Q2 2020 Eversource Energy Earnings Call
Welcome to the Eversource energy second quarter 2020 results Conference call. My name is that I sat and I'll be your operator for today.
This time all participants are in listen only mode. Later, we will conduct a question answer session. During the question and answer session. If you have a question. Please press Star then one Touchtone phone. Please note that this conference is being recorded.
I'll now turn the call over to Mr. Jeffrey Kotkin, Sir you may begin.
Thank you enough good morning, and thank you for joining us I'm, Jeff Kotkin Eversource Energy's VP for Investor Relations.
During this call will be referencing flights that we posted last night on our website and have you can see on flight one some of the statements made during this investor call maybe forward looking after find within the meaning of the safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
These forward looking statements are based on management's current expectations and are subject to risks and uncertainty, which may cause the actual results to differ materially from forecasts and projections.
These forecasts. These factors are set forth in the news release issued yesterday additional information about the various factors that may cause actual results to differ can be found in our annual report on form 10-K for the year ended December 31st 2019.
And our form 10-Q for the three months and at March 30, Onest 2020 I.
Additionally, our explanation of how and why we use certain non-GAAP measures and how those measures reconciled to GAAP results is contained within our news release and the flights we posted last night and in our most recent 10-K.
Speaking today will be Phil Lembo, our executive VP and CFO.
Also joining us today, our Joe Nolan, our executive Vice President for strategy customer and corporate relations, John Moran, our treasurer, and senior VP for finance and regulatory and Jay Buth our controller.
Now I will turn to slide two and turned over the call to Phil.
Thank you Jeff.
Good morning, and I'll start off wishing you all and hoping to everyone on Oh remains healthy and that your families are safe and doing well.
This morning, I will cover a several items talk about the results the second quarter 2020.
We view the impacts of Covance 19 that our customers energy and their energy is.
I, just got three regulatory development, including a new grid modernization proposals in Connecticut.
And the status of our application in Massachusetts.
Got to purchase the assets of Columbia gas of Massachusetts.
And finally provide an update for you on our offshore wind investment a partnership with more stuff.
So let's get started a I'd like to noting that recurring earnings was 76 cents per share in the second quarter of 2020 compared with recurring earnings of 74 cents per share in the second quarter 2019.
Yeah results, which included a charge of one cents per share relating to our pending acquisition of the assets of Columbia gas total 75 cents per share compared with earnings of 10 cents per share in the second quarter 2019.
And last year last year's results included a 64 cents per share impairment charge relating to northern pass.
So in the first 2020, our recurring earnings excluding Columbia gas.
Total of $1.77 cents per share compared with recurring earnings of $1.71.
Per share in the first half 2019 again, excluding the MPT impairment charge.
Turning to our business segment.
Our electric distribution segment earned 34 cents per share in the second quarter 2020.
And with 33 cents in the second quarter last year.
Improved results were driven by higher revenues.
Actually offset by dilution and higher over them cost depreciation and interest expense.
Our electric transmission segment earned 39 cents per share in the second quarter 2020, compared with recurring earnings of 37 cents per share again, excluding the MPT charge in the second quarter 2019.
Improved results were driven by a higher level of investment in that trends mission to selling partially offset by dilution.
Our natural gas distribution segment right one cents per share in second quarter of 2020, compared with a slight loss in the second quarter last year improved results were due to high revenues, partially offset by over them depreciation as well as dilution.
Our water distribution segment or three cents per share in the second quarter 2020.
Compared to earnings of two cents per share in the second quarter of 2019.
Improved results were largely due to higher revenues and lower depreciation expense.
At the Eversource, Paris, Oh, we lost a one cents per share in the second quarter 2025.
Excluding the Columbia gas of Massachusetts asset acquisition cost compared to earnings of two cents per share in the second quarter last year.
The primary driver the change was a lower mark to market earnings.
Last year in a clean energy investment we made a number of years ago as you may recall.
And fund that mature soon and each year, we mark that investment to market in the second quarter.
As you probably noticed a nurse news release, you can see on slide three we are reaffirming our 2020 earnings per share guidance.
$3.60.
To $3.70 range as well as reaffirming long term EPS growth rate of 5% to 7%.
We expect that our existing core business will allow us to grow earnings per share around the midpoint of that range through 2024.
Earnings from offshore wind and Columbia gas asset acquisition.
I would both be incremental to that growth. Both we would have somewhat of a different profile.
As we've said before offshore wind earnings would commence in the.
Latter years on the forecast as the turbines at the service.
While we expect Columbia gas asset acquisition to be accretive to our earnings per share starting in 2021.
From second quarter results I'll turn to slide four and our continued.
Progress and success and operating the business during cold 19 pandemic.
Our very strong safety and reliability performance continued through the first half of the year.
We are the promptly and effectively to all the storms we've encountered in the vast majority of our employees, who either had tested positive for covert 19 or were self quarantine and now back to work, providing superior service to our 4 million customers.
Excuse me.
We remain on target executing a $3 billion capital program.
Through June our capital expenditures have totaled 1.44 billion above $30 million ahead of last year's pace.
In terms of usage kilowatt hour sales in the second quarter were down about 1.4% overall compared with last year, but in new Hampshire, which is not decouple they were actually up 1.8%.
New Hampshire residential sector sales are very strong due primarily to more customers being at home as well as weather and we see that throughout.
The company.
We had cooler than normal weather in the first half of the quarter and hotter and more humid and normal weather in late May and June.
On the natural gas side, where both Yankee gas and star gas or decouple.
Sales in the second quarter, we're up about 1.7%.
Compared with last year.
This was due to colder April in early May weather. So on a weather normalized basis sales were off about 7% due to lower commercial and industrial usage.
And our water segment, which is also decouple in Connecticut unit sales were up 7.1% in the second quarter. This year.
Lastly, due to customers irrigating their properties during a very hot and dry month in June.
Yes, we are not shutting up customers and non payment.
We continue that program, Connecticut, and new Hampshire have implemented varying schedule or when shut off moratoria will be lifted.
In Massachusetts, we're working we're part of a group that's working.
Now to review policies regarding payment plans.
And shocks and non payments and there are no due dates.
The ending the moratorium at this time.
So despite the moratorium in place across the company.
The impact of covert 19 on our overall receivable balance has been manageable today.
Covert 19 and sale.
I'll now turn to.
Slide five.
The recent developments around our ongoing rate reviews.
We have to general review spending.
Hearings in the NSTAR gas rate review in Massachusetts concluded a month ago.
Our final replied briefing will take place in August.
We continue to expect a decision by the end of October with new rates effective November 1st.
In New Hampshire hearings in the public service of New Hampshire rate review start late.
Later, I guess in the month of August with a final decision in November.
New rates would be effective December 1st we expect that would be retroactive to July 1st 2019, when a temporary rate increase of $28 million took effect.
From the rate reviews, I'll now turn to create modernization and the filing we're making in Connecticut rate today later on today.
As I mentioned on past calls the public utilities, right and that's our target authority on PURA.
As opened 11 dockets to look at modernizing the electric creating Connecticut to accommodate customers higher expectations for reliability and technology.
And to provide both increased resilience and a path to help the state reduce its carbon footprint by at least 80% by the year 2050.
Today, we another party to filing proposals in three of the 11 dockets.
As you can see on slide six the most capital intensive proposal, we're making as related to.
Automated meter infrastructure or am I.
Our our Connecticut light and power customers.
Our filing will present comprehensive analysis of the cost as well as the technological operational and environmental benefits of implementing am I.
Moreover.
As I said in the past our current AMR metering technologies ending.
Nearing the end of it useful life.
And we'll need to replace.
About 800000 meters, one way or another over the next five years.
It would involve a.
Capital investments that would be we viewed by PURA as part of their ongoing evaluation.
In addition to am I, we're seeking us that support.
To support the state of Connecticut, and targeting to have about 125000 electric vehicles on the road by the year 2025.
Our proposal combines rebates and infrastructure investments over three year period, enabling 2500 homes semi wide for electric vehicle charging and for 3000 additional charge for.
To be enabled and multifamily dwellings commercial centers.
Destination locations than other places.
We would not on the charge ports themselves, but we would invest in the backbone to get the power to the vehicle.
Finally, we're proposing a program to incentivize the installation of 30 megawatts of storage among CLM piece residential customers at 20 megawatt lots on the commercial industrial side.
This program with not involve capital investment by CRP, and we are requesting a modest level.
Success based incentive similar to our energy efficiency programs.
We expect pure to facilitate an extensive review and public comment period over the balance of this year on all our proposals as well as other proposals that are likely to be submitted.
By utility in non utility parties today.
In Massachusetts, we continue to implement the grid modernization plan authorized by regulators more than two years ago.
We expect to complete the authorized projects including infrastructure.
3500 charge ports and utility storage projects on Cape Cod in market is being used in 2021.
In mid 2021, we'll be filing the new three year plan for implementation in 2022 through 2024 time period.
In addition to the regulatory proceedings I just reviewed we've made significant progress on our acquisition of the assets of Columbia gas of Massachusetts.
Slide seven reviews, the key elements of the acquisition.
Okay, 1.1 billion or in cash for the assets the cash will come from.
Combination of the issuance of new parent equity index.
We rank the equity portion in mid June when we sold 6 million shares and that it just over $500 million and proceeds.
We're very pleased.
Let the investor interest in the issuance, which was nearly three times oversubscribed and priced without.
Price without a discount to the prior to his closed.
Well fund the debt portion of the purchase price from a future pairing long term debt issuance.
We're very confident the transaction will be accretive to eversource shareholders. In 2021 first full year after closing and be very positive for Columbia gas customers.
Slide eight reviews, the principal elements of our deep you filing I want to emphasize that this transaction provides both local ownership. So one of the largest gas delivery systems in Massachusetts.
In a pathway for 330000 customers to benefit from ever sources Award winning energy efficiency program.
Our strong safety record and high level of customer service and reliability.
We truly believe it is when a customer Columbia gas customers the communities and for the statement as a whole.
But do you filings, which are available on our investor website under the rate case update section.
Includes a settlement between the same attorney General Governor Baker.
Hartman of energy resources.
And low income car.
Coalition nice work and that resource.
We've asked the deep you to approve the application by September Thirtyth.
The deep you ahead of schedule virtual public hearings.
Yes, 25th and August 27.
To take up the matter.
The settlement structures and eight year rate plan with modest rate increases on November 1st of 2021 in 2022, respectively.
There are additional.
Base rate resets.
On November 1st of 2024, and in 2027 that will be related to the level of investment we expect to make in the Columbia system.
These investments are separate from the pipe replacement capital tracker that all Massachusetts natural gas distribution companies have implemented to help accelerate the replacement of older cast iron and unprotected steel pipe.
And we expect Colombians and continue to replace above 45 miles of its all the time annual.
The agreement maintains Columbia's currently authorized equity component of its capital structure of 53.25%, but raises the authorized return on equity from currently at 9.55% to 9.7%.
As I mentioned earlier, we fully expect the transaction to be accretive in 2021.
To be incrementally accretive in each of the following years.
Based on the integration planning we've undertaken to date. We also remain confident that the transaction would be very beneficial to Columbia gas customers and community.
As you can see on the slide will provide the deep you with a status report on the Columbia system by September of next year.
That report will provide a blueprint of enhancements will make to ensure that Columbia's 330000 customers received the same level of safe and reliable service that our existing 550000 natural gas distribution company customers receive in Massachusetts and Connecticut.
Turning now to slide nine in our offshore wind partnership with more stand on June nine Federal Bureau of Ocean Energy management, our CFO.
Released its cumulative impact study concerning potential development of about 22000 megawatts.
Of offshore wind generation, along the Atlantic Seaboard.
This was an important step in bombs evaluation process.
For the different applications that have been filed today, including to join proposals with of course that one of those being self for the other revolution, where.
The study reviewed the impact of the project, which bone expects to be developed over the next decade.
Impacts were gravy.
From a major to Nick negligible I guess on their scale.
The level of impacts identified in the report or anticipated.
By the offshore wind industry.
They were primarily primary reason that the for developers in the six ocean tracks off, Massachusetts, including our partnership with Orthotec.
Proposed on one nautical miles by one clinical mild spacing for alternatives in the region.
The cumulative impact study found that such spacing would at least partially mitigate the impact on fisheries and navigation.
The cumulative impact study was supported by the Coast Guard early conclusion.
Thats the proposed turbine space.
Which is the widest in the world offshore wind was adequate to support safe navigation.
Search and rescue efforts.
Fisheries mitigation plans proposed through other agencies, such as the Rhode Island Coastal resource management Commissioner will further mitigate impacts on fisheries by providing compensation efficient for negative impacts, resulting from the wind farms.
The response to the analysis by the public was I'd say largely positive.
With Rob renewed emphasis on the very significant contributions these turbans will make to carbon emission reductions in the northeast.
Hi, public comments sessions on the impacts that you were held in the summer and written comments would do on Monday This week.
BOEM is expected to make a final decision on the renewed wind application on December 18.
And as you recall vineyard when is the first new England project in the Q.
We expect that later this summer but.
Both early lease at schedule.
Federal Agency review of South for.
And as we disclosed in the Q1 earnings call. We believe it is very unlikely that south work went to service before the end of 2022, so after that date.
On the other projects, we were able to resume survey work in June in New York State to support our son will rise when filing with bone.
We continue to expect that filing to be made later this year.
And finally last week.
New York issued an RFP for up to 2500 megawatts of offshore wind.
It's our do on this RFP.
By October the Twentyth.
Awards to be made by the end of this year to ensure the winners can benefit from expiring federal tax credits.
We endorsed and expect to bid into that RFP.
Sunrise wind partnership one more than half of New York initial offshore wind RFP in 2019.
That concludes my comments and I'll turn the call back to Jeff for QNX.
And I will return the call to Vanessa just to remind you about how to enter the Q in a Q.
Thank you we will now begin our question and answer session QQ up with your question. Please press Star then one on your Touchtone phone if you wish to be removed from the Q. Please press the pound fine or the hash key and if you're using a speakerphone. Please pick up the handset first before pressing the numbers once again with your.
Question. Please press Star then one.
Thank you for NASA. Our first question. This morning is from Star from Guggenheim Good morning Sharp.
Morning, Jeff Good morning, Phil.
Good morning car.
So just couple of questions here focusing on the core business I mean, you provided in depth slide on the Connecticut grid month filing you had this week.
And you've also stated in the past that the total and my opportunity in Connecticut, and Massachusetts Little over 1 billion of Capex that would be incremental the plan. So if we sort of take this incremental opportunity paired with the accretive Columbia gas deal does it support sort of the top end or are we in a situation where the actual grow.
Both guide can actually change to maybe 6% to 8%. So I guess, how do we see how should we sort of think about that shape that you kind of highlighted especially when you're layering in offshore wind venue and you're rolling growth forward. So.
Is it is it a function of supporting higher end of that growth or does the actual.
Take or change in time.
Okay. Thanks, a question sharing the.
The answer to that is the.
The grid modernization program in Connecticut is really still.
In the midst of it process to review the 11, the 11 categories and really the from the goals are to eliminate barriers to grow in the states green economy transition into a decarbonize future, enabling customers to access resilient reliability.
Secure energy so the the pure.
Processes underway in the exact details of that won't be developed until we too we moved through the entire process so depending on.
I guess, it's premature to to provide guidance there but.
As we move through the process with PURA programs will become clear the spending levels would become clear sort of the time periods would become clear and then it would be.
We'd be able to kind of slot those into the plan, but certainly if you are making.
Smart investments.
Growing rate base to the to benefit customers like like we do and are able to keep your your cost under under control and you have a benefit of of an accretive transaction that should help.
Bolster your your earnings potential and growth prospects going forward.
Okay got it and then just one last question is Connecticut Assembly members sent a letter to pure earlier. This week requesting the suspend the rate increases that went into effect that you guys to spend on July 1st.
Sure. It took this is it like a formal motion for reconsideration enrolled rule on the motion after considering sort of comments any thoughts there and expectations on this development.
Sure certainly there's been.
Some some press related to customer concerns about high Jill.
In Connecticut, and I can assure you that.
We have in the path and we continue to work with our customers in a broad sense and one on one really.
To reduce bills, we have a variety of customer care program.
We were we have extensive and extending our financial assistance programs to help customers manage and reduce future bills. We have award winning.
Energy efficiency.
Programs and support support for that as I mentioned in my script that.
As a moratorium this business shut up.
We're not shutting off customers and we're working diligently to help customers.
In this.
Pandemic situation.
We'll say that.
The built in general are due to much higher built but due to much hotter weather. This June.
Really and more customers working at home I think we were all doing that.
Residential sales at Connecticut light and power spiked in June.
Really.
Residential kilowatt hours were 26%.
Higher this June versus last June and 36%.
Kilowatt hour usage was 36% higher than that may so.
Customer CAD, one bill and they see it then they get the next bill and they see an increase but has been a 36% increase in usage thats really.
Driven by.
I'd say, 85% are more it's driven by the record.
Level of usage in fact anecdotally the weather still then.
Hot afterwards, I mean, we've been going through some heat waves and we've been selling some of record levels of temperatures. So so really.
There's some additional items we have contract.
To provide have pay Matt subsidy, some might say to millstone.
Nuclear plant.
We had some transmission true ups that we do this really just to reflect.
Under collection of transmission.
So overall sort of on a rate standpoint, the rate overall on a customer's bill is only up above 3.5% I think when you look at.
The impacts of the Millstone.
Without that we didnt have that contract the actual rate would have been about $5 lower for a typical customers. So.
Yes.
I think certainly the reaction.
People are hurting we want to help.
Part of the solution here.
And usage is the driver so our energy efficiency programs and other programs that we have we're going to come to the forefront. So we've we're working closely with with all our customers with the.
The regulators and other folks.
To get the message out about the drivers and what can be done to help mitigate usage.
Asia.
Got it thanks, thanks for that elaboration.
You guys can thank you.
Alright. Thank sharp next question is from James Balaguer from BMO capital markets. Good morning, Jeff.
Good morning, Jeff fulfill how are you guys.
Great Great How're you.
Good real real quick question on Colombia, and I don't want to put the.
Cart before the horse or get too granular, but as we're thinking.
About the accretion I know you've spoken about it being.
Creative in the next 12 months.
Post the close but as we think about kind of say, maybe a mid thirtys kind of net income that was being booked.
When Nisource was running it and then there is some shared services can you talk a little bit about how quickly you think.
Those shared services were sort of roll off any sort of guidance you can give us on kind of what the magnitude of that was in.
And finally, I guess, just when do you think you could get it at least approach that kind of.
Allowed our OE that you guys have settled on and that nine seven range.
Okay.
Thank you for over a question and really.
We're very excited.
With this transaction really.
The primary heating source in Massachusetts.
In our gas is is really good.
It does get displaces.
During the year.
Oil that's being used for heating so in terms of.
Expanding the gas footprint.
We believe that the gas delivery infrastructure is critical to own and in the state.
Going forward. So this transaction is.
Very positive from a customer and the company's standpoint.
As you can imagine we're in the mid now of.
In our integration efforts with Columbia, we did and threats.
I'd say very.
Constructive settlement agreement with the parties.
I discussed.
Approval is expected by the in the September.
With steel in the process of parsing out.
What what functions, we can take over on day, one what functions, where we're going to need to have.
Transition agreement, how those how that transition agreement will work over what time period.
So as you say not putting the cart before the horse, but I think our our expectation an IP I'd be disappointed if we weren't able to earning our authorized returns within within a few years there that we have some incremental costs and some.
Processes to improve.
From the gecko and.
Knowing that track record for our ability to do that I'd say very quickly we should be able to too.
Make those processes.
I'd say into our Eversource process again, I'd be disappointed if we weren't able to get up to that level within a few years.
Okay, great. Thank you and just one last I guess question just rounding that up.
The amount of amount of debt that you guys have to do to sort of complete the transactions pretty de minimis, but I'm. Just wondering if you guys had put any sort of interest rate swaps or sort of locked in the interest rate on that at this point.
Well, we use a variety of.
You can hedge some rates you could just.
Try to.
What kutcher here.
Debt profile in terms of identifying times to go so.
I'd say that.
In general we're not we're not we're not big on swaps in place.
We do a little bit more plain vanilla soda I'd say long term debt financing.
Got it more part of your sort of view omnibus debt financing you do for the Corporation, yes, exactly and just kind of similar to how we do it with the rest of the corporation.
Perfect. Thank you guys I really appreciate have a great weekend.
Great to you today.
Thanks.
Our next question is from Sophie Karp from Keybanc Good morning Sophie.
Well Jeff.
Thats on the quarter. Thank you for taking thank you.
Thanks.
Yes, I wanted to cap, maybe a little bit about the offshore wind in the progress there and just.
Are there any concern with everything that's been going on the supply chain with.
The availability of equipment or has anything changed I guess with respect to how the supply chain is developing.
In May you add them how much.
Equipment to the available.
Outside of the U.S., given all of the disruption to hit the income that pandemic.
Good question Sophie we certainly the.
Yes step one and this processes.
Putting together a compelling.
Bid to win an RFP that.
Is both.
Appropriate level.
Our two to achieve our mid teens return target.
Sort of step two is getting through all the getting through the permitting application processes that were saying, but.
A key element of the construction plan is certainly the supply chain as you point out in that I can assure you that.
From the joint venture standpoint from.
Our team working on the project or sets team that that is a priority to to stay connected to suppliers to understand.
What the queues are.
How we can manage those cues to effectively deliver so.
I can't guarantee that they're there isn't a supply or.
Supplier I suppose supply date that somebody might not be able to make because of cobot 19, but I'd say overall I'm comfortable that we've had.
On the high degree of high level interest in.
And oversight over the supply chain soda.
We are on more on top of the current situation.
Okay, Okay fair.
I guess overall big Jason will do that the.
Because the decline as key.
More.
Of these projects.
The development than more come in the mine and turbines that get larger is this trend sort of something that can be hillary of even more by Colby easy because of greater industrial capacity availability maybe.
Thats something that early talk about or is that fair.
Yes, I think that.
Cove.
Covert or no covert.
I think the supply chain costs are.
Coming down and I think that trend.
Over the last several years has been costs.
On the down.
Slow.
Turbans getting larger.
So I'd say that that that's been a trend thats been there.
Despite.
The pandemic and whether or not there's additional manufacturing our industrial capabilities to.
Who are doing something else that now can retool to move into offshore wind I think that could only be even more helpful. So that is this an underlying trend of bigger and less expenses.
Overall, and possibly as you suggest with additional capacity that some manufacturers have that could even provide more opportunities to accelerate that trend.
Hi.
Well, thank you all Jeff Burton.
That's great. Thank you Sir.
Thanks. So our next question is from Durgesh from Evercore Good morning Durgesh.
Good morning, Jeff. Thanks for taking my question and good morning to Phil Good morning together.
Good morning, just can you.
Perhaps comment on what kind of bill increases I'm thinking percentage been increasing you proposing into each you applied in Massachusetts.
I didn't catch in Alaska, and my wet plant.
In the 80 a rate blend in the Columbia gas of Massachusetts settlement that you filed.
Just wondering if if you could share with us what impacts.
Are you proposing to customer bills.
Okay. So.
Yes, good question and I am sorry, I Didnt catch the cut back part of that but essentially as I talked about is no. There's no change.
Till 2021 in 2022, so theres really.
In the near term.
For Columbia gas.
Transaction, when not proposing to make any.
Change that those changes get implemented.
Over the following year in the year after that so so really it is.
The the normal course of business.
In terms of Massachusetts gas activities that aside from the base distribution rate. We have this accelerated pipe replacement, we call GSM gas system enhancement program, and Thats, where I mentioned that I would expect that Colombia will continue with both 40.
Five miles of pipe replacement over the course of.
Okay.
Annual pipe replacement so really.
There is no increase until November 21, and November 22, and I'd say those increases a modest at that point.
Understood. Thank you very helpful color and then just can you remind us off your current.
Consolidated tax bank status, and then if that changes with the Columbia gas acquisition.
We are a tax payer.
Add.
We've always talked about being.
Tax payer in the neighborhood of.
$100 million and not standpoint, so we still continue to be.
That.
We might be in 2020 Morgan.
50, and $60 million range in terms of federal and state taxes combined.
So thats.
Yes, with Columbia, certainly if you have.
This if net income there that would that could change your tax position, but thats. The position. We're in we've done a taxpayer and a 2020.
Slightly elevated from where we had been before so we might be in though 150 160 range.
In terms of course and.
Perfect and just one one really quick one anything in particular on the I appreciate what our businesses, coupled and small fortunate to earnings power, but anything in particular in terms of goal Rick trends there.
There are different from the Leptra gas I mean are you seeing the same dynamic residential being higher commerce, and thats still bit being lower but anything in particular different on the Waterside then qubec electric gas real quick.
No there really isn't.
On the covert front any difference.
The same safety.
Protocols in place the same kind of people working from home.
Issues of usage the Oneq dumping we've seen again not colvin related is just because of the hot humid weather and lack of rain people were had been using more.
Water for irrigation purposes, but not nothing on the covance sizes differ.
Thanks, So much guys. Appreciate all the all the time today. Thank you. Thanks, Eric. Thank you Durgesh. Our next question is from Jeremy Tonet from JP Morgan Good morning, Jeremy.
Hi, good morning.
Good morning, just.
I wanted to start off with offshore wind again here in.
New York recently op.
The RFP that now.
Speaking on 2500 megawatt capacity here.
Deadline seems like it's coming up this fall for proposals I imagine this could be of interest Eversource and just wondering if you could comment on the market dynamics on how you see that they've evolved in these type of competitive bidding process.
Over time.
It seems like they've been pretty aggressive bids and just wondering what your thoughts on here and what's your strategy.
Thanks for the question our strategy is one that.
Targets financial discipline and financial returns that.
Our at the higher end of higher return profile, so that would be in that in the mid teens level. So we work.
Actively with or Stat, and we develop joint proposals I can assure you that we and our proposals we look to uncover every every rock so to speak in terms of.
What's included in that proposal.
Both from a.
Financial and.
Non financial sort of economic development standpoint, so.
Most of these proposals have.
Financial element to them and a sort of economic development element tool.
So we work effectively with our partners to do that certainly that other.
Participant there are some players who purchased leases in the.
Reset lease.
Auction by the federal government that are now.
In the in the in the game I'd say that to prepare RFP.
Our approach has not been too to chase those for two to win a bit but to to be disciplined and to focus what we do well and bid accordingly.
Got it that's helpful. Thank you.
In the first scheduled.
Technical conference to explore whether existing policy can accommodate future offshore wind growth and just wondering if you could refresh us and your thoughts on how you see your transmission assets opposition here in do you think you can.
Comedy future growth just any thoughts on that in general would be helpful.
Sure I think it goes in it goes in phases and certainly in our in our region. So.
In new England.
As you know there's been many large power plant retirements, whether they be nuclear or coal or oil plants that have.
Retired over the last several years.
And those retirements have been.
Happen happened to be in locations that are very conducive for offshore wind to make landfall to connect into.
So there is good.
Onshore into connection.
Abilities as a result of those.
I'd say this robust which are things like that.
We've invested.
Considerable amount of money at our transmission system.
Over the last decade too.
To upgrade and make it more resilient so I'd say in the near term for what's on the drawing board I think that.
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Aside from specific locations, if you're landing in a specific location you might need to do a specific upgrade but in the big picture standpoint, I think the the interconnection points. The transmission system. In this region is capable of handling the.
The therapies that are out there.
X years down the road if those this in a more and more and more desire for offshore wind and more into connection points needed you may run into.
Constraints, where the the interconnection locations that have capacity now may get used up so so I guess from a timing standpoint in the near term I'd say.
The the transmission investments a more localized depending on the landing place and what that substation might look like so in a big picture standpoint.
Where we're in good shape, but as time goes on the capacity could be used up and require additional transmission investments.
Got it so fair to say in the near term.
Key any sizeable transmission project need.
Maybe and point over time, nothing sizable transmission in the near term.
Well.
It could be as I said, they could be a specific substation when you say sizeable.
Yeah.
Billions of dollars, but you could have substation upgrades.
Fiftys millions hundreds and millions of dollars or something like that that.
But.
That would be specific to the location of where though the landing interconnection pointers. So I'd say, it's kind of location specific and not a bride investment.
Got it Thats helpful. Thank you for taking my question.
Great. Thank you Jeremy our next question. This morning is from Mike Weinstein from Credit Suisse. Good morning, Mike.
Hi, good morning, guys.
Hey, Mike.
Great quarter had just wanted to ask about the.
As you think about the new gas business from Colombia is that.
Additive to the.
So the 6% to 8% growth rate overtime or is that.
In line with that growth rate.
Considering the accretion that's going to happen off the bat, bringing up the or are we.
Yes, well, Mike as you know our growth rate is 5% to 7% sorry by that bucket, but I'm glad that.
That's why we're such a high performing company that.
Five to seven good again were sleeping [laughter].
Yes.
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As I I may have said earlier that certainly.
You know as as that property gets to be I'd say hitting on all cylinders once we can get.
All of the integration.
Efforts done we're no longer using transition service agreements were able to to move all the functions over two and Eversource.
System et cetera that.
We feel.
Very good above.
Being able to get to they allowed returns that are in the in the settlement and as you know settlement has been approved yet so but.
Right.
If you look at our history of being able to operate effectively our operations team does a fantastic job in terms of keeping our our system up and running whether it be as we say blue Sky day or whether it be trouble in the system keeping the gas flowing.
Investing appropriately so that we can we do so in NAFTA.
That right now the the contribution from Colombia is not in our guidance numbers. So.
That is going to be helpful. It's going to add to whatever number we had having colombia and have because it's accretive transactions.
Do you think it'll be additive to that growth rate going forward as you roll, especially as you roll forward your capex plans in Europe.
The growth rate.
When you do that next year.
Yes, I think it's.
It's more probable to be additive right to to either move it up in the Ranger.
Hello.
Go above that.
But we're not making any determination of that at this time, but certainly.
This financial benefits of the transaction as I as I mentioned as well as customer community in state benefits to us moving in on that system. So.
That's right, we feel it will be additive to that to the story.
Great and Connecticut grid model, how has that the financing. So that program. Then is that reflected in your current plans, especially since some of that goes out beyond the current five year plan.
It's all that dinner already reflected in the plan or is that it's going to require some more financing plans approved.
Just to be clear on the written by the across the three states. The only grid modernization investments that have been our current.
Plan is in Massachusetts, where we have approval to spend $233 million on a variety of programs, including.
Battery storage.
EDI infrastructure technology enhancements et cetera. So nothing has nothing in our plan right now for New Hampshire for Connecticut, and the reason for that is has been approval of any plans there. So.
As so so to answer your question directly that there's no financing need because we don't have anything in the plan right now.
For grid modernization of the Massachusetts.
In fact, we go through the the processes and the various states.
And program development spending get identified then we'll have to determine what that does to the to the investment plan, whether how we're going to finance that et cetera, but right. Now there is nothing in the plans was no financing associated with it.
Okay, great. Thank you very much.
Thanks, Mike.
Next question is from Paul Patterson from Glenrock Good morning, Paul.
Good morning, guys.
To call.
So.
Back to the Connecticut grid mode.
I apologize if I missed this would how should we think about that impacting rates I know you've got some capex. It but also maybe there might be some savings are they in line can we get a little bit of a sense about.
How that works.
Yes, I think that.
It depends on what the the size of the programs are that the.
The pure would approve and going forward so.
It's really difficult today answer specifically.
What that is I mean, some of the some of the some of the spending we're going to have to do as I mentioned, we're going to have through.
Replacing our meters anyway. So if we work on a on a my.
Program that.
We will be buying am I meters and set of other meters. So how much of that is is incremental.
Now what level of battery storage or the infrastructure.
The state what so right now.
It would just be hypothetical and until we get some approval from the.
From PURA it.
There's really no impact on.
On rates because there's no there's no programs in place in.
In Connecticut right now.
Okay.
Hi, Good thing overall I'd say overall, if you look at the Massachusetts example.
It's modest in this in the sense of the spending.
It's $233 million over over a multiyear period, so it's less than $100 million.
A year type of thing so even if you took if you took that kind of approach.
It's not going to have a dramatic impact.
Okay.
Well.
So to Millstone you correctly, that's $5 a month effectively of the bill increase that.
Thats, causing to stir in Connecticut right now.
Well.
What I said was.
In Connecticut.
And you can imagine right that we're all working for call Im working from home I'm sure.
Working from home and.
Yes, so people are not.
Used to having their condition around all day I know that.
Before I left.
In the morning, I adjust my temperature of thermostat or have a of the nest adjusted because you're not there and now people. There 24, seven and it's been it's been really it's been hot and.
I said that weather is really the.
Has caused the increase in usage I mean in the Bill I mean.
36% more usage from our kind of in residential customer segment than the previous months. So yes, we're using 36% more than you were using in May and June and if you want to go back to last year June to June using 26% more so either way.
Okay.
He is using a lot more and really the the.
Great.
It's a bill is the rate times the usage of usage is up dramatically the rate in the calculation. This is up above.
3.5%, if you look at the total wafers.
The distribution charge the energy charge has gone down so so what I said was millstone. This we have.
Requirement.
To buy power haven't millstone as a charge on the bill for that.
For that purchase add what I've said in terms of the $5 less if that wasn't there we weren't buying that power there that the the typical customer bill EA access seven 700 kilowatt hours and kind of the typical customer you would it take that typical customer bill.
We would've been down by $5. So.
As opposed to increasing so it so that that that is a part of it usages upon that we had some transmission.
Under collection that you can you move into the next period to collect so all those all those things combined.
Our impacting the customers Bill and.
We're trying to to work with customers and and and regulators whatever on this first of all I know you or I know you guys think it's very seriously.
Wondering though is that this is a little unusual.
In that we've had legislative leadership, we get this letter we've got to the per almost immediately responding.
We're seeing we look as you know we're looking around the country would have you when we see this it is rather.
What are the things it's come up in the media is this focus on Millstone, but then also as you know we've got offshore wind we've got other calls coming in and I'm just wondering.
Laid out here, how do you guys see.
I know you guys are trying to manage I know you guys are doing energy efficiency and what have you, but how should we think about when we see something.
Like this.
Sort of a blip in other words, all the things that you're talking belts are perfect storm here thing or should we think about.
Perhaps other.
Issues too to manage the situation over time, if you follow what im saying.
I do I, followed, saying, we take bill impacts very seriously any any decision we make for investment opportunity. We we fully assessed the bill impacts at the end today.
Customers are paying for these investments and.
We have a responsibility and we take a very seriously to make sure that.
The impact there.
I'm not.
Significant or not.
The the price that with the cost of the improvement is worth it and if you really we if you look at our history.
I put our track record up against anybody in terms of ability to take costs out of the system Weve.
Post merger, we took 5% owned them out of the business every year over $250 million.
When we've been in for recent rate reviews.
The headline story has been our own them cost today as part of the rate filings are less not not by inflation just absolutely less today than they were 10 years ago at our surface is 30% to 40% or more higher so.
We take it seriously too.
Keep our cost down and if we're putting capital in that whenever it comes out and.
But it is something that.
We look at impacts on a custom bill.
But I do think two year to year kind of analogy. It is a beta perfect storm in the sense of everybody's home. The weather has been extraordinarily hot and I think the usage is really what what the driver is and I think as people see what the real components of the change for that.
You know a governor on the legislature that regulators customers will will have a better appreciation that it's more related to usage than anything 80, 80% to 90% of its usage really.
Okay, great. Thanks, so much guys thinking there thanks.
Thanks. Paul next question is from my end Levine from Citi. Good morning, Ryan.
Good morning.
And do you see any do you see any green hydrogen or other hydrogen based opportunities to leverage or platform and have you started to pursue any these potential opportunities.
Hi, Thanks, So the question and certainly hydrogen has been sort of.
In the news or it's a topic and.
Whether it be transportation or or other or other usage and I'd say, we're in the we're in the phase now where were evaluating the possible uses.
Usage of hydrogen.
You know and various aspects of our business again, whether it be up.
An alternative for transportation or whether it be.
For some other component of introducing it to our gas distribution infrastructure. So I'd say that at this stage, we're tracking we're tracking progress globally.
You know.
We'll we'll.
Keep an eye on it but we have not say identify them.
Specific applications at this stage.
Okay.
Thank you and maybe just one follow up.
On that point you are you looking at anything to integrate Premier Wen development opportunities.
Hi, Jay or is it more for the LDC a transportation fuels.
Well as I said, we're tracking.
All possible.
Applications, there, but there hasn't been any specific identified on the on the offshore on the offshore wind side at this stage.
Okay. Thank you.
Thanks, Ryan next question is from Julian from Bank of America, Good morning Joanne.
Hey, good morning, Thanks for the time guys I'll try to make a quick.
So.
Yes.
Started the call here.
On on the timing for updates with CMS and otherwise.
The expectation.
Yeah.
Into the Fourq you will board and then if you think about some of these other capex items.
Probably make it into the next iteration in 22, I'm just thinking about.
The Connecticut and mass both on the am I and the the storage process.
When do you expect to make these updates and roll forward and integrated all at once if you will.
Perhaps going back to Rick the.
The core of Yours question, if you will.
Yes.
Thanks for your question Julien.
Well the.
The timing lines up just as you say that in terms of the expectation for any.
Real finalization of programs et cetera in the Connecticut grid modernization will be.
Getting approval for Colombia at the end of September so it all so to need the.
Tightens up times together, so that we can roll that into the update that we do in the in the fourth quarter. So that that would be my thinking at this stage.
It's something would happen to change that but I think the base thinking is that they would all be rolled into the next update.
Alright.
Thank you and then quickly on the offshore I don't want to beat up too much but can you just to fund the parameters of whats.
The opportunity for you all just in terms of timing.
Sides of the project when you think about your own.
Size availability and how that lines up against the resource RFP that they're looking for so we want to kind of frame the timing the synergies and the the total side as you see it today again, I'm not going holdings goodies broadly the parameter.
Well.
A couple of the general parameters are our our two lease areas.
Can develop say 4000 megawatts of offshore wind. We currently have 1700 10 megawatts of offshore wind under contract. So ill. So just the im not quite half of the lease areas or under contract right now so in terms of what's available to us we have.
Side of 4000 megawatt opportunity.
As we've identified up and down the New England States. You know include and then if you include New York into that.
Because more capacity that is.
Being sought by the state than than what the lease all the leases combined.
Had the opportunity to produce so we think that.
Our leases of well situated in terms of their proximity to to shore.
Our leases are.
Well situated in terms of ocean depth.
Our leases of well situated in terms of wind speed. So we think that.
And plus we're into those leases at.
A small amount of money compared to the 130 plus million. The recent lease owners bought their leases that so so from a cost standpoint from a from a lease location and size I think the opportunity is still very strong for us in the.
Future in the RFP is that are out there are only going to get more as we go forward.
Timing settlements on New Hampshire Lastly.
So we have a rate proceeding.
New Hampshire.
It has been.
Delayed a bit I'd say for from the Covance situation, but we are looking to finalize that later in this year probably.
And in November with with rates effective in December.
But as you recall with there but.
In New Hampshire, it's a kind of a two phase process. So we received a temporary rates in July of 2019, so whenever we get the file rate decision that kind of go retroactive back to that point.
So but the to answer your question directly the final decision.
We're looking at the November timeframe with.
Rates effective December for us.
Hi, Thank you very much the care that include thank you Julie.
Thanks.
Next question is from David Arcaro from Morgan Stanley David.
Hey, Thanks, so much for taking my question I was wondering if you could run through the equity needs in the forecast right. Now in was also curious if you would anticipate that capex associated with growing the Columbia gas business overtime.
In the kind of yet to be approved Connecticut grid, not capex would also potentially need any additional equity on top of the base plan.
Thanks, So a question David Hope you have during a family of doing well.
So.
What's in our plan right now is about $700 million of of equity needs to support.
Our plan that we've laid out that goes through 2024, so in that plan.
Colombia was not in that plan. So we did a separate financing for Colombia.
Going forward, we'll have to incorporate Columbia into our our plan going forward and then as I mentioned earlier, we do not currently have any spending for Connecticut, or new Hampshire grid modernization in the plan.
So the 700 supports the current.
$14 billion Capex plan that we have.
As we.
Look to update that going forward, we're going to have to consider.
Cash flow cash from operations, what we have maturing what we might need to do so I'd say that's to be determined and would be disseminated when we update the.
Our plan at the Q4 call.
Okay got it that makes sense. Thanks. So much. Thank you. Thank you Dave It looks like we have one more question during the call in the queue Travis Miller from Morgan Morningstar Good morning Travis.
Good morning, Thanks for squeezing me in their own be real quick just two quick ones on Colombia, one what is the pipe replacement.
Specs as a share of total Capex was first one then second one if you're able to close by the end of October would there be any material earnings impact this year.
From Columbia.
So I'll answer the second question first.
No nothing material.
Fit we.
We expect to close soon after getting approval from the deep you there could be a few months of.
Operations in the numbers, but I'd say nothing material is expected for those that timeframe.
In terms of the exact percentage of GE Sep two total I'm going to have to I'm going to have to get you have the information on that I don't have that off the top line ahead, Travis where we can get back to you on that.
Okay. No problem, then two quick ones on offshore wind one the with the New York RFP is there any chance that you guys could be more competitive either lower costs or.
Or or better synergies.
With Sunrise wins relative to other.
Other bidders who might have.
No no stake there right now in New York.
And then that was the first and then second new Jersey's thrown out all winter big numbers on offshore would you be interested in doing everything in New Jersey.
So in terms of the second part.
Good question are these areas really.
Our.
Best suited for new wing to reach any RFP that go on a new England are far into New York, New Jersey would be.
A bit far for RBC areas to be truly effective.
In meeting so so I'd say new Jersey.
Part of our strategy.
In terms of our competitive position.
I'd like to say, we'd be competitive anywhere, whether we have contract or even if we don't I mean that.
And certainly there are advantages of having contract is there's advantages of.
Having plans already in place and an understanding of the area, but I think that are I am thrilled that our partner is the worldwide leader and offshore wind development with doors that we are where the I'd like to think the.
Sorry.
Leadership role in terms of our transmission and our local knowledge and ability so I like our chances whether we.
Already have existing contracts or don't have existing contracts to win RFP things that come out, but certainly there are advantages. If you. If you do have contracts in place I'd say.
Okay, great appreciate it.
Alright, Thank you Travis and that wraps up all the questions for today. So we want to thank you very much for joining us and please follow through with any emails or questions by phone. If you have any have a great day and a great weekend.
Thank you. Thank you.
Thank you ladies and gentlemen, this concludes our conference. Thank you for your participation you may now disconnect.
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