Q2 2020 Xcel Energy Inc Earnings Call
Welcome to the ex energy second quarter <unk> earnings Conference call.
Only be chicken from institutional investors reporters can contact the media relations.
Acquirees in individual investors and others can reach out to Investor relations.
This conference is being recorded.
The conference over to Paul Johnson, Vice President of Investor Relations. Please go ahead Sir.
Good morning, welcome to Excel Energy's 2022nd quarter Earnings Conference call. Joining me today are then folk chairman Chief Executive Officer, Bob Frenzel, President and Chief Operating Officer, Brian Valuable Executive Vice President and Chief Financial Officer, and Amanda Rome, Executive Vice President and General Counsel.
This morning will review, our second quarter results sure recent business regulatory developments and discuss how we're managing through uncertainty around cobot.
Slides that accompany todays call are available on our website.
That's a reminder, some of the comments we made during today's call may contain forward looking information.
Just can factors that could cause results to differ from both anticipated are described in the earnings release in our SEC filings.
Today, we will discuss certain metrics that are non-GAAP measures.
Including items ongoing earnings electric and natural gas margins information on comparable GAAP measures and reconciliations are included in Orange was.
Now I'll turn the call the menfolk.
Well, thanks, Paul and good morning, everyone. We had a strong quarter booking earnings of 54 cents per share for the second quarter 2020, compared with 46 cents per share last year.
Our year to date earnings are on track with our financial plan and we are mitigating the impact of Cobot 19. As a result, we are reaffirming our 2020 guidance.
We continue to help our customers and protect our employees during a pandemic.
Stepping up our charitable giving to help our communities or business continuity plans have been executed extremely well, we're keeping employee safe, while providing reliable service to our customers.
We're helping to restart the economy through our capital investment programs that create jobs in our communities.
Earlier this year, the Minnesota Commission open day relief and recovery docket and invited utilities in the state to submit potential projects that would create jobs and help jumpstart the economy.
In June we filed a plan to propose is $3 billion and capital investments.
This includes approximately 1.8 billion incremental capex for when Repowering at 460 megawatt solar facility.
Got it easy infrastructure and about 1.2 billion of accelerated transmission distribution and natural gas investments.
We recently announced this oh solicitation for Repowering of wind projects.
That are either own bike. So why don't you are under P.P. A's, we estimate 802000 megawatts of potential repowering projects and expect to make a commission recommendation by year end.
Well also proposing options to mitigate customer bills overall feedback has been very positive and we look forward to working through the process with the commission.
That was you might have heard the U.S. Treasury recently announced a one year extension of the safe Harbor for renewable projects when projects that began construction in 2016 now have until the end of 2021 to complete construction every seat ptcs at the 100% level.
While we were confident that our projects would qualify for 100% PTC level, regardless of this change the extension assurances bent up there for our customers should any projects slip into 2021.
Importantly, this change also presents the opportunity to move Dakota range from the originally planned 80% PTC level to 100% PTC bubble, while this will not impact earnings it will significantly reduce cost which is a great outcome for our customers.
Advancing our strategic priority of leading to clean energy transition, we and our co owners recently announced the early retirement of the second coal unit at Craig well, we only have a small ownership stake in Craig we're proud to help drive the early retirement of another coal units.
We're also making significant strides to improve E.S.G. transparency and disclosure. We recently issued our Tcf de report and risk assessment, which describes the resilience of our climate strategy using different scenarios.
The addition of this report enhance our disclosures and results in a full tcf be compliance PERC cell energy.
Another strategic priorities to keep our customer bills low as a result, it was very satisfying to see that Sps is electric rates in Texas and in Mexico with a long list in the country for 2019 has recently reported by S&P Global.
Providing strong customer service and reliability and an attractive prices a hallmark of excel energy and we're very proud of this recognition.
We're also excited that after 10 years, we've reached a settlement agreement with Boulder that will result in a new franchise agreement and also a partnership to explore grid site options to meet our carbon goals.
Approval process for the settlement will include a vote by city Council in August a ballot referendum and vote by the people of older in November if approved the franchise will go into effect in January of 2021.
Finally, I was recently elected chairman of the I will be an honor to lead the industry in such an important and challenging time and I tend to focus on three areas. My first priority is the industry's ongoing cobot 19 response related to the workforce customers and recovery from from the pandemic spec.
Can I intend to focus on clean energy innovation.
Masking the eye to develop federal and state policy proposals that will bring dispatchable zero carbon technologies into the marketplace to enable the industry to meet our long term carbon goals.
Finally, I'd ask he died of focus on what our industry can do to promote racial justice and increasing our commitment to advance diversity and inclusion.
Like our country and tire industry has been shaken by the death of George Floyd. Mr. Floyd died only a few miles from our corporate headquarters in Minneapolis was the first city to experience widespread protest and writing.
I think of society, we have a lot of work to do we need to look hard at ourselves our unconscious biases and our business practices. They have some hard questions about how we can improve our diversity.
I'm confident that excel energy can play a leadership role in driving positive change for our country and our communities.
So with that let me turn the call over to Brian will provide more detail on our financial results and our outlook right.
Thanks, Ben and good morning, everyone.
The strong quarter booking 54 cents per share for the second quarter of 2020, compared with 46 cents for sure last year.
The most significant earnings drivers for the quarter include the following lower on I'm expenses, primarily driven by cost management efforts increased earnings by five cents for sure.
Our electric margins increased earnings by two cents per share, which reflects the wire doesn't rate increases that offset the negative so seven cents per share impact from declining sales largely due to covert 19.
Hiring if you do see equity increased earnings by three cents per share and finally, our lower effective tax rate increased earnings by seven cents for sure.
However, the majority of the lower each yards due to an increase in production tax credits, which flow back to customers through electric margin is largely neutral.
Offsetting these positive drivers worth.
Increased depreciation interest expense, reflecting our capital investment program and other items, which combined with reduced earnings by nine cents for sure.
Next I want to discuss the status of cobot 19 impacts are mitigation efforts.
As expected opened 19 had a major impact on second quarter sales.
Our second quarter weather adjusted electric sales declined by 7.1%.
However, these impacts are better than projected in our base case scenario, which is embedded in our guidance assumptions.
On the weather adjusted basis April retail electric sales declined 9.6%.
Maybe showed improvements as retail electric sales declined 6.7% in June showed further improvement as retail electric sales declined 4.7 sometime.
This monthly trend reflects economic shutdown that started in mid March and the gradual opening up with the economy in May and June.
As a reminder, you have a sale true up mechanism for all electric classes in Minnesota, and decoupling for the electric residential and non demand small seen I classes in Colorado. This covers about 45% for coal retail electric sales.
Since second quarter sales came in better than projected in our base case scenario, we have additional cushion shouldnt economic her elastic or the recovery falter.
Conversely, if sales continue to come in better than expected real just or contingency plans accordingly.
We're also closely monitoring bad debt expense and working with customers on payment plans well, while it was difficult to reject wearable and bad debt expense increased approximately 25 million into 2008, 2009 time period as a reference point.
Our commissions in Minnesota, Wisconsin, Texas, New Mexico in Michigan have issued orders to defer pandemic related expenses.
Also reached a settlement in Colorado for staff and LCC that would allow us to the for cold 19 related bad debt expense lending a commission decision finally, our filings in North Dakota in South Dakota remain under Commission review.
We've also made strong progress on our efforts to reduce on I'm pasta mitigated the impact sick over 19.
Based on our contingency plans, we expect annual own I'm expenses, a little declined 4% to 5% in 2020, which would offset covert 19 impacts in the best case scenario.
We're also prepared to implement additional contingency plans if the impacts exceed our base case scenario.
As we've discussed in the first quarter there are limitations to what we can offset we remain focused on providing strong customer service and reliability will not make short term decisions that have a negative long term impact on our customers are shareholders.
The last pull the 19 topic I want to covers liquidity.
We finished our plan debt issues issuances for the year and we were able to access the capital markets on strong terms and issue bonds at record low coupons.
Also closed on the sale of the main Kato Energy Center, which provided approximately $650 million of cash proceeds after carving out the game for charitable contributions.
As a result, we now have available liquidity of approximately $4.5 billion.
And finally, we issued an equity for last year, which we expect to settle later this year, bringing our total liquidity to approximately $5.2 billion.
Next let me provide a quick regulatory update in new Mexico. The commission approved or constructive settlements that reflects a rate increase of $31 billion or are we have 9.4 or 5%.
Equity ratio of 54.8% and accelerated depreciation of the total coal plant to reflecting earlier earlier retirement.
In Texas reached a constructive unopposed black box settlement, which reflects the electric rate increase of $88 million.
Our or we have 9.4 or 5% and equity ratio of 54.6% for if you do see purposes, an acceleration of the depreciation life of its own coal plants, we anticipate a commission decision in the third quarter.
In July we also reached a constructive settlement in or Colorado natural gas rate case, which reflects.
The net rate increase of $77 million are are we have 9.2% in equity ratio of 55.6% and the historic test year of an adjustment to the tungsten the Blackrock project.
We anticipate a commission decision later this year.
Our last call, we discuss our preference to avoid rate cases impossible, especially in light of Colgan 19.
So we recently filed for rider recovery of our wildfire in advance for that investments in Colorado set a filing a comprehensive rate case riders Republic 2021 through 2025 and provide regulatory flexibility.
And as part of our Minnesota relief and recovery filings, we express or interest in seeking and I'll turn it on a path to avoid a rate case filing. This year. We think this would be a constructive outcome for all parties, who had initial discussions all keep you posted.
With that I'll wrap up we're effectively mitigating cobot 19 impacts.
We continue to provide reliable energy service to our customers, while ensuring the safety and well being of our employees in communities.
We reached constructive settlements and our Texas and Colorado rate cases.
We avoided in electric rate case in Colorado by filing for wildfire and advanced grid riders.
We filed our relief and recovery proposal in Minnesota, which will create jobs of rejuvenate our local economies and result in significant customer benefits.
You know, it's early retirement of another coal plants and achieve Tcf the full compliance.
We reached a settlement with Boulder that should under municipal innovation efforts.
We are reaffirming our 2020 guidance range of $2.73 to $2.83 per share based on our solid year. There. It results in progress on contingency plans.
Finally, we remain committed to delivering long term earnings and dividend growth within or 5% to 7% objective range.
This concludes our prepared remarks, operator, we'll now take questions.
Thank you the question and answer session will be conducted electronically.
Like Downscaled question. Please do so by pressing the Starkey followed by that did you want on your Touchtone telephone. If he is the speakerphone. Please be sure. Your mute function is turned off to layer signal reach our equipment. Once again, ladies and gentlemen, Please press star one to ask a question and we'll take our first question from Jeremy today with JP Morgan.
Hi, good morning.
Good morning Martin.
Just wanted to touch base I guess on your retail sales our expectations at this point didn't know if you had any data from July if you could provide us anymore color. It. It seems so far in the second quarter you guys are trended somewhere between the base case and the mild case and just wondering if you'd give us any feeling I guess from what you can t. So far I'm you know how the third.
There might be shaping up initially between those two scenarios.
Yeah, Yeah happy to it but just as you know we don't have am eyes. So we have some visibility into July information in particular from we have some samples customers and what we're seeing.
See Eni side as we're seeing a slight improvements as we look at some of the specific data that we have we've seen some improvement in the oil and gas slowed down in Sps something we're watching closely if you looked at the results down there.
Bob Anabolic in May and we've seen improvement relative still below both 5% for more was pretty cold at levels, but good to see the scene I presume that there were also watching your Colorado see an eye. If you looked at our earnings release in our presentation. You can see that's the C. United sales from May to June.
I didnt improve as much as they did from April domain. So that's something we're focusing on in Q3, but we are seeing positive trends there in the residential I think we're still continues to you that the strength that we saw in Q2.
So overall positive trends going into Q3, but you know military bases that are we'd have significant improvement from the depths in Q2 to Q3. So some are watching closely.
Got it that's very helpful. Thanks, and just.
Just with regard to the Minnesota, releasing recovery proposal, but just wondering if you might be able to share anymore as far as any early feedback that you might have received so far just kind of expectations going forward at this point.
Yeah, Jeremy its Bob and thanks for the question.
You know coincidentally, we actually had a Minnesota planning meeting yesterday with the Department and the commission to talk through the a relief in recovery Act you know we think this is a.
Really interesting example of coordination between the.
You know investor owned utilities, and the political community to try and solve some of the problems that are affecting our communities from the pandemic.
I think the commentary yesterday was kicked off by Lieutenant Governor where the positive tone I feel like we had some positive tone from some of the commissioners.
With a special interest to an expeditious resolution and timelines. The we'll know more as we work through the rest of the summer in terms of timeline, but I think yesterday's planning meeting felt a fairly positive.
That's encouraging that's great. Thanks, and I could just sneak one last one here it seems like a year. Your guide DNA interesting a if you do see equity all kind of changed a little bit. There I was wondering if you could help us with some of the drivers.
Yes, certainly I mean, when you put them all together bottom line impacts pretty immaterial for the year puts and takes depreciation changes coming out of our rate cases, we had some depreciation rate changes that were implemented obviously interest expense, we set a record low coupons, Minnesota.
We should a 30 year bond at 2.6%, which is the lost 30 year first mortgage bonds for utilities.
So really good results there are the team and then on the other pieces a rider revenue right just a little bit of delays in implementation or wind farms, but net net pretty immaterial impact that you take them altogether.
Great. Thanks, so much.
Your next well go to a Julien Dumoulin Smith with Bank of America.
Hey, good morning.
Hey, Thanks, the time Guy.
So let me let me take the other side of what Jeremy was just talking about let's talk about cost reduction and let's talk about that in the context your progress.
Year to date and what this means going forward into future years right I hear you guys talking about saying out and in Colorado for instance, leveraging riders little bit more but give us a little bit of context in and where you are against the plan given the 45% articulated and then what that means for sustained the bill.
City and prospects to stay out these things.
Yes, let me because I think I'm going to let Brian.
Give you the details on that drilling, but let me just say I really proud of how the entire team tyrants sell workforce has really stepped up.
To.
Mitigate the impacts of cobot 19, while still some you know.
Providing this important obviously product that we deliver.
And we've done in a number of different ways, but what is most impressed me as the innovation and creativity to use of technology and.
To improve our business. So you know I'm optimistic that.
A lot of that we've got work through it but a lot of this will give us a lot of thought momentum as we go into 2021 and with that I'll ask Brian and give some more details.
Yes, thanks data in the board enjoying it yeah. So from a run rate right you know weve put in the in the contingency plans in essentially the end of March as what we saw this hit and so we had nine months from a year to date perspective, we're about little over $50 million ahead of 2019, so executing I would say slightly.
Had a plan when we look at what our plans or for Q2, so that puts us in a good position for the balance as of year, no. Obviously, if sales coming a little bit better we're going to adjust those contingency contingency plans for the year in bed inside of while you know teams done a great job of exit developing and executing those plans for.
This year and we really turned our attention to what is sustainable in 2021 and beyond but I think you got it.
When you talk about regulatory flexibility and reiki sales were also the other side of equation is you know were everything we've learned over the past few months from from the impacts you called the 19 years, we're incorporating into our sales forecast for 2021 and.
And in covering husband or sales forecast for 2021, and so we're looking at both sides of the equation insult big focus for the team in Q3 from and all of them sustainability perspective, which will deliver further guidance Sinclair India in Q3 on that.
Got it but net net I'm fairly confident to convince me earn out authorized levels to the extent switch that you're a successful thing out in these cases inclusive of for instance, the Colorado.
Yeah, I think that's a fair assumption you broke up a little bit I think you think you said you read.
I expect or another authorized levels with a regulatory proceedings just to make sure I heard you correctly.
Yeah.
Where exactly are you Julien.
[laughter], we'll talk about that later.
[laughter], we had we have enjoyed your notes from the road Julien.
[laughter], they've already got or big so in Colorado and speaking of Colorado, what are your prospect for stimulus here as you think about the potentially mirroring your African minute in Minnesota.
Hey, Joe in its Bob So if you're in Colorado.
Yes.
Well driving good weather out there we've had a nice a warm summer I think you saw some are weather adjusted sales were pretty strong in Colorado.
As far as relief and recovery goes you know what we've done in Minnesota, We believe it's been relatively unique.
For the country, but we're certainly open to the ideas and trying to partner and other jurisdictions.
I'll give a lot of credit to the administration and the commission in the Department in Minnesota for their leadership and their partnership with US on the our and our plan and getting the utilities in the state to step up and try and help our communities and our customers.
And we could find that kind of partnership we are absolutely looking and willing to do that.
It was it the pandemic continues or if we see some resurgence you know there may be more opportunities down the road for us.
Something similar in other jurisdictions.
I wouldn't rule it out.
Right, that's the block that.
Hockey soon see I travel.
They say where your math [laughter].
And next we'll go to Travis Miller with Morningstar.
Good morning gravity too.
Hi.
I Wonder if you could talk a little bit more when you said in Minnesota the alternative path.
What that might look like in lieu of one of the full through your rate cycle violent.
Yeah, Travis you know as we kind of a port in our relief and recovery plan. They alternative passes really looking at potential stay out for 2021, you know it going into 20, Twond, who we were able to reach or a constructive stay out with the parties, which is a commission approved and that was really fall.
Because you know a couple of key components around a sales true up in a deferral is there any t. amortization a couple of key components and no. We're we're just started we we put that in or releasing recovery plan to think there. There's another path there and we've just started to the initial discussions around that and certainly we'll look to see if we can find to oh, good constructive settlement that.
Works for our customers and offs.
Okay, well what do you include potentially something like a.
Yes.
Rig days true up something like that as well or.
Are there other mechanisms in there that we give you at that louder or slightly below the allowed or are we.
Well for permanent so the two big components look similar to.
Early sitting here today similar to the settlement that we reached for this year has a big component is the sales true up and then the deferral of some amortization.
We do have right. We do have rises recover a lot of our investments with our renewable investments flowing through our renewable rider we have our transmission cost driver, which covers some investments. So we have a rider mechanisms that help recover the investments, we're making for our customers.
Okay got it and then just confirming that you guys are still on track for that.
Five year Sutherland presented rate based growth than the 22 billion cutbacks and any changes.
So those are normally I would say Travis this is Ben Yeah. We're on track and you know we're targeting the upper happening.
Most of you know well, we'll update all of that and the third quarter. When we update you on their five year capital forecast, but.
I think you'll be you'll be pleased with what we're projecting.
Okay and then just real quick does that include the 3 billion.
Minnesota or would that be incremental.
It would be in that would be well first of all 1.8 as incremental <unk>. The other is an acceleration, but but yeah. I mean, that's that's not necessary to for us so that would be incremental.
Okay, great. Thanks, so much.
Next we'll go to a Steven Fleishman with Wolfe research.
Hey, Steve.
Yeah, Hey, good morning.
I'm learning so just.
Hi, good to hear your voice Ben.
And have fun being the share of VR.
[laughter] the virtual here I suppose [laughter].
[laughter].
So the.
On the Minnesota kind of recovery investment.
Has there has to commission give some indication on the basis for the decisions that are going to make in terms of like is it based on the amount of jobs created.
As soon as you know the rate impact or just how are they going do.
I think that.
Decision, so I think to take a number of factors into consideration, but you know I think as as you know our steel for fuel strategy accomplishes capital investment job growth and health with rates. So it's that we can emphasize that I think the better we'll be there won't be a solicitation.
Can and will you know will bring those projects and we are anticipating you know that we'll have a very good price point for the solar that we're planning and.
Brian or Bob I don't want to add anything else you, Steve I think it's still just a little bit early innings, but I think the comfort level with the investment the economic development the job creation that portfolio account you know.
Coupled with the relief opportunities as the Brian mentioned on rates and stay out mechanisms I think is a big package. We haven't got to full time line out of them. We had a big planning meeting yesterday, which was favorable with some positive comments from the commission.
And even the administration and so were.
Comfortable and confident where we said we don't have a lot of details other than that to share with your right now.
Okay did did you do you have any sense sort of rate impact of the 3 billion.
For your kind of waiting to see you're bidding and all that.
You know I think we still need to run through the solicitation process on the renewable portions for sure which will run through August and then in through September before we make some decisions.
But we're pretty confident that we know the impacts of the things we would put forward and we know a little bit of what other people would do as well so I'm pretty comfortable with the cost side. It I see what you put forward a wind repowering if it wasn't a NPV positive to the consumer so so I I think the real okay. He is.
Well that offsets the acceleration of some of the the distribution and transmission spend that we're talking about and I think I think likely it will but the bobs point will run through those numbers that you have Steve just some color. Your powering very we had so the long road repowering approved in remodel or should be up on the commission hopefully in Q3 and those.
On the front end customer saving and you got to the Repowering, which is you know really get into some environments and so we're working through no similar analysis on our currently owned wind farms that we think would be good candidates for that.
Okay and since most of these things are related to things that you own who like your pre assuming it gets approved pretty highly likely it would be you who actually mixing investment.
So now that's correct third parties.
I think that's a fair and just last question yeah. Okay.
And last question related to the so if that is all true yeah.
One thing to be clear I know there are a part of third parties that could submit.
<unk> for either a PPA extension or B O T. So.
Six to be some combination of our investment plus others.
Great and less and I apologize last question on this which is just how should we think about.
Financing plan for.
You know as much as the incremental.
Or more.
More time, yes, Steve as long as office building.
Yeah, as we talked about before and then really no in the following or do we think about 1.8, it's the incremental part the other 1.2 rough threes accelerated but as we go through this process. You know we expect commission indicated yesterday that the we'll look to.
Find a way to move through this pretty quickly and all at the same time are developing our five year capital plan for 21 through 25, and so we'll put that altogether and and rollout a five year financing plan. If you have enough clarity to include this in our five year capital plan by October, but generally you know what we've spoken about before.
Timing in size matters for incremental capital.
And if it's significant enough in and it winds up you know will generally farmed out with at our consolidated capital structure of the as we've spoken about before it's important to maintain that financial strength and the.
Credit quality of the company.
Yeah.
Great. Thanks, so much appreciate it.
Thanks to.
Next we'll go to Sophie Karp with Keybanc.
Hi, good morning at wells in the quarter I think people taking my question.
Thank you Sophie.
Well done.
So I did this year and the questions on that I'm wondering if you know it within lots more I guess payouts away from yeah, Yeah, right decision and then they call that situation, but.
As it continues to be the case colitis, yes, its day and it looks like they come on me.
Consequently will be lingering part while could we see it seems like you overall strategy, where you're moving away from periodically capable and kinda patron them more permanent basis to alternative mechanisms and.
Tend to move away from the strategy of being a serially, it's five or so more of a.
They now for longer periods, Columbus, I guess my question.
Hey, Sophie it's Bob good to hear your voice you were a little broke up there, but let me let me try and address the question, which I think is.
You know how do you think strategically about rate cases in context to the pandemic in longer term is sort of my take away and you know.
We have a lot of writer mechanisms in our various states and we're making billions of dollars of investments on behalf of our customers and infrastructure around clean energy transition and grid modernization.
And we also have to keep the the utility financially healthy. So that's the backdrop that we work with we are obviously working with our regulators right now on mechanisms by which we wouldn't need to file rate cases, and we're actively engaged in conversations with stakeholders in Minnesota.
In Colorado, I think you saw settle our gas case, and then file a couple of writers we should think would allow us to stay out of our electric case in Colorado.
That's a bit of the strategy.
I missed it continued to invest in areas that have real time and rider recovery, you've seen us execute on decoupling in sales throughout mechanisms in our businesses and thats helpful as well.
And so strategically and things here in the right places, we're always going to look for mechanisms by which we can mitigate our cost structure keep our bills low for our customers. While we keep you need to invest in the infrastructure that we need to.
So we'll continue to be creative their unpopular with our conditions.
And you know the goal would be to not go into rate cases, if we could avoid them, but we have to keep the utility financially healthy and so we balance all of that yeah. Sophie just building on what Bob said I mean, whether its.
Traditional rate cases or expansion of writers or some combination to bottom line as.
We're going to achieve our clean energy objectives, our levels of reliability and our customer improvements in customer experience all while keeping total bills below the pace of Cpis. That's our objective and that's what we're on track for and that's what I think Oh, we still remain on forecast to do so.
That's the key thing is to make these investments while not a lot.
While keeping our product affordable.
Got it. Thank you went up a lot, but if I may on they only ma'am.
Yeah, you're guiding for Oh nm growth year over year, and then all the time you had to sleep Seth and think quickly.
Fine plus cots writes off that they impact and it sounds like it's going to going well.
Could you just last one cents a more shape over that go out the year are you can't even into its now and went to ramp up in the second half where are you pretty much Ryan that's <unk> run rate. That's it's coins and we should expect this baby crying out one and projecting throughout the year, how should we think about that.
Hey, Savi. This is Brian I think you're the where you said you assume a steady run rate pretty ratably over the quarters. So I think you're thinking about it right that continue to see that run rate.
Got it thanks, so much.
Thank you.
Next we'll go to Paul Patterson with Glenrock Associates.
We could warning.
Hey, Paul [noise].
Just a few quick follow up so that the Minnesota.
I'm, sorry, I completely understand is how should teach you guys, where you guys, saying with.
This capex might be going to third party some contracts how much how much of the total subject to that.
The the 1.8 incremental is that's our spend.
Okay.
What Paul was saying is when we do a solicitation, we'll have our own wind projects that we all that we bid into that and but we will also encourage.
Independence bid in as well and they can bid and either as a build on transfer which wouldn't resolved in our ownership or they could bid and with the an extension of a power purchase agreement and we'll take a look at all of those but at the end of the day, our incremental Capex will come from from a ownership in wind projects.
Perhaps our own and perhaps be Oh geez, the the solar facility that we're talking about at our.
Coal plant and Becker.
Minnesota, a advances in easy infrastructure.
And I think that covers the incremental and then we then we look at the acceleration about 1.2 billion or grid spend.
Okay, all right medal.
We're not going to know what other parties, they're going to build it until we get through the process, which should be more towards the end of August.
Okay, and then <unk> when we when we say because that'll just be clear that doesn't mean, bringing slipped again from the future of this is just incremental in other words it when it did whatever happened anyway. It doesn't change the trajectory of UBS. Your Capex outlook from you know in other words, you have looping something from the future to today.
Now, it's a ads and accelerated would suggest when you say incremental it would be when it occurred otherwise is that the way to think about.
Yes, I mean, I, just like what as Paul Okay, maybe.
I think I understand and then with respect to the.
The Oh, well just let me let me go look I think the way to think about it is the 1.2 billion that we're not calling incremental that's an acceleration of something that's already in our forecast. The 1.8 billion would not be in our existing forecast now over the course of 15 years might end up happen. Yeah. That's that's how we're that's.
How we're defining that.
But that's really helpful. I appreciate it and then with respect to the.
<unk>.
<unk> goal is that still 2%.
Yeah, I mean, because it depends a little bit by jurisdiction is that Oh, yeah, that's roughly at XL level, a good way to think about it.
Okay, and then just in general I mean defense and sort of touched on brother people, but I'm. Just wondering if this you know if it continues down. This road is there any potential baby to upsize live.
We have a weaker economy.
It from.
People, what I'm, saying is there any sort of discussion.
Potential like Hey, maybe maybe this is a good a good jobs like the or economic stimulus ideas.
And then we could see something that being bigger than this.
I think pellet.
The team weigh in on this fall, but I think it's probably would come from other jurisdictions.
Okay.
And Okay, you get York circuits so okay.
I appreciate it takes too much.
Thank you have good day.
Well go to Insoo, Kim with Goldman Sachs.
Thank you I just have one quick question and your guidance for the year and that they keep assumption what type of I guess assumption are you, making on control treatment of corporate related costs.
Or around yeah bad debt for all the time to this is Brian.
Oh, you know as we talked a lot in Q1, we assume that we get a constructive treatment around the regulatory deferrals and I'll know what are we thinking about a bad debt expense, we have roughly no bought $25 million increasingly look at what happened in 2008 in 2009, and that's you know everything we've seen for the three months of impact.
So that remains pretty consistent as our thinking going into this you know and if we think about right. We have about 95% of our ours of our business is covered with our six deferral orders that you were waiting for the other Dakotas. So we feel like around who we've reached a concern.
Active place with those deferral orders and we'll continue to value, even though you evaluate the deferrals as we go through the balance of the or.
Got it so the bulk of at least the bulk of what's happened in terms of be a few approvals where.
Somebody embedded in making that kind of thing.
Yes, that's correct.
Got it.
Thank you.
That concludes today's question and answer session I now turn the call back over to Brian Vance able for any additional for closing remarks.
Yeah. Thank you all for participating in earnings call. This morning, please contact our Investor relations team with any follow up questions.
Good day, thank you.
That does conclude today's conference. We thank you for your participation you may now disconnect.
[noise].
Oh.
[noise].
[noise] and [noise].
And.
[music].