, our compared to the prior year I'll make a few comments here and you can find additional details on Q2 year over year changes in gross margin and operating expenses in our earnings release and in our 10-Q that we will file later today.
At our electric utilities operating income increased by $500000 gross margins were flat compared to the prior year with favorable weather offset by a rider true up and negative cobot impacts I spoke to on the previous slide.
Operating expenses decreased $1.7 million due to lower employee expenses and lower generation expenses from planned outages last year.
Depreciation was 1.2 million higher due to increased plant in service.
But our gas utilities operating income increased by 9.6 million gross margins increased by 8 million benefiting from new rates favorable weather customer growth in our service territories in mark to market gains on commodity contracts.
These benefits were partially offset by negative cobot impacts on gross margin that I mentioned on the previous slide and lower transport and transmission revenues.
Operating expenses decreased by $4.7 million, driven by lower employee costs and lower outside services.
Depreciation expense increased 3.1 million as a result of increase plant in service.
On the bottom half of slide 12 at our power generation segment operating income increased 1.2 million.
Revenue was higher in 2020, primarily due to increased production from our new wind generation assets added late last year.
Operating expenses increased due to higher depreciation and property taxes from the new wind assets.
As a reminder, the primary earnings benefit from our new wind projects comes through reduced income tax expense from federal production tax credits, we receive on these projects.
These tax credits are below the line and not included in the operating income numbers.
Operating income at our mining segment increased by $1.8 million, we enjoyed a 29% increase in tons sold due to higher demand at the white eggplant as there were extended outages at that plant last year.
Slide 13 shows our financial position through the lens of capital structure credit ratings and financial flexibility. We are in excellent shape from a debt maturity and liquidity perspective, our credit ratings remain at Triple B plus at both Fitch and S&P and BW two at Moody's with a stable outlook at all three agencies.
On April 10th S&P affirmed our triple B plus rating with a stable outlook and in February we issued 100 million of equity to help support our 2020 capital investments, we don't expect to issue anymore equity in 2020.
As Lynn mentioned earlier, we issued 400 million of 2.5% 10 year notes in June to term out our short term debt and support our ongoing capital investment program further enhancing our liquidity position. This debt issuance was a great outcome and provides our customers low cost debt for the next decade.
At quarter end, we had no borrowings on our credit facility and we don't have any material debt maturities until late 2023.
As at the end of July we continue to have approximately 730 million of liquidity available from capacity on our revolving credit facility.
And we continue to targeted debt to total cap ratio in the mid fiftys over the longer term.
Slide 14, and 15 showed jobless claims and unemployment rates for the states, our electric and gas utility serve and how they compare to the national averages over the past few months the graphs illustrate that trends in our states are below the national average.
Thus far the pandemic has not impacted our rural service territories is severely as more densely populated regions.
I'll note that in past major events, such as the financial crisis, a decade ago. Our service territories have typically been more stable and more insulated from major economic swings than the coastlines in major metropolitan areas.
We remain cautiously optimistic that will be the case with this crisis and we will continue to closely monitor trends in our territories.
Turning to slide 16, as I mentioned earlier cobot impacts are generally trending as we expected during the second quarter, we estimate electric and gas utility pretax cobot margin impacts of 1.5 million and 900000, respectively.
Based on what we've experienced thus far through July we're maintaining our assumption there will be some customer usage impact for the balance of the year. The net impact we are modeling for the remainder of the year at our electric utilities assumes reduced usage from commercial customers and a few industrials, partially offset by increased residential usage and our gas utility.
As we have assumed some overall negative impact through the balance of the year, mainly from a few industrial transport customers.
We incurred extra costs during the second quarter associated with the pandemic and expect additional costs in the near term.
At this time, we are not sequestering any mission critical employees in any of our locations. Although we're ready to do so if the virus spreads more deeply into our territories. During the second quarter. We sequestered mission critical employees at two of our generation sites and also generation dispatching reliability center employees in rapid city.
Sequestration activities ended in mid July.
We're also incurring additional cost for equipment and supplies to keep our coworkers safe.
We accrued an additional 1.5 million for bad debt in the second quarter on top of an extra 500000 in the first quarter as we saw delinquencies increase.
Like all utilities in the US we suspended disconnects throughout the second quarter. We're re initiating disconnect activities in some of our states in August and expect to do so in all our states during Q3 and into early Q4.
We're also taking proactive steps to work with our customers on payment plans to assist them in these challenging times.
During the second quarter, we largely offset the pandemic related costs through savings on travel training and certain outside services that were planned for 2020.
We have slowed our hiring and are closely managing other expenses were tracking covert 19 related margin and OEM impacts and working closely with regulators and our states to determine appropriate treatment of these costs.
Obviously, the pandemics not yet over.
And it is difficult to predict the duration of the event for the impact it will have on the local economies and customers and our service territories, our assumption for the earnings impact in 2020 from Cold and remains consistent with our Q1 call in May the expected combined effective reduced margins and net expenses will impact 2020 pre tax.
The income by $4 million to $8 million equivalent to five to 10 cents of vps.
While we remain optimistic our territories will be less impacted than other parts of the country. Our assumption surrounding pandemic impacts on our earnings could change as we navigate the remainder of the year.
Slide 17 illustrates our dividend track record evidence of our disciplined management through other historic economic events. We're on track to deliver 50 consecutive years of increasing dividends in 2020, and we've grown the dividend at a strong rate in recent years with 12 cents annual increases in 2018 and 20.
The 19.
While we may go slightly above 60% for a payout ratio in 2020, we maintain our long term dividend payout ratio target of 50% to 60% of EPS demonstrating our confidence in our long term earnings growth prospects I'll turn it back to lend now for his strategic overview.
Thanks, Rich moving to slide 19.
Our operating in business strategies, and our solid planning by our teams allowed us to be ready.
And respond well to this pandemic.
As we work through these near term challenges our commitment to our strategy drives success for now and over the long term.
We believe our customer focused strategy will deliver sustainable long term value growth for customers and shareholders.
We are investing in our customers' needs for safety reliability resiliency growth in overall positive experience.
We are aligning our people our processes technology.
In analytics to better and more safely serve our customers.
Based on the system needs across our expansive infrastructure, we expect to deliver long term earnings growth above the utility average.
We also expect to realize incremental growth opportunities from generation and other larger projects.
Slide 20 illustrates the strategic diversity of our utility business and the seasonality of our earning streams.
Our geographic and fuel diversity positions us for greater stability of mid uncertainty as we work through these headwinds alongside all of our stakeholders.
As Black Hills has grown we've added value for our customers and shareholders through scale efficiencies and a large geographic footprint, providing diversification of both opportunities and risks.
Our mix of electric and natural gas businesses also delivers complimentary seasonality for more consistent.
And predictable total cash flows and earnings.
The value of diversity is especially evident during difficult economic times differentiating us from other utilities.
While we are certainly not immune from impacts of this pandemic, our fuel diversity and our geographic diversity.
Coupled with our system scale translates to greater stability.
Fortunately and while not losing sight of the impacts of Cowen 19 on our nation and world much of our territory has thus far experienced a relatively low incidence of cobot 19 cases.
The lower population density of our service territory in the largely rural areas of the country allows for many businesses to be opened or operate at reduced levels of operation.
Also our diverse mix of residential commercial and industrial demand further tempers total business impact.
While short term business closures impact near term results. The attributes of many of our large customers such as data centers continue to support normal and growing demand levels.
Slide 21 illustrates our large infrastructure, our expansive electric and natural gas systems require significant investments to maintain upgrade and modernize to serve our customers. Additionally, our geographic presence across eight states also delivered a strong base of growth opportunities.
Our capital investment plan as illustrated on slide 22.
Over the next five years, our 2.7 billion dollar forecast is focused on projects and initiatives that maintain customer safety and reliability and foster customer growth.
Our planned investment far exceeds depreciation.
And the returns on these investments will provide future earnings growth.
In 2020, we are on track with all our planned capital projects.
We continue to expect a base of at least $375 million and recurring utility capital primarily for maintaining safety and integrity across our large utility systems.
And supporting normal customer growth with many opportunities in projects in the works that should keep our total capital investment at over $500 million per year for the foreseeable future.
As noted in prior quarters, we take a relatively conservative approach to our capital forecast. We include opportunities we are relatively certain will materialize.
As represented in our base recurring capital investment expectation and then we add capital as we gain more clarity and comfort around incremental projects that will support customer growth.
We anticipate that additional capital opportunities are likely over the plan period, especially in the outer years.
As part of our annual forecasting cycle, we plan to refine and update our current five year capital forecast in our third quarter earnings release.
And we typically add an additional year in our fourth quarter and full year earnings release.
Slide 23 illustrates our capital plan is utility focus with timely recovery of most of these investments we continue to add transparency into our capital forecast last quarter, adding detail with a rider eligible capital category, which was previously included as part of the mineable lag category.
As you can see rider capital is more than one third of our total five year forecast.
This is driven by our programmatic capital approach that is focused on customer safety reliability and system integrity.
Slide 24, we remain committed to operational excellence and serving our customers. Our team safety performance continues to be better than the industry average.
We are proud to support the United States Army Reserve a national guard in our communities many of our co workers and future coworkers provide a valuable sacrifice for our country to defend and protect us at home and abroad, and we are proud to offer them. The continued promise of meaningful civilian employment.
I signed a statement on behalf of Black Hills Corporation, and our teams setting forth our commitment to support our veteran coworkers.
And the mission of the employer support of the guard and reserve.
Slide 25 illustrates the results of executing our customer focus strategy delivering strong long term total shareholder returns.
On slide 26, you'll find our Twentytwenty scorecard, we publish our major initiatives scorecard each year to hold ourselves accountable to you our shareholders and to our customers We group our strategic goals into four major categories.
Profitable growth.
Valued service.
Better every day and great workplace with the overall objective of being an industry leader and all we do.
This quarter, we check the box on our electric vehicle incentive program.
Which we rolled out to support and grow the charging infrastructure for electric vehicles.
In closing we are pleased that our second quarter performance reflects our teams exceptional execution and delivering essential energy to our customers safely and reliably during a challenging time.
Our 2020 capital plan is on schedule and we're developing additional capital opportunities, we've identified to generate sustained growth and value creation.
Our investment and capital plans are driven by the returns we can generate not solely growth for the sake of growth.
Finally, we are well positioned to navigate the pandemic with a strong balance sheet and liquidity ongoing access to capital dependable and growing cash flows and a dedicated team that is committed to delivering value to our customers and attractive returns to our shareholders.
That concludes our prepared remarks, enriching our happy to respond to questions.
Ladies and gentlemen, we are ready to open the lines for your questions.
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Your first question comes from Michael Weinstein with Credit Suisse.
Hi, good morning, guys.
Mike.
Right.
Considering the.
The recent consolidation of leadership in Colorado, and the level of votes on the franchise.
On the franchise situation.
Yeah, maybe you could talk little bit about so how.
How those two things have improved or affected the operations, there and their relationship with the regulators and.
How it might be affecting for instance that filing do you have a for renewable advantage going forward and when the next rate case might eventually come up on the electric side.
Thanks, Mike.
I'll start by saying Thank you Susan Daily who is retiring sees our VP of coal to gas been doing the job for quite some time. It was more than 40 years just done a fantastic job. So we really appreciate what she's done when we lets you announced a retirement so it's coming up. This early this fall on here couple of weeks actually.
Again, the process of looking at how we can manage Colorado.
Holistically, if you will from lots of different perspectives.
While we grow the electric load, how we also growth gas load, especially in light of.
Horse electrification and things of that nature, we determined it would be helpful. If we had a single obviously strategy across the state.
Using a single strategy with a single leader.
Our success.
It was coupled with another decision to bring on.
Commissioner.
Yes.
Until these board.
Gardner.
Colorado policy regulatory policy in Colorado, some zero the opportunity to be frankly cost neutral in terms of adding.
As an officer as long as retirees and other considerations for US we're always looking how we keep our cost as low as we possibly can for customers and so the combination of those two liters of those data that can really help us a great deal as we focus on continuing our partnership at our relationship both with the Commission staff, the you'll see see and.
Of course with the customers that we have the opportunity to serve you acknowledged.
Got it out so we can get another shot the arm if you will with respect.
Franchise boats, but low real pleased with that.
Great. Thanks for those customers.
So that record numbers and certain other revenue record numbers, and then voted overwhelmingly to keep us.
Provider. So all that's working together as a positive.
As you know finished at rate review in Colorado guest not too long ago.
Walked away with a slight reduction.
Rates there for Colorado gas part of the order from the commission was that we re file.
For a rider request that we added.
Yes.
So following their request we are filing for the writer reviewer.
For the writer along with that we have invested quite a bit of capital.
Yes put into if you will rate review.
Combined the writer request.
A rate.
Well that later this quarter. So all in all we're pleased with the Colorado is Billy.
We're working very hard to partner with our customers partner with all of our stakeholders, especially the commissions.
And the staff in the RCC in Colorado.
The Franklin very excited for the future and I think we're off to a great start.
Hopefully that's responsive to your question.
You know maybe along the same lines. They know they used to got you guys used to say that you expect above average earnings growth over the long term and.
Obviously, the cobot 19 situation as a lot of uncertainty and it's hard to make predictions like that but.
Aside from covered 19 is that still do you still see that going forward above average earnings growth.
We do like global executing there's sort of rough teresina strategy in that regard yes.
Capital investment for this year is on track.
Projects are on track this year.
Particularly Corey deals wasn't so no change there.
We still see our growth trajectory in spite of coal with 19.
No it's going to happen.
Our territories. Despite gold was 19 continue to grow.
We're on a record ace once again in the front range of Colorado in northwest, Arkansas as examples.
Record meters sets. This year. So we continue to see migration to our territories and frankly.
We some theories of Golden 19 might increase or accelerate that growth for us as some people they want to leave the lower than populated areas and moved to the rule search excuse me the real territories that we currently serve what we're hearing.
Information and seeing facts about people buying homes sight unseen within our service territories, which is something we've not seen in them.
We remain confident.
Our growth story still remains intact.
Go in 19 in coal that might actually help us accelerate the summary stuff.
One last question for me.
Can you talk maybe about some of the opportunities that you see ahead for those that what does one to two projects a year that are not in the current forward capital plan.
I know that you always have something on ONTAP, maybe not ready to announce yet, but maybe just give us a kind of a indication of what things are on the radar what types of projects might be might be additive to the.
Current capital plan at some point in the future.
Thanks, Mike.
Well I think we're looking very closely as renewable generation, our renewable ready program. The subscription program. We had in South Dakota building was very popular.
Yes.
Yes.
Totally done and those subscriptions are complete so we have customers who are interested in war renewables and so we're working with those customers how we might cost effectively expand for example, the renewable ready program.
We're looking at opportunities with respect to our energy renewable natural gas, we serve a lot of the ranches arm territory.
Our territories, so partnering with.
Opportunity, both with landfills and with agriculture, livestock feed lots and things of that nature.
Are examining those we have some transmission opportunities.
On the electric and gas side opportunities for us to improve reliability, and frankly lowers cost for our customers.
Looking also at Red is supposed to be able to smart really just kind of have a lot about the maybe late but how do we make a smarter grid, we have a 100% am I across our electric utilities, how do we continue to take advantage of that or reliability for our customers and enhance.
Well, the and the experienced customers.
Importantly is working to attract continue to attract those loans to our service territory.
Just on the agricultural loans and what we call alternative agriculture, frankly, that's the marijuana loan we hear about southern Colorado.
Lots of opportunities there.
And also the.
Just the poultry industry, especially in Arkansas and dividends in Nebraska, No data centers continue to be a focus for us and the block chain haven't heard a lot of that block chain lately, but we still get inquiries, especially into Wyoming, which.
Working hard to be attractive to block chain loans, and then over the next quarters, you'll start to here for loss about yes, G. Obviously, something very important to our industry.
Our dollars that we invest or essentially DSG dollars well, we will be announcing we held by the next time, we do our Paul.
As GE oriented goals and things of that nature and investments that may occur around that.
As I pointed out of some of my comments rich did as well. So we've got a very expensive infrastructure, we've got about 6500 miles.
Pipeline that we'd like to replace it just a matter of quickly replace it in terms of customer rates and regulatory oversight and then we've got a 160000 meters.
At risk that we'd like to continue to replace so they kind of captures the pie I think pretty comprehensively the things that we're looking at.
Great. Thank you very much and have a great day.
Thanks, Mike.
Our next question comes from Julien Dumoulin Smith with Bank of America. Your line is now open.
Hey, good morning team. Thanks Bye.
Actual results.
Absolutely. So if I can just start with the cobot impacts here.
If I heard right.
And then talk for some covered in the quarter.
Back to my notes first quarter here you guys talked we think about initially reducing your guidance range by five to 10 with about five to 10 cents.
The cumulative remainder of the year, how are you thinking about that three cents versus the five to 10 cents overall that you talked about just just a quarter ago. It seems.
Yes.
My perspective that that you're trending certainly in the better into that range and maybe the substance question is what does that mean also for your.
Overall, 20 guidance well I guess.
Yes. This is rich Julie.
Obviously, if you assume to similar trends through the next two quarters that would put us toward the upper end to that.
In range, but.
Even in July as we look at load information, we're seeing improvement from what we saw.
In May and June.
So it is trending as we expected we do expect the impact to lessen as the year goes.
So hopefully we can head for the better into that range, but we're sticking with five to 10 cents. Thank you the midpoint of that it's important to above the midpoint of guidance. We put out earlier this year given what we know a year to date not know what's coming in the future. We feel like we're down the middle fairway right now but.
Forecast Julie.
That'd be both cold and full year guidance.
Yes, I understood, Okay fair enough well connectivity later in the Maryland.
No. It started to bring a by doing I, just wanted understand and maybe youre not ready to talk too much about this I never go the filing or even even this morning.
Nope out here.
Can you comment a little bit about their efforts brings back in the level.
View in terms of total capacity Simon basically how would you frame that decision.
And I know you're not hit speak on behalf.
On their behalf, but perhaps give some context, perhaps behind that in the process that will follow subsequently at the state level.
Yes, Thanks, Julie I appreciate your raising that.
Yes.
Monday as well as you pointed out for the sake of the audience Darren animal Bill did file it notice to withdraw or set aside the settlements and they did a late last week.
Over the weekend in the late Friday is into Monday, we spent time with oil and we have.
Well through our discussions with them.
Recently filed you may not have seen it but on Monday, they filed a notice to withdraw their motion to set aside the settlement and then we also filed a concurrence which supports the motion withdrawal and so now where we think we are now we'll have to wait 15 days to see if anybody miles in your comments and then that settlement would remain untouched.
Just as and we think we back on track for the.
The commission bird to approve the settle that perhaps late this quarter certain.
Last year as what we believe so not sure. If you saw that most recent filing with dyno Nobel with truth.
We understand their filing to be centered around another large industrial customer that we serve and show.
Oh refinery thats going to temporarily closed and then reopened as a renewable diesel fuel refinery, which bodes well for future of that plans I believe in service longevity.
Customer, we're not sure about whether load might be on the other side of the retooling if you will.
I know bells raise this question well, we agree with the price that we settled or maybe there was an issue around the quantities.
Other customer the refund or for refinery will soon and so we have agreed that as a state issue before the oil linked commission.
That's where that that argument or where that should be considered.
So that's kind of the technical or the illegals area. If you will.
Operation side, we just very recently set another peak load in Cheyenne, indicating we do have growing loans. There. So no matter what might happen do this other customer in terms of reduce little beacon changes piece.
Each each winter and summer if you will see research very growing territory. There. So maybe that answers. Your question with respect to whats happened, where we are and where we think we're going.
Sorry, one clarification.
Indeed in the filing from this morning, I believe with dine out.
Hey, reference a state level, Wyoming PSC effort, just want to understand that but I think the bigger point that you're trying to leave US with is you recently set a key growth. Despite having this larger customer mid retooling on this.
They've got a fair ready for Anderson, and maybe that's a backend of way of addressing simply this this PFC docket that since becoming a.
That's correct Julien, Yes, you struggles pulled pearls together nicely.
What happens the commission over time, we agenda, we've been asked the file an IR p. or electric resource integrated resource plan in Wyoming. Later next year, we may not file that next year.
It doesn't conversations with our commission.
Well that a bit and see what happens with this customer.
So over but will work closely with commission staff about the best way to approach.
Integrated resource plan as we go forward, but again as you pointed out we are setting record peaks, we do have customers are drilling.
Frankly coal that is helping them grow because of the services they provide.
Excellent. Thank you guys very much appreciate it.
Thank you Julie.
Our next question comes from Andrew Weisel with Scotiabank. Your line is now open.
Thank you guys. My question, we're all asked and answered.
Okay. Good Andrew.
Well.
Our next question comes from Brian Russo with Sidoti. Your line is now open.
Hi, good morning.
Most of my question, we're also asked and answered, but just curious the settlement.
In Colorado for incremental bad debt.
Okay.
But pretty soon.
Sorry, Brian you were breaking up we Couldnt understand your question all we heard was settlement in Colorado for bad debt.
Correct, who is part of that settlement.
I'm good question, just yes, yes.
Although it's Atlas and I have like you area.
Apis Excel.
Gee.
Black Hills of course, the commission trials.
And the conference call It an office in consumer Council deals.
The ones are signed onto it.
Okay got it and then 400 million of 2.5% tenure debts to raise in second quarter second to be used to pay off short term debt, where it's just a finance.
The capital budget.
Yes, we used our revolving credit facility.
Pete program at the time, we did that was at about $350 million. So we just pay that off and had some excess cash in deep into the quarter.
Okay, Alright, thats it from me thank you.
Thanks, Brian.
As a reminder, ladies and gentlemen, if you'd like to ask a question at this time that is star then one.
Your next question comes from brand to leave with Mizuho. Your line is now open.
Hey loan Havent.
Quick question.
Yes.
When we get a little bit the clarity on the equity need I know you don't need any this year, but it's something that you look are you looking to raise equity next year.
Yep.
I've said in the past on that brand is with the currently disclosed capex.
We probably need 25 to 50 million of equity next year.
And then thereafter, probably little in a way of equity needs and based on the disclosed capex, but as Glenn noted in his comments.
Likely to add to that Capex as we approach those years, given some of the opportunities we have and as we add capital.
What we disclosed.
We will likely needs a 25 30 cents on the dollar equity to help fund that additional capex expense.
Yes sure.
And then another quick question.
Once you guys start disconnect.
Do you believe that the bad debt expense will decline.
The plan Brandon we started the community we've always communicated with our customers through this whole endemic about helping them pay their bills finding ways for them to find the agencies to help and things of that nature, making as easy as we can for our customers and so yes, we started communicating.
In the last couple of weeks about re initiating.
Non disconnects or not they things of that nature.
We've had it we've been walking engine and with our regulators with respect to that as well and so we have their backing if you will this time started that process. Once again. So yes, I think next couple of weeks next month or two a bad debt will begin to go to begin to decrease because we'll put our normal processes and procedures.
Just back in place of course really continue to work hard with our customers in terms of helping them pay their bills. As an example, we donated more than $600000 Oh from our shareholders into a helping our customers pay their bills working very closely with agencies, helping our customers find the easy ways to contact.
That would work with them so it's going to be in all the above kind of approach.
Because especially aggressive was helping and find ways to pay those bill.
Great. That's it that's all thanks a lot.
Thanks Brendan.
With no further questions I will return the call back to lean Evans for closing remarks.
Thank you Liz again, thanks to everyone for joining us. This morning, we really appreciate your interest in Black Hills.
Just want to express my extreme problems for my coworkers and how well we perform this past quarter and frankly, the last five to six months as we worked as pandemic they've done a fantastic job, serving our customers keeping our customer safe and keeping ourselves.
Very proud of our team and how they continue to execute our 2020 capital plan remains on schedule and our treasury teams, a fantastic job with their balance sheet and making sure we have liquidity to execute our strategy and I'll remind you the both rich and I are always available to answer any questions you've got may happen.
These have great days and stay safe and stay well. Thank you.
Thank you for your participation in today's conference. This concludes the presentation you may now disconnect. Okay.
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