Q3 2020 Ameren Corp Earnings Call
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Greetings and welcome to the Ameren Corporation's third quarter 2020 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded it is now my pleasure to introduce your host Andrew Kirk Director of Investor Relations for Ameren Corporation.
Thank you Mr. Kirk you may begin.
Thank you and good morning on the call with me today are Warner Baxter, Our chairman, President and Chief Executive Officer, and Michael named our Executive Vice President and Chief Financial Officer, as well as other members of the management team joining remotely.
Wondering Michael will discuss our earnings results and guidance as well as provide a business update then we will open the call for questions before we begin let me cover a few administrative details this.
This call contains time sensitive data that is accurate only as of the date of today's live broadcast and redistribution of this broadcast is prohibited to assist with our call. This morning, we have posted a presentation on the amarin investors Dot com home page that will be referenced by our speakers.
As noted on page two of the presentation comments made during this conference call may contain statements that are commonly referred to as forward looking statements.
Such statements include those about future expectations beliefs plans strategies objectives events conditions and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated.
For additional information concerning these factors. Please read the forward looking statements section in the news release, we issued yesterday and the forward looking statements and risk factors sections in our as in our filings with the SEC Lastly, all per share earnings amounts discussed during today's presentation, including earnings guidance are presented on a diluted basis unless otherwise noted.
Now here is Warner Thanks.
Thanks, Andrew Good morning, everyone and thank you for joining us.
Before I jump into our discussion of third quarter results and other key business matters I will start with a few comments on probationary team.
To begin I hope you your families and colleagues are safe and healthy during this challenging time.
While COVID-19 has driven a great deal of change I can assure you that one thing that remains constant and amarin is our strong commitment to the safety of our coworkers customers and communities. So.
So too is our strong focus on delivering safe reliable cleaner and affordable electric and natural gas service. During this unprecedented time.
We recognize that millions of customers in Missouri, and Illinois are depending on us.
I can't stress enough appreciation to my co workers, who have shown great agility innovation determination and a keen focus on safety, while delivering on our mission to power the quality of life.
We continue to carefully monitor the impact of corporate banking on our electric sales liquidity and supply chain.
To date these impacts will be manageable largely in line with our expectations.
In addition, our team continues to successfully execute our strategy across the entire business.
Looking ahead.
We remain focused on executing our strategy, including employing our strong safety practices as well as continued exercise financial discipline to mitigate the impact of COVID-19.
At the same time, we will look to capitalize on key opportunities that we've identified during the last several months, including benefits. We are realizing from our digital investments and other efficiencies in our operations.
Turning now to page four for an update on third quarter results and 2020 earnings guidance.
And we are delivering results.
And did you good is becoming more reliable.
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We are implementing and enabling cleaner energy to buy renewable energy and transmission investments.
And our customers electric rates remain among the lowest in the country at approximately 20 per cent below the national average.
Of course, we're not done.
Continue to make critical investments across our businesses to modernize the energy grid.
In addition, we will continue to transition our generation portfolio to a cleaner and more diverse portfolio in a responsible fashion.
That transition will include significant investments in renewable energy whichever cover in more detail in a moment.
And we will continue to invest in innovative technologies, including digital technologies to meet and exceed our customers rising expectations.
Consistent with the M M, Missouri Smart energy plan, we're putting meaningful dollars to work to modernize the energy grid and to serve our customers better.
I am pleased to report that in July payment, Missouri began installing the person 1.2 million electric smart meters for customers.
Installation of these smart meters over the next several years, one hands for liability provide more visibility and choices for our customers to control their energy usage.
Or am in Illinois, electric and gas distribution customers already seen these benefits as we completed the installation of over 1.2 million electric smart meters and over 830000 gas modules in 2019.
We have also been working hard in the regulatory arena to earn pair returns on our investments.
Because we're discussing our first and second quarter earnings calls you electric rates went into effect on April 1st of this year as a result of a constructive settlement and Amarin Miseries electric Great review.
In addition, it's Michael will cover in more detail later, we will continue to progress through our electric and natural gas regulatory proceedings in Illinois.
In November and December.
Consistent with abuse that we express during their second quarter call. We do not expect comprehensive energy legislation to be addressed during the veto session and 2020.
Looking ahead, and we will continue to engage with the key stakeholders and an open and transparent fashion to better understand their views and advocate for constructive energy policies that support investment and critical infrastructure.
Moving am in Missouri regulatory matters or not.
October 16th we have filed requests with the Missouri Public Service Commission to track and have her in a regulatory asset shredding COVID-19 related costs incurred have any COVID-19 realized cost savings.
September 30th 2020, we have accumulated approximately $9 million of net costs and we'd requested additional troops next year.
If I requested approved by the Missouri, PSE recovery and timing of the recovery of these costs would be determined as part of the next electric and gas rave reviews.
If he has he is under no deadline to issue orders and we cannot predict the ultimate outcome. This matter.
Speaking of future right reviews, and as we discussed during our second quarter Conference call. We continued to expect to file the next am in Missouri Electric wait review and the first half of 2021.
In addition, we also expect to file an almond, Missouri natural gas right review during the first half of 2021 as well.
Turning out of pay seven and misery integrated resource plan.
Further we expect to see an extension of the operating license of our carbon free Callaway nuclear energy center beyond the current expiration date of 2044.
And we will continue to implement robust energy efficiency and demand response programs.
Importantly, our plan represents a responsible transition of our portfolio that takes into consideration environmental stewardship system reliability and customer affordability.
Our plan Leverages, the very low cost generation that our customers enjoy today and use that as a bridge to enable us to add greater levels of intermittent resources in the future all insurance system reliability.
Our plan also intends to leverage important research and development investments by the public and private sectors and incorporate advances in clean energy technologies over time to achieve our net zero carbon emissions coal.
We're very excited about this transformational plan and are already taken steps to implement it.
In September we issued a request for proposal that will enable us to assess and take the appropriate next steps on solar and wind projects.
We'll deliver the best value to our customers consistent with that RFP.
Response to our request have been robust we are in the process of assessing those proposals as we speak.
We will provide an update on our assessment as well as our five year capital plan for 2021 to 2025 during our year end conference call in February.
Consistent with our approach in the past we will consider a variety of factors for we include such major projects into our plan.
Having said that one thing is clear our RP includes significant incremental investment opportunities, including approximately $3 billion by 2030.
As I said before we are very excited about our transformational plan as well as how amarin and our industry are leaving the country and the world and executing responsible and achievable plans to significantly reduce carbon emissions and in so doing creating a cleaner and sustainable energy future.
Speaking of creating a cleaner and sustainable energy future, let's move now to page eight for an update on our $1.2 billion loan generation investment plan to achieve compliance with Missouris renewable energy standard through the acquisition of 700 megawatts of new wind generation at two sites in Missouri.
Good progress continues to be made at both facilities.
All of the construction and related installation of key components for the 400 megawatt facility have been completed and tested in the units will be completed over the next several weeks.
As a result, we expect the 400 megawatt facility to be in service by the end of 2020.
For the 300 megawatt facility, we are working closely with the developer to monitor the shipment and installation of remaining facility components.
As we've discussed on prior earnings calls this year, we have experienced some delays in the project due to several factors, including those related to challenges in the global supply chain through to COVID-19 as well as in the transportation of certain components.
As a result, we expect a portion of the project are approximately $200 million of investment to be placed in service in the first quarter of 2021.
We do not expect this to have a significant economic consequences or reduce the production tax credits for this project because of the recent rule changes made by the US department of the Treasury to extend the in service criteria by one year to December 31 2021.
Moving to page nine looking ahead through the end of this decade, we have a robust pipeline and investment opportunities of over $39 billion that will deliver significant value to all of our stakeholders that makena and integrate stronger smarter and cleaner.
This robust pipeline now includes the new renewable generation proposed in the preferred plan, the Missouri integrated resource plan, which added approximately $3 billion of incremental investment opportunities in 2020 to 2029.
Importantly, these investment opportunities exclude any new regionally beneficial transmission projects that would increase the reliability and resiliency of the energy grid as well as enable additional renewable generation projects.
Of course, our investment opportunities not only create a stronger and cleaner energy grid to meet our customers' needs and exceed our expectations that.
But they will also create thousands of jobs for local economies.
Maintaining constructive energy policies to support robust investment in energy infrastructure will be critical to meeting our country's future engine needs.
And delivering on our customers' expectations.
Moving to page 10, a few moments ago I mentioned that we are focused on delivering a sustainable energy future for our customers communities and our country.
Consistent with that focus we recently published a state quarter presentation called leading the way to a sustainable energy future, which is Amarins vision statement.
This presentation demonstrates how we have been effectively integrating our focus on environmental social governance and sustainability matters into our corporate strategy.
This slide summarizes our sustainability value proposition for environmental social and governance matters.
We have a strong environmental focus which is in part demonstrated by the Missouri integrated resource plan I discussed earlier.
Importantly, the preferred plan discussed earlier is consistent with the objectives, the Paris agreement and Liberty Global temperature rise to 1.5 degrees Celsius.
Emissions from our coal fired energy centers are well below state and federal limits and on natural gas pipeline system has no cash or wrought iron pipes.
We also have a strong long term commitment to our customers and communities to be socially responsible and economically impactful Thursday.
There's never been a more important time than now to be a leader in this area.
In terms of COVID-19 relief, we have been tirelessly working to help our customers in need including implementing disconnection moratoriums, providing special bill payment plans, providing over $15 million critical funds for energy assistance and other basic themes.
And we have set up and spoken out against racial injustice and discrimination and have taken actions to enable our company and community to further embrace diversity equity and inclusion.
And we were honored to again be recognized by diversity, Inc. It is one of the top utilities in the country for diversity equity and inclusion.
Finally, our strong corporate governance is led by a diverse board of directors focused on strong oversight that's aligned with yours. She matters in our executive compensation practices include performance metrics that are tied to sustainable long term performance and progress towards a cleaner sustainable energy future.
Anchor you to take some time to read more about our sustainability value proposition.
One final presentation at Amarin investors dotcom.
Moving to page 11 sum up our value proposition the consistent execution of our strategy over many years and on many fronts as positioned us well for future success.
We remain firmly convinced that the execution of this strategy in 2020 and beyond will deliver superior value to our customers shareholders and the environment.
In May we affirmed our five year growth plan, which included our expectation of 6% to 8% compound.
The annual earnings per share growth for the 2020 through 2024 period.
This earnings growth was primarily driven by our approximate 9% compound annual rate base growth from 2019 through 2024 and compares very favorably with our regulated utility peers.
I am confident in our ability to execute our investment plans and strategies across all four of our business segments. As we have an experience and dedicated team to get it done.
In addition, we will continue to advocate for constructive regulatory frameworks and energy policies to support these important investments for the future.
Further our shares continue to offer investors a solid dividend.
Last month Amarins board of directors expresses confidence in our long term growth plan by increasing the dividend by 4% seven consecutive year with a dividend increase.
Given the midpoint of our 2020 earnings guidance range that I discussed earlier, our dividend payout ratio is approximately 59%.
Which towards the lower end of our Companys targeted dividend payout ratio range of 55% to 70%.
This factor combined with our strong earnings growth expectations.
Yes, well for future dividend growth.
Of course future dividend decisions will be driven by earnings growth. In addition to cash flows and other business conditions.
Together, we believe our strong earnings growth outlook combined with our solid dividend results in an attractive total return opportunity for shareholders.
Again, thank you all for joining us today I'll now turn the call over to Michael.
Thanks, Warner and good morning, everyone. Turning now to page 13 of our presentation yesterday, we reported third quarter 2020 earnings of $1.47 cents per share compared to earnings of $1.47 cents per share for the year ago quarter.
The key factors by segment that drove the year over year results are highlighted on this page.
Ameren transmission any Ameren, Illinois natural gas earnings were up three cents and two cents per share respectively, reflecting increased infrastructure investments.
Ameren, Illinois electric distribution earnings increased one cents per share reflecting increased infrastructure in energy efficiency investments, partially offset by a lower expected a lot of return equity underperformance based rate making.
And Missouri, our largest segment reported earnings declined two cents per share compared to the prior year.
The comparison was primarily driven by a lower electric sales of eight cents per share due to both milder than normal temperatures in the third quarter compared to warmer than normal temperatures in the previous year as well as lower weather normalized sales, primarily due to the impacts of Kobe 19.
And Missouris earnings also reflected lower EMEA performance incentives of three cents per share compared to the year ago period.
These unfavorable factors were partially offset by new electric service rates effective April Onest, which increased earnings by eight cents per share compared to the year ago period, as well as lower operations and maintenance expenses, reflecting disciplined cost management, which increased earnings by four cents per share.
And finally, ameren parent and other results decreased four cents per share primarily due to the timing of income tax expense, which is not expected to impact full year earnings and increased interest expense, resulting from higher long term debt outstanding.
Moving now to page 14 of our presentation I'd like to briefly touch on key drivers impacting our 2020 earnings guidance.
As Warner stated, we narrowed our 2020 earnings guidance to a range of $3.40 to $3.55 per share from $3.40 to $3.60 per share.
This guidance range assumes normal weather and the remaining three months of the year as well as reflects sales updates since our second quarter earnings call in August primarily related to COVID-19.
For the year, we expect total weather normalized sales volumes are going to be down approximately 2%.
Broken down by customer class, we now expect 2020 commercial sales to decline approximately 6.5% industrial sales to decline approximately 3% and residential sales to increase approximately 3.5%.
Overall, our update today is largely consistent with our expectations outlined our call in may in terms of both total sales and EPS impacts for 2020 due to COVID-19.
Before moving on let me briefly cover electric sales trends.
And the Illinois electric distribution for the first nine months of this year compared to the first nine months of last year.
Weather normalized kilowatt hour sales to Illinois residential customers increased a little over 2.5% and weather normalized kilowatt hour sales to Illinois, commercial and industrial customers decreased 6.5% and nearly 8% 8% respectively.
Recall that changes in electric sales in line no matter the cause do not affect our earnings since we have full revenue decoupling.
Moving on to other guidance considerations select earnings considerations for the balance of the year are listed on this page.
As Warner mentioned earlier, we remain very focused on maintaining disciplined cost management for the remainder of the year.
Our focus in these areas enabled us to effectively address the headwinds we have faced from coda 19 to date.
Moving now to page 15 for an update on the Ameren, Illinois regulatory matters.
In April we meet our required annual electric distribution rate update filing.
Under Illinois performance based rate, making we're required to file annual rate updates to systematically adjust cash flows over time for changes in cost of service and it drove any prior period over and under under recovery of such costs.
In late September the ITC staff recommended a $49 million base rate decrease compared to our rate compared.
Compared to our request of a $45 million base rate decrease.
A decision is expected by December with new rates expected to be effective in January 2021.
Earlier this year, we also filed with the SEC for an annual increase in Amarin, Illinois natural gas distribution rates using a 2021 future test year.
And and has since update our request to in September So rebuttal testimony.
We are requesting a rate increase of $97 million, while the ICC staff has recommended an increase of $69 million.
A decision is expected by January 2021, with new rates expected to be effective in February 2021.
Turning now to page 16 for an update on financing activities.
I'd like to highlight an important milestone recently reached for wind generation investments on October 9th and Missouri issue $550 million or 2.625% Green first mortgage bonds due in 2051.
This issuance in like the first green bond offering for the company as the lowest coupon an amorous ori or any amarin issuer has secured on 30 year debt.
At the time of issuance. It was also the fifth lowest 30 year coupon ever in the power and utility industry.
Proceeds from the issuance will be used to fund a portion of the 700 megawatts of wind generation investment.
We also expect to settle a portion of the equity forward sale agreement before the end of this year with proceeds also used to fund a portion of the wind.
Generation investment.
We expect to settle the remainder of the equity forward sale agreement with a 300 megawatt wind project was completed in the first quarter of 2021.
Finally on October 15, Ameren Corporation, redeem $350 million of 2.7% senior unsecured debt at par there was mature on November 15th.
A portion of the proceeds from the in our million dollar issuance Banro Corporation in early April was used to fund the repayment.
Before moving on I'd also like to mention that we expect Hamlin, Illinois to issue long term debt this year to repay short term debt.
Moving now to page 17, we plan to provide 2021 earnings guidance when we release fourth quarter results in February next year.
Using our 2020 year to date results and guidance as a reference point, we have listed on this page select items to consider as you think about the earnings outlook for next year.
Beginning with his area as previously noted the 700 megawatts of wind generation are expected to be substantially in service by the end of 2020.
With a portion of the 300 megawatt facility expected to be in service in the first quarter of 2021.
As a result, we expect to see contributions earnings from these investments beginning in 2021.
The 2021 earnings comparisons also expected to be favorably impacted in the first quarter next year, but increased Missouri Electric service rate that took effect April Onest 2020.
We also expect higher weather normalized electric sales in 2021 compared to 2020, reflecting the continual improvement in economic activity since the code 90, Lockdowns in the second quarter of this year.
Further we expect to return to normal weather in 2021, while increasing our Missouri earnings by approximately four cents compared to 2020 results through the third quarter, assuming normal weather in the last quarter of this year.
As a result in Missouri PSC approval of our requested changes in the way we account for Callaway scheduled refueling and maintenance expenses, we expect the amortization expenses associated with the fall 2020 outage to be approximately seven cents per share higher in 2021 in the amortization expense expected to be realized in 2020.
The fall 2020 outages are expected to cost approximately 11 cents per share will be amortized over approximately 18 months starting in December of this year.
Moving on earnings from our FERC regulated electric transmission activities are expected to benefit from additional investments in human, Illinois, and eight dxi projects mean under forward looking formula rate, making.
For Amarin, Illinois Electric distribution earnings are expected to benefit in 2021 compared to 2020 from an additional infrastructure investments made under the Illinois performance based rate making.
The allowed ROE we enter the final via the average of the 2021 30 year Treasury yield plus 5.8%, which applied to year end rate base.
From Illinois natural gas earnings are expected to benefit from higher delivery service rates based on a 2021 feature test here and from infrastructure investments qualifying for rider treatment.
Finally, the issuance of common shares under forward sale agreement to fund a portion of our wind generation investments and under our dividend reinvestment in employee benefit plan as well as additional equity of approximately $150 million in 2021 are expected to unfavorably impact earnings per share.
Of course in 2021, we will seek to manage all of our businesses to earn as close to our allowed returns as possible, while being mindful of operating and other business needs.
Finally, turning to page 18, I will summarize we have a strong team and are well positioned to continue executing our plan. We continue to expect to deliver solid earnings growth in 2020, as we successfully execute our strategy and navigate the impacts of pillar 19.
As we look to the longer term, we continue to expect strong earnings per share growth driven by robust rate base growth and disciplined cost management.
Further we believe the growth compares very favorably with the growth of our utility peers and amarin shares continue to offer investors a solid dividend.
In total we have attractive total shareholder return story that compares very favorably to our peers. This concludes my prepared remarks with an asset we now will invite your questions.
Thank you, we'll now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad. The combination will indicate your line is in the question Kim.
Back to you if you'd like to remove your question from Q.
We ask that you. Please limit your time to one question and one follow up as necessary.
Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Jeremy Tonet with <unk>.
Morgan. Please proceed with your question.
Hi, Good morning, Jeremy from way how are you doing.
Great. Thank you.
Terrific.
Just wanted to dig in on 2021, a little bit more if I could and would you be able to provide any additional color on the sales outlook across different sectors residential commercial industrial and your 2021 earnings considerations and what local trends are you seeing and how do you expect these trends to change over 2021 with Kobe to recovery and then lastly are there any.
Additional considerations for your gas versus electric operations under continued cobot impacts.
Yeah, so Jeremy so lots to unpack there.
Clearly Michael laid out some of the trends that we're seeing in 2020 and now obviously, we've talked a little bit about 2021 in the past so Michael lunch and maybe touch on some of those trends and then we can sort of look at the biggest business and sort of the second part of that question yet yeah. Good morning. Appreciate the question at what we did last quite a bit of detail obviously on to.
2020, and we continue to I think track pretty well with where we expected things to do is to come out as we talked about the beginning in the year.
I think for the most part so it's coming in about where we expected the mix is a little bit different do.
Do you think about 2021 that we are doing a lot of different scenarios, Jeremy and we're thinking about how this recovery is going to continue and we know we are obviously modeling a recovery to continue into 2021 and were looking hard within each of those sectors and obviously you've seen the strong piece on the residential side in the industry.
Well as is come back for the most part commercial is the area. We're spending a lot of time on just really trying to understand.
What that impact will be for retail et cetera.
So we Havent, obviously provided what we're going to done exactly see for 2021 years, because we want to really see or 2020 continues to finish out here being really thoughtful about it I mean to be honest I am not seeing a lot of scenarios, where we would gain all of that back I mean, I'll be honest about that but we clearly do continue to to see the recovery continues.
In place now all of that is premised on the fact that we Wouldnt go back any sort of shelter in place orders and for the most part.
Where were impacted by earnings here in Missouri, We're pretty well opened up I mean, you do.
Have certain sectors operating as unlimited capacity restaurant store retail those kind of things and so we're assuming that some of that continue to come back but again all that is premised on the fact that we wouldn't have any significant sort of shelter in place at the moment, Michael I think that bed. So thats a great summary, so I think Michael summed it up well.
We continue to see fairly pretty much what we expected at the outset, we expected a modest recovery over time, that's what we're seeing and we'll give more guidance of course would come out in our February conference call with regard to 2021 and beyond a little bit or give us. Some more perspective, you asked about the gas business and so keeping.
Hi.
Big gas business, we have a small gas business, Missouri, but the biggest business in Illinois Mets decouple, assuming they in terms of covered 90 and the implications there are are really.
Not not existed in terms of the overall impacts on on on sales and margins and the like yes. That's exactly right. One army we are de coupled from residential and small noncommercial customer, Illinois, which is probably about 90% of the margin.
Over there Jeremy so that that's probably the really the way to think about that for 2021.
Got it Thats very helpful. Thank you and maybe just pivoting a bit over to.
To the Missouri rate cases, and what are the primary drivers of the timing of Missouri rate cases here and do you expect to incorporate any IR elements in your electric filing around the plant retirement.
Are there any notable test your guidance is under a first half 21 filing versus filing now.
Edge areas show. So this is one of you know look I think that.
Well, we'll be able to provide a lot more detail when we ultimately file the rate case, but as we said before when we think about filing. This next rate review, we're going to be mindful of the fact that we have some big wind generation projects by renewable wind generation projects that we expect to be substantially in service by the end of the year. So thats thats clearly a driver.
We are always an opportunity to true up or the costs and sales those would obviously be drivers as well, but to say there'd be any significant variations at this point in time it'd be premature Marty and his team are diligently putting together that that rate revisions resettable, we'll put together in the first half of next year and so.
I think the best thing to say is that obviously the wind generation is a big portion of it as well as the smart energy player right. This by keeping that lose focus on the fact that we're making significant investments in Missouri. So those are some key drivers to be looking towards them and we'll be able to give you a better update when we file that plan sometime in the first half of next year.
Got it that's helpful. I appreciate it. Thank you thanks, Jeremy have a good day.
Thank you. Our next question comes from the line of business to help out with Evercore ISI. Please proceed with your question.
Good morning, good morning.
Hey, good morning, guys. Thank you for taking my question I am sorry, I didn't realize it was a new maybe.
Maybe you you guys talked about.
And so as you're going be cautious and disciplined.
Including some of the incremental capex on the on the on the Q4 call.
Perhaps what are between now and Q4, so what goes into that into that concentration of of including the capex entity and its something incremental on the RFP that you want to hear just any thoughts or color on around that would be appreciated sure sure. So this is one or Dan you look as we've said in the past.
Now, we'll be we'll be thoughtful in terms of when we include new.
Renewable generation projects know things from the integrated resource plan into our long term capex and looked at a variety of factors.
Certainly one important matter that will be mindful of is that.
Marty and his team they've issued an RFP for the wind and solar projects and so that's already out there. So it will not only be filed the RFP, but you know, we're we're taking steps to execute elements of that plan and of course, an RFP and and our ability to assess those projects for that RFP will be one important consideration that we'll look at and of course, our regulatory.
Factors, it's always a we want to be thoughtful in terms of when we do these things looking at the nature of the projects the regulatory approvals that will be required all those things go into to our determination of when we actually put it in there.
So as I said at the outset. The one thing is clear is that the opportunities from our integrated resource plan are significant and there were $3 billion to 2030 and Mr. Michael any any other things that you would add to that I look at that's a great summary, I think of the RFP itself. I mean, I think is just the normal kind of budgeting and sub the updates that we'll do in the February timeframe, where we go through that process.
Obviously throughout the year, we continue to look at capital allocation issues and so it will be the normal updates just in the course of the business that we run through and so you certainly should expect to see that and Thats typically when we do that in that February call as well Bob Sutherland absolutely.
That's great and maybe just a quick follow up could you comment on sort of how much room do you have into stayed with the SEC apps and that sort of something that view.
Looking you talked with investors about and.
How does the IR deep line fit into that.
Yes, very appreciate your question you know really what Weve said in the past I think youre, referring to the 2.85% cap that was built in does it sandal fivesixty four related there's only two things that have occurred again that the CAGR over that 17 through 23 time period.
Two things have happened since the legislation was passed we had the obviously the federal tax reduction that occurred in 18, we were able to keep half of that for purposes of that calculation and then we just obviously concluded this last rate review, which was another 1% deal.
Decrease so.
We haven't specifically said exactly how much headroom, but again EPS sense that both of those things have been rate decreases you had a 2.85% CAGR. So it gives you hopefully an idea of what kind of headroom we have today.
Great. Thanks, guys appreciated.
Thank you. Our next question comes from the line of Julien Dumoulin Smith with Bank of America. Please proceed with your question.
Julian how are you doing.
Hey, good morning, it's actually a various laws me on for Julian how are you I am doing terrific. How are you doing.
Doing well thanks, I just wanted to quickly touch on your.
2020 guidance as I look at your driver is relative to the Q2 update it looks like you're expecting an incrementally higher ROI in Illinois, and it looks like your Q4 Colgate impact once you back out the Q3 impact look like that's gotten a little bit better by about a penny. So can you maybe just help us understand.
A little bit better.
What.
Drove the reduction by nickel at the high end.
Yes, I mean really I think if you think about the reduction of the nickel I mean, so you go to the 930.
39, 30 were down about four cents, obviously on weather, we've had a number of coated impacts there you can see about 17 cents or so along with that.
And you know as we thought about it we have offset a lot of those call. It impacts obviously with the with some disciplined cost management going on inside and really its about adjusting that down by a couple of cents on a weather piece of that really is what what drove that decision.
Okay, great. Thank you and let me just touch on the dividend briefly you mentioned in your remarks earlier you guys. It sounds like you have a little bit of latitude relative to your 55% to 70% range. So I know future decisions are obviously subject to board approval, but how should we think about.
Future.
The increases in the payout relative to to the payout range and also to your six 8% EPS CAGR.
And I. Appreciate this is Warner again, clearly the dividend so important area of focus for our board of directors and we've been we've been clear all along that we target our dividend payout ratio of 55% to 70% and so and so as you know over the last several years.
We have allocate a great deal of our capital to rate base growth, which is obviously driven strong earnings per share growth, which that coupled with our solid dividend is really delivered.
Really strong total shareholder returns.
So at the same time I think as you pointed out we have seen that dividend payout ratio now come lower down our overall brand new so.
Thats factor, coupled with our strong earnings per share growth expectations are 60%, it really positions us well.
For future dividend growth nine can ultimately predict that but but the point is that we try to execute our strategy and position ourselves for for a solid dividend growth and perhaps even greater dividend growth in the future and so you.
You saw our board of directors just increase of 4% just recently.
I think thats evidence of of their belief in our overall strategic plan in their confidence in it.
So we're continuing to visit that going forward, but does this give us an opportunity certainly when you look at those metrics to continue to grow that dividend.
Okay. Thank you very much sure.
Thank you. Our next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed.
Hello, Bill how are you oversight of managing the day to day so.
So in terms of Illinois.
Legislatively speaking do you expect anything to happen in in this.
In this abbreviated session here.
With respect to clean energy or.
Or the.
The formula rate stuff that Youve put forward and what have you BDC anything legislatively significantly happening.
But as you get it to you guys.
Yes. So Paul this is Warner so yes, as I said in the talking points, we do not expect comprehensive energy legislation to be addressed in the veto session, which is coming up to obviously have two sessions scheduled in November and December that for certain base. So we do not see that at this point of course, we can't certainly predict that but as we sit here now.
We do not see comprehensive legislation.
On really any of those fronts being addressed and the veto session at this time.
Okay.
And then just to clarify it looks to me that your although you are lowering the top end of the guidance for this year your growth rate is still off of the midpoint of your original guidance.
Of 2012 correct.
Yes.
Thats the way to think about it absolutely I guess Michael.
Awesome. Thanks, guys.
Sure Bob Thank you.
Thank you. Our next question comes from the line of Duffy conflict Keybanc capital markets. Please proceed with your question.
Hi, good morning.
Thanks.
Okay. Thanks for taking my question.
Absolutely follow up on that anymore.
Your question.
Can you tell us well they will come back full time, and if you have a sense. So when will they may decide to pick up the staple location.
Well you know was so we laid out.
I made the talking points to specific dates for the veto session and and.
And there's a thing called a lame duck session Theres been no specific dates for them to to set that that would be sometime in January so whether they have that remains to be seen thats ultimately up to the speaker and the president of the Senate. So no specific dates, but one of the things getting through the second part of your question is when might they take it up I've learned.
Long ago, not to to handicap, not just legislative proposals or when legislation ultimately be taken up I will just say this that there's stakeholders are absolutely engaged.
On energy legislation and a lot of various forms including the downstate clean energy affordability Act by that is that is continuing to be a topic of conversation as well as comprehensive energy legislation to address.
Items and issues that they are being addressed up in the northern part of the state and obviously, we're very focused on things that are new in the southern part of the state.
So because of that I do expect energy legislation to be a topic of discussion in the next session.
Certainly can't predict when and what form it'll take at this time.
I can say is that Richard Mark and his team are or advocating for the downstate clean energy Affordability Act for all the right reasons, because as we believe it will deliver streaming and value.
Our customers certainly for the state of Illinois, and we believe to contain.
Continued to deliver long term value for not just customers, but also for shareholders. So stay tune.
Hi, Thanks for dialing it back we'll follow up with one more.
Can you tell us what the timeline looks like.
And Laurie.
Well.
That will give us some kind of indication on capex.
Sure.
A couple of things around that I know Marty Lyons is is on the line you can be you can jump into some of the specifics, but but there is no set time period with regard to the integrated resource plan.
History has shown that it's usually all dressed within sort of one year the filing and I think last time those around nine months when it was all said and done.
So remember too that commission when they go through this they really would approve the overall process and what we go through in terms of putting together the integrated resource plan to.
We don't necessarily go through and approach.
Approve specific elements or projects contained within that plan.
So.
The process has been started.
Filings have been made and then Marty I'll, let you come on and if Theres any other specific details around that but.
But again the commission doesn't have a set time period, but history has shown us usually been within nine to 12 months Marty you have anything to add from that.
Warner that though accurate.
I would say that once you file ERP theres opportunities for others other stakeholders to.
Comment on their perspectives and any deficiency they see.
The commission at its option can have a hearing to discuss those matters that others bring up.
And ultimately will provide some perspective on the ERP that but typically with the commission does is.
Jeff identifies whether there were any deficiencies or not.
Necessarily approval of the ERP itself for an endorsement of the eight.
So with all that said the other thing I would simply mention is in our prepared remarks, we mentioned that we have already issue.
Issued a request for proposal relating to projects that we would plan to do in accordance with our preferred plan and we're not precluded from moving forward with that.
Negotiating or now team or filings for.
Certificate of convenience and need that commission there is nothing that precludes us from taking any steps before the commission actually rules on the integrated resource plan and the way that venture.
Great. Thank thank you so much.
Well great.
Great. Thank you.
Thank you, ladies and gentlemen, as a reminder, if you'd like to during the question queue. Please press star one on your telephone keypad. Our next question comes from the line of Andrew Levi with UBS. Please proceed with your question.
Hey, guys.
To remedy how are you doing.
Doing well.
Actually I think a more I think a more upset I think Paul already.
But just to clarify so.
The 5% Delta.
Your guidance.
We shouldn't carry that into.
2021 is really no effect.
Matt as far as the midpoint or what was going to be.
Your base or anything like that it's all about.
Our weather related it kind of a one time item.
Okay onetime stuff.
You got that.
[music].
That will come back.
22.
You got any I think you said, 5%, but five cents is Ed at Boston, Yes.
Yes so.
Anyway. So you may may knees buckle, you said, 5% just to clarify Jim did I say that I apologize.
Yes, no or if you're thinking about it the right way in terms of the jump off point so.
Okay, great. Thank you very much.
Thank you Andy.
Thank you. Our next question comes from the line of Kim with Goldman Sachs. Please proceed with your question.
Good morning into how are you.
Hi, Good morning, just one question from me can you just give us the latest update on the the appeals process or the.
I think the judge's ruling last year on Davidian Rush Island plants, and what do we expect any updates before the end of the year.
Sure. So this is this is Warner again, we have filed our Bruce with the appellate courts, obviously, putting forth. What we believe are very strong arguments and so really where things are at today is as there were waiting for the court to schedule or arguments and we're still hopeful to have those scheduled by the end of the year. So that's you know it's going through the normal process of.
Course, there are no specific timeframe that the court has to act or to take specific action.
But so we'll wait to hear the schedule and it is still possible haven't still by the end of the year.
Got it and if that decision the appeals process goes against what our procedurally. The next steps that you are considering and given these plants in Europe in our PE at least you've laid out like some other retirement dates and.
Potentially require you to take other actions that were some of the thought process there.
So you know so I think the answer is making.
Maybe shares little bit garbled here in terms of you is your specific question as a result of the court's decision on my shine when it might that change is that what does that what your question was in terms of RFP.
Not necessarily accurate, but if the appeals process doesn't go your way what are the next steps and just thoughts around given the remaining rate base of the plants.
Like your thoughts around that.
The plant for sure.
No look if.
As I said, we strongly believe we have a great case, but having said that if things go against what we think is the appropriate answer then we'll do what we always do we'll step back full duals really take a look at what we believe our next steps are depends on the specific actions and things that the court says of course.
And then we'll take a look and determine what we think is in the best long term interest of our customers and that and certainly our shareholder so it'd be premature to speculate just exactly where that might head.
Understood. Thank you very much thanks and take care.
Thank you. Our next question comes from the line of David Path with Wolfe Research. Please proceed with your question.
Morning, David how are you.
Yes, good morning, Warner how are you doing them terrific. Thank you.
Great just one follow up question maybe it's.
Assuming you were too.
Owned a 1.2 gigawatts of renewables under your preferred option in the RFP and I think those are projected to be online by year end 25, correct dissipate do you anticipate that to be have an upward bias on EPS growth target or will that capex capex push out or displace other non renewables capex in that.
24, 25 period. Thanks.
Dave This is Michael probably won't be a terribly satisfactory answer, but I mean I love. We're just we're probably a bit premature to speculate on that I mean, it's something that we will be very thoughtful about annual will take a number of things under consideration. When you look at it just in terms of what the overall rate impact is the timing of it I mean.
Hopefully, we'll be able to give some additional color color on that in February as one and talked about I mean, we don't want to get ahead of just the regulatory process there, but so what we'll be very thoughtful about it but it's probably a bit premature to to answer that.
Okay I understand thank you.
Thanks, David.
Thank you, ladies and gentlemen that concludes our time allowed for questions I'll turn the call back to Mr., Craig any final comments.
Yes. Thank you for participating this call a replay of this call will be available for one year on our website. If you have questions. You may call. The contacts listed on our earnings release financial inquiries should be directed to me Andrew Kirk Media should call Brad Brown again. Thank you for your interest in Amarin, we look forward to visiting with you at our meetings next week until then have a great day.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.