Q3 2020 Black Hills Corp Earnings Call
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Good day, ladies and gentlemen, and welcome to the Black Hills Corporation third quarter 2020 earnings Conference call. My name is Josh and I will be your coordinator for today at this time all participants are in a listen only mode. Following the prepared remarks, there will be a question and answer session. If you would like to participate in this portion of the call.
Press Star followed by one at any time during the conference if assistance is needed at any time during the call. Please press star followed by zero and a coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes.
I'd now like to turn the presentation over to Mr. Jerome Nichols director of Investor Relations of Black Hills Corporation. Please proceed sir.
Thank you Josh Good morning, everyone welcome to Black Hills corporations third quarter Twentytwenty earnings Conference call.
You can find our earnings release and materials for our earnings call. This morning at our website at Www Dot Black Hills, Corp. dotcom under the Investor Relations heading.
Leading our quarterly earnings discussion today are Lynn Evans, President and Chief Executive Officer, and Rich Kinzley, Senior Vice President and Chief Financial Officer.
During our earnings discussion today some of the comments, we make may contain forward looking statements as defined by the Securities and Exchange Commission and there are a number of uncertainties inherent in such comments, although we believe that our expectations and beliefs are based on reasonable assumptions.
Actual results may differ materially.
We direct you to our earnings release slide two of the Investor presentation on our website and our most recent form 10-K and form 10-Q filed with the Securities and Exchange Commission for a list of some of the factors that could cause future results to differ materially from our expectations.
I will now turn the call over Tillman Evans.
Thank you Jerome good morning, everyone. Thank you for joining us today moving to slide four I'd like to start as we always do a black hills with a focus on safety.
The safety and the well being of the people we work with.
And the communities. We serve is Paramount and we are committed to being on the forefront of safeguarding our coworkers and our customers at all times and especially now.
We continue to monitor the pandemic and its impact to our business our customers and our communities.
While some of the service territories are experiencing an increase in infection rates, we are not anticipating significant log sales to close our local economies.
For our customers, who need financial assistance, we are continuing to support them as well as local nonprofits in our communities.
I'm extremely proud of our team's dedication to support and serve our customers. They truly are going the extra mile to provide safe and reliable energy that our customers depend on as we improve life with energy everyday.
Overall financial impacts from COVID-19 are trending as expected for the year, we continue to maintain strong liquidity to support our businesses and our supply chains and capital projects are operating with little impact.
Moving to slide six we had an excellent third quarter, we executed operationally and exercised diligent expense management delivering a 32% increase in earnings over the same period last year.
Based on the strength of our earnings and outlook. We are increasing this year's earnings guidance to a range of $3.60 to $3.70 per share.
We're also introducing guidance for next year in a range of $3.75 to $3, a 95 cents per share, reflecting our expectation for solid growth year over year.
We also increased our five year capital forecast to continue serving the growing needs of our customers and communities.
We've identified an additional $239 million of capital projects and that increases our total five year forecast to $2.9 billion.
95% of that $2.9 billion will be invested in our utilities.
Slide seven list the excellent strategic progress we made this quarter, we obtain final approval from FERC for the Y. Gen. One power purchase agreement.
The approval of this agreement allows us to continue to provide critical base load capacity and energy for our Wyoming electric utility.
We filed our new rate review in rider request for Colorado guess last Wednesday in Nebraska, We had a constructive hearing on a settlement agreement regarding our pending rate review.
We also maintain strong liquidity to support our capital investment program.
We are delivering on our promise to enhance communications on our EPS GE initiatives. We recently disclosed new SG reports using the E Bay and AG, a qualitative and quantitative templates.
And we will announce our greenhouse gas emissions reductions goals later this week in tandem with our updated corporate sustainability report.
I'm very pleased that we welcome two highly experienced corporate leaders to our board of directors and we also marked and historic milestone for our dividend track record.
Not only did we announce a 5.6% increase in our dividend we.
We also completed 50 consecutive years of annual dividend increases a remarkable achievement that exemplifies our legacy of sustainable growth.
Overall, it's been an outstanding quarter of strategic execution and.
And we are confident in our strong outlook and continued success in delivering what we told you we would accomplish now.
Now I will turn it over to rich for a financial update rich.
Thanks, Lynn and good morning, everyone.
Ill start on slide nine.
As Lynn noted, we delivered strong financial performance for the quarter with EPS as adjusted of 58 cents up 14 cents from last year, driven by strong year over year Q3 results at our gas utilities.
Notable in the quarter were returns on invested capital there utilities favorable weather impacts customer growth and favorable tax items.
We estimate weather positively impacted Q3, EPS by five cents compared to normal and by 11 cents compared to Q3 2019.
Results for the third quarter. This year include negative cobot impacts of approximately three cents per share inline with our expectations.
Net income as adjusted increased 35% quarter over quarter, while EPS as adjusted increased 32% quarter over quarter. The difference driven by dilution from additional common shares outstanding from our equity issuance earlier this year.
On Slide 10, you see we increased our 2020 earnings guidance and initiated our 2021 earnings guidance as Glenn noted earlier in his remarks.
Our earnings guidance assumptions are shown in more detail in the appendix.
On slide 11, we reconcile GAAP earnings to earnings as adjusted a non-GAAP measure we do this ties late special items and communicate earnings that we believe better represent our ongoing performance.
This slide displays the last five quarters and demonstrates the seasonality of our earnings there were no special items in the third quarter. This year.
Slide 12 is a waterfall chart illustrating the primary drivers of our earnings results from third quarter of 2019 to third quarter of 2020. All amounts on this chart are net of income taxes, while I talk through the gross margin comparisons I will refer to pretax margin impacts.
Our electric utilities gross margin benefited from rider revenues power marketing results in a pickup related to the tax cuts in job Act, which I will cover more in a moment.
Our gas utilities gross margin benefited from new rates favorable weather conditions that increased agriculture loads customer growth and mark to market gains on gas commodity contracts.
A bit more color on agriculture loads last year was a record precipitation year in our Nebraska service territory and our irrigation loads were correspondingly low in the third quarter. This.
This year was hotter and drier than normal in Nebraska.
Compared to normal for agriculture loads last year's Q3 pre tax margins were negatively impacted by approximately $5 million. While this year's Q3 pre tax margins were positively impacted by approximately $2 million. So.
So we had a $7 million pre tax swing related to the agricultural loads comparing Q3 2018 to Q3 2020.
When looking at weather overall for this year's Q3, including the agricultural impacts our electric utilities gross margin benefited by $1.6 million pre tax compared to normal and our gas utilities gross margin benefited by $2.6 million pretax compared to normal.
A final comment on our utilities gross margins relates to cobot impacts, which generally played out as we had forecast.
The combination of coal that net load impacts and for given late fees impacted our utilities gross margin by approximately $1 million pretax.
Our nonregulated margins were slightly higher than last year, reflecting higher revenues from our new wind assets in our power generation segment, partially offset by lower tons sold in our mining segment.
Total on M. increase compared to the prior year, largely driven by a 2.4 million after tax expense from the retirement of certain assets at our power generation segment.
Net cove unrelated on M. of 800000 after tax resulted from higher bad debt expense accruals and sequestration of essential employees part.
Partially offset by lower costs related to travel training and outside services.
Depreciation increased as a result of additional plant placed in service.
Interest expense increased due to higher debt balances, resulting from new debt issued to fund our capital investment program.
Other income expense was unfavorable to the prior year, reflecting additional expense for our non qualified benefit plans this year related to stock market performance and higher pension expense.
We had a favorable effective tax rate in Q3 compared to the prior year. This was driven by additional production tax credits from our wind assets placed in service last year and the release of reserves associated with the tax cuts in jobs Act.
More color on that we finalized certain regulatory proceedings around the TCPA during the third quarter and were able to release associated reserve amounts benefiting our electric utility gross margins by $1.5 million and income taxes by $2.1 million.
Additional third quarter detail on segment earnings can be found on slide 24 in the appendix and you can also find additional details on Q3 year over year changes in gross margin and operating expenses in our earnings release and in our 10-Q that we will file later today.
Slide 13 shows our financial position through the lens of capital structure credit ratings and financial flexibility. We are in excellent shape from a debt maturity and liquidity perspective, we continue to maintain solid investment grade credit ratings.
In February we issued $100 million of equity to help support our 2020 capital investments, we don't expect to issue any more equity in 2020.
You'll note in our 2021 guidance assumptions in the appendix, we expect to issue $80 million to $100 million of equity through our aftermarket equity offering program in 2021.
We've mentioned previously the need to issue up to $50 million of equity in 2021 based on our previously disclosed forecast.
And the addition of $142 million to forecasted capital investments for 2020, and 2021 drives the increased equity needs.
In June we issued $400 million of 2.5% 10 year notes to term out our short term debt and support our ongoing capital investment program further enhancing our liquidity position.
This debt issuance was a great outcome and provides our customers low cost debt for the next decade at.
At quarter end, we had $84 million of borrowings on our credit facility with no material debt maturities until late 2023.
As of the end of October we continue to have over $600 million of liquidity available from capacity on our revolving credit facility.
Slide 14 illustrates our dividend growth track record, we completed 50 consecutive years of increasing dividends in 2020 with strong and consistent increases the past few years, we maintain our target for a long term dividend payout ratio of 50% to 60% of EPS, demonstrating our confidence in our long term earn.
Earnings growth prospects.
I will turn it back to lend now for his strategic overview.
Thanks, Rich moving to slide 16, our customer focused strategy is designed to deliver sustainable long term value growth for customers and shareholders.
We're aligning our people processes technology and analytics to serve the growing needs of our customers and our growing communities.
We are investing in our customers' needs for safety reliability resiliency growth and an overall positive customer experience.
These investments for our customers positions us to deliver both long term earnings and dividend growth for shareholders.
Our programmatic approach to these investments also provides greater consistency and clarity for the benefit of all of our stakeholders.
Turning to our capital investment plan on Slide 17, we added $239 million to our five year forecast for a total of $2.9 billion focused on projects and initiatives that maintain customer safety and reliability and foster customer growth over the next five years.
Most of the increased capital is related to additional programmatic investment in our gas utilities and more than half of the increase is planned for this year and next year.
For this year, we are increasing our capital investment by 64 million to $733 million.
And for next year, we're increasing our capital investment by $78 million to $633 million.
Going forward, we fully expect to invest at least $500 million annually to support our customers.
We continue to take a relatively conservative approach to our capital forecast. We include opportunities that have a reasonable degree of certainty and then we add capital as we gain more clarity around incremental projects that will support our customers. We anticipate that additional capital opportunities are likely over the plan period, especially.
In the outer years.
Slide 18 illustrates that our capital plan as utility focused with timely recovery on most of our investments 95% of our forecasted investments are for our utilities, and we anticipate 83% of our gas utility investments and 51% of our electric utility investments will receive timely recovery.
On the regulatory.
The Tory front Weve listed our current activity on slide 19.
As noted earlier rate reviews are underway for our gas utilities in Nebraska, and Colorado. We appreciate that we had a constructive hearing last Wednesday in Nebraska. The hearing focused on our settlement agreement for the rate review the rider, we requested and further consolidation of our two utilities in Nebraska.
And other regulatory initiatives, we continue to advance our renewable advantage program to add up to 200 megawatts of renewable energy in Colorado, where.
We're currently negotiating with the winning bidder on a 200 megawatt solar project to be constructed and plug low Colorado were excited to complete our renewable ready subscription based program for our South Dakota, and Wyoming Electric utilities are 52, and a half megawatt Corey tail wind project. We are building to support that program is near.
Early complete and we expect it to be in full service prior to year end. The wind facility is located near Cheyenne, Wyoming, one of the best wind resources in the United States.
On the EPS G front, we have a strong legacy of sustainable growth and were guided by our core values to safely and cost effectively serve our customers as we provide opportunities for our people to develop and advance their unique skills.
A black hills, we have a strong EPS GE commitment and we're prepared to tell our story more holistically.
An important initiative for US was the publication of our first SG reports, we use the E Bay and AIG templates that I mentioned earlier, which will soon be followed by our greenhouse gas emission reduction goals, which we will release later this week.
We are adding or expanding renewable energy and all three of our electric utilities in Colorado, South Dakota and Wyoming.
This year, we were once again awarded gold Star status in Colorado is environmental leadership program Gold stars the highest achievable status and I am proud that we have held this distinction since 2014.
In fact, we were the first utility in Colorado to achieve this designation.
We also recently voluntarily joined EPA methane challenge program to reduce methane emissions beyond regulatory requirements in our gas utilities we.
We continue to rigorously promote our strong safety culture with a goal to be the safest utility in the industry.
Our team is already delivering results better than industry average and they are staying on the forefront of processes and safeguards to keep people safe during the ongoing pandemic.
We're also very engaged in serving the needs of our customers through financial aid and supporting organizations like the United way that offer critical assistance in times like these.
In 2019, we provided over five and a half million dollars and charitable giving and we continue to support our strong commitment to the economic viability of our customers and our communities.
On the governance front, we're pleased to welcome very Granger and Scott Prochaska to our board of directors. They are impressive credentials and experience are already being instrumental in driving future growth, while fulfilling our SG commitments.
They participated in our board meeting last week and are already adding value.
In closing we are confident in our future.
We are well positioned as a low risk utility investment and complimentary gas and electric utility businesses, and we're privileged to operate and stable and growing territories, which continued to be resilient even during the ongoing pandemic.
We have a solid financial position and liquidity.
And we are investing and being ready to serve the growing needs of our customers and communities as we improve life with energy.
That concludes our prepared remarks, and rich and I are happy to respond to questions.
Thank you.
Ladies and gentlemen, we are ready to open the lines for your questions. If you wish to ask a question. Please press star followed by one on your touched on some long. If your question has been answered or you wish to a prior question. Please press pound again press star one to ask a question. Please.
Please stand by for your.
Next question.
Our first question comes from Michael Weinstein with Credit Suisse. You May proceed with your question.
Hi, guys good morning.
Good morning, Mike.
Hey.
Hey on the easiest to review and now on the greenhouse gas fired units coming up.
Maybe give us an idea of where we're headed especially after announcing coal free Colorado generation fleet is that going to be something you can hear.
We are targeting over long term to replicate in other states as well.
Yes.
Thanks, Mike Good question and good morning by the way, Yes, we're very excited to announce our EPS goals, which will do on November five that's our current plan we've been working on those very hard for about a year, we really started digging into what we could do with respect to ESG, revealing more holistic in our approach and how we talk about.
DSC and setting some goals.
As you'll see on a couple of days only with share those goals. We are sharing goals that are true to our values in that you're not going to see a lot of caveats in those goals are going to be goals that we can achieve through current technology and things that we are currently doing and considering the life of our plants that were currently operating.
We are going to remain committed in the as you'll see in the short term is to our coal plants.
Those are vital to our customers in terms of the low price energy that we're able to provide them, especially reliable energy, but we've learned a lot about adding renewables, especially adding renewables that have been cost effective, especially for our customers and as you pointed out in Colorado.
Colorado taken a very aggressive approach and a different approach and we've been very much at the at the helm with respect to that we now have by far well the cleanest utility perhaps in the country certainly there in Colorado. So you won't see again, you'll see a lot of caveats about the technology, the yet to be invented things of that nature, but you're going to see go.
Holes that are aggressive and ones that we can achieve and then importantly.
The next element of our EPS to you, especially with respect to our stakeholders shareholders and customers will be when we plan or prepare the integrated resource plans will be filing IR fee in Wyoming and mid July will also do South Dakota with that because we do those that you typically simultaneously and together.
So that will be when we will then approach the commissions with the additions of renewables and things of that nature and Mike.
The extra gas gas utility programmatic capex for the next two years is that mainly surrounding our is that for methane leak reduction or is that is this something that we can expect that.
Then another year or two you'll be rolling forward and you'll have that you'll be increasing the plan again.
On another two years or is this something very specific to the next two years fares that you are focused on right now.
Good question, Mike and thanks for the unit you will see a very programmatic approach to our pipeline replacement. We've got about 4000 miles of steel that we need to replace we got about 2500 miles of plastic pipe in pipe and by the way, we've got or more than 160000 meters that we call out risks that we replacing as well so our.
Programmatic approach has really replacing that pipe along the way.
As you'll see in our EPS goals later this week, you'll see that we get the benefit of reducing greenhouse gas emissions through that investment and we see this as a essentially a multi decade type of investment.
Going forward. So what we've shown you have we anticipate we will do for frankly.
Frankly, a couple of decades.
So I mean is it other way of asking that is can we expect additional increases in the five year plans as with every every roll forward that we see going forward.
Yes. Thank you Mike for clarifying that yes to answer that question as what we certainly anticipate yes, just like you've seen in the past right.
Right right.
Okay ill step out for now thank you.
Thank you Mike.
Thank you. Our next question comes from Julien Dumoulin Smith with Bank of America. You May proceed with your question.
Hey, good morning team and frankly, congratulations all around here well done good morning, Good morning, Julien. Thank you.
Absolutely.
Question.
You talked about growth no material net impact from Covance on your 21 earnings guidance.
How are you thinking about the various puts and takes an iguana acknowledged you talked a little bit about this but if you want to think about the various.
Offsetting factor is that you have explicitly reflected and costs were flat as you move around year end at 21, he what's your level of confidence through able to sustain that no material net impact if you will.
Yes. This is rich Julian I'll start in inland can fill in the blanks.
What we've seen.
Is.
A really nice trend relative to loads certainly in the second quarter, we saw the load impacts pickup on the small commercial side in a few large industrials.
With residential loads offsetting that partially but as we work through the third quarter and now into the fourth quarter, we really seeing those load trends improve.
Most of the large industrials are fully back online.
The small commercial loads of comeback is our economies of reopened and residential loads of remained strong.
So.
Thats the load side of things on the bad debt.
We think we've got pretty good accruals at this point, we accrued 3.7 million additional bad debt above what we normally would year to date through September.
And then on waved customer late fees. This this is on slide 38 by the way in the appendix on wave customer late fees.
We think thats pretty much done now given that we were able to reinstate disconnect policies for all of our utilities, except Arkansas through.
Through the third quarter Arrearages have come down substantially from peaking out in the third quarter.
We're not quite back to normal, but getting much closer to normal there.
So when you when you look at all of those together the last one being sequestered sequestration costs, we incurred were done with that as well. We believe when you look at all that together and then consider that we're continuing to save costs on travel.
And outside services we.
We think the impact in the fourth quarter is going to be pretty minimal and as we work into 2021, the net impact is going to be immaterial as well.
And what would you add to that I think rich has done a nice job answering your question Julien, Let's say, we've learned a lot we've learned a lot about the virus certainly more than what we knew back in may when we did some of our initial forecast with respect to the impact of our know how to keep our employee team safe, we know how to keep our customer a team safe we know more about how the virus spreads.
Things of that nature, and our frankly, our customers have learned a lot more about and how they operate and that size. So shines through through their usage and the loads that we are seeing beginning to really come back as rich indicated bad debt is declining or bad debts have been down about 20%.
Our Arrearages Arrearages apologize Arrearages is down about 20% from the from our from the height of the pandemic and as Rich said also some of our largest expenses were relative to sequestering employees now that we have processes and understand that in place and know more about the virus, we don't anticipate having to do that.
As we go forward either.
Got it excellent well good stuff you listen if I can pivot a little bit more strategically here is more of a OLED question, perhaps how.
How do you think about the bifurcation valuations out there across the various kind utilities certainly.
I'm curious to hear how you think especially if this is a bad administration, how do carbonization of gas utilities proceed but separately how do you think about the sharp deviations out there in this mid caps and especially your gas utilities today.
Comment a little bit.
Thank you for that Julien, Yes, we've got questions. Just like you do we were kind of surprised frankly by how spreads have not seen valuations responded to our business essentials our business.
Metrics are very good right now very solid as we've been able to establish over the last couple of quarters as we've dealt with the pandemic you mentioned, the Biden administration and we've been watching that very closely.
Very engaged in terms of the campaign promises and statements that have been made we'll see how that actually translates into either legislation or orders assuming that becomes president biden in the white house.
We think that typically that means we might have to accelerate some of the.
SG goals that were going to express next week as we what was we drafted those we did not try to consider a change in the white house, we make goals that we felt strongly that we could do and we could accomplish with current technologies and what we know today should there be a much more aggressive stance against against climate changing.
And greenhouse gas emissions et cetera, we may have to accelerate some of our investment on behalf of our customers and you mentioned natural gas is specifically.
We see natural gas is a long term fuel I don't see it simply as a bridge fuel, especially in the territories that we currently serve.
We take that very seriously when it comes to customer choice, we have pulled our customers and things of that nature across our northern great Plains tiers. The Rocky Mountain region is very clear to them that their natural gas and that choice around natural gas is very important to them, especially when it comes to heating bills and things of that nature. So were.
We're certainly not to an ostrich with our head in the sand around natural gas. We're at the table with the American Gas Association other entities. When it comes to the use of hydrogen things of that nature. So we have a group of people very focused on what we call forced electrification across the organization and how we actually combined.
And our efforts with other utilities in the region, we partnered with other investor owned especially in Colorado in response to for example, the the commission information meeting that the PC is going to have their shortly partnering also with the AG in terms of our comments et cetera, So kind of a broad question.
Broad answer, but maybe that 'cause shares with using the thoughts I have in my head and how were looking at our strategy here at Black Hills.
No I appreciate it actually started go back real quickly on the detailed questions Haaretz here, if you don't mind.
On the equity you, all obviously tweak that a little bit here.
Can you talk about like the timing, perhaps a little bit you all did quite well this year. So I'm just curious on thought process. There and then more importantly, as you move out right. You, obviously ratings as well you talked about that $5 billion range give or take what do you thinking out there this quarter EPS.
Yes, so what what we've said in the past is that you know with the previously disclosed Capex, we would need upwards of $50 million of equity next year, and then we would need 25 cents to 30 cents on the dollar for additional Capex of which we just disclosed.
An additional 239 million about a little over half of which $142 million in 2020 in 2021, So thats really what drove the $80 million to $100 million next year.
That should make sense and then when you think beyond next year, we did add about $100 million of capex to those years.
So we probably will need some equity after next year not a substantial amount, but again as we continue to increase capex, we're going to continue to sprinkle equity in there to help fund that.
It makes sense Julien.
Absolutely no. Thank you for the clarity rather appreciate your outpatient and best of luck, we'll see.
Finished jewelry under lined up.
Thank you. Our next question comes from Andrew Weisel Scotiabank you May proceed with your question.
Thanks, Good morning, everybody.
First question just to elaborate on that last comment you were making going forward. So we still think of 25 to 30 cents of equity for every incremental dollar of Capex is that still a good rule of thumb.
Yes, I think Thats fair Andrew.
Okay great.
Next I wanted to ask about the Capex recovery, you talked a bit about this but it looks like numbers have moved around with less spending now considered eligible for timely recovery looks like it's about 70% numbers, 80%. Previously just wondering have you reclassified certain projects or is something else going on there may be something to do with recovery of the increment.
It'll spending.
Well, our our gas utilities are over 80%.
Timely and electrics over 50% total.
Is it.
I think similar to past quarters I'll have to verify what you're asking.
Well I just mean you have in the past you've talked about 80% as being recoverable and now you're saying, it's about 2 billion out of the 2.9 and just based on your disclosures on page 32, you can sort of I'm getting that around 70%, 80% in the past just wondering if there's anything noteworthy there.
The $2 billion, a new sub head are we added there's probably some rounding involved there I would say Andrew but when you think of the timeliness of recovery I think the reality is it's fairly consistent with what we've seen in the past disclosures.
Yes.
Okay, Great maybe I'll follow up on the numbers offline then one last one with the new Capex outlook, what's your latest thinking as far as rate base growth going forward.
Well, we havent disclosed the specific rate base growth rate as Lynn said, we plan with our year end earnings release to put some more color around long term growth rates, whether thats earnings growth or rate based growth, we're going to give you some more color in a quarter on that.
As you just work with the information we disclosed obviously our rate base growth spend very strong.
In 2019, 2020, and it's looking good in 2021.
And as you think about the opportunity to increase capex in those out years, we think it's going to remain strong so.
That's the employee you got to work with right now more to come.
[laughter].
Sounds good I'll do my best to be patient for a few more months. Thank you guys very much.
Thank you Andrew.
Thank you and as a reminder, that Star then one to ask a question. Our next question comes from Brandon Legal Mizuho. You May proceed with your question.
Hey, good morning loan good morning rich.
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The first question is around.
Okay, good and the impact on your load.
Since the third quarter it looks like.
The cases have picked up in your service territory have you seen any changes in and loan since.
We ended the quarter.
We have seen actual that while we've seen a tick up in cases, you are correct. There. We continue to also see load usage continued to rebound through the third quarters and into the fourth so they don't necessarily seem to be connected at least in our in our territories doesn't mean that could not be.
At some point, but currently as I indicated before seems our customers are learning how to operate.
In spite of covert if you will and so we're seeing the residential load continue to be strong we anticipate as content people continue to work from home.
And much of our territory that will remain strong and that will probably translate perhaps into the natural gas side of the business as well in the early her heating season as people that might be staying home. We're also seeing.
Very strong.
Industrial loads in Wyoming, that's probably because of our strong focus it is because of our strong focus on data centers, there, which is offsetting some softer loads that we tend to be still be seeing in Colorado in South Dakota, but overall, we're seeing a good load increases.
Trending very much back toward normal and frankly growing especially on the natural gas side hopefully that helps you there.
Great and then.
Also given the decline in the LDC multiples have you noticed any change to numerous discussions regarding gas capex or any pushback from regulators on your planned capex.
I would say the short answer is no, but it's obvious in Colorado that the commission is looking at how they implement the clean energy plan is what I will call. It the clean energy plan does not necessarily does not to call out natural gas. It really focuses on the electric business.
Given the the 'cause the commissioner information meeting is scheduled to come up soon we'll be watching that very closely there with respect to our ongoing opportunities I will put it with natural gas, but again, our customers in Colorado are pretty enthusiastic about their natural gas usage and really.
We want the customer that mix of energy available to them so much more to come with respect to the.
Great. Thanks, that's very helpful. That's all I have thanks a lot.
Thank you.
Thank you and as a reminder to ask a question you'll need to press Star then one on your telephone.
One moment.
And with no further questions I will turn the call back over to the Adams for closing remarks.
Thank you Josh. Thank you all for joining us. This morning, I will look forward to sharing our SG goals later this week.
We're really looking forward to virtually seeing many of you at the EEI Financial Conference next week.
Thank you all for your interest in Black Hills Corp. apply.
Please remain safe healthy enjoy a safe day. Thank you again.
Thank you for your participation in today's conference. This concludes the presentation you may now disconnect good day.
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Good day, ladies and gentlemen, and welcome to the Black Hills Corporation third quarter 2020 earnings Conference call. My name is Josh and I will be your coordinator for today at this time.
All participants are a listen only mode. Following the prepared remarks, there will be a question and answer session.
Participate in his portion of the call. Please press star followed by.
One at any time during the call.
[laughter], we didnt have any time during the call. Please press star followed by zero.
Ordinator, we'll be happy to assist you as a reminder, this conference is being recorded for replay purposes I would now like to turn the presentation over to Mr. Jerome Nichols director of Investor Relations of Black Hills Corporation. Please proceed sir.
Thank you Josh Good morning, everyone welcome to Black Hills corporations third quarter Twentytwenty earnings Conference call.
You can find our earnings release and materials for our earnings call. This morning at our website at Www Dot Black Hills, Corp. dotcom under the Investor Relations heading.
Leading our quarterly earnings discussion today are Linda Evans, President and Chief Executive Officer and.
And rich Kinzley, senior Vice President and Chief Financial Officer.
During our earnings discussion today some of the comments, we make may contain forward looking statements as defined by the Securities and Exchange Commission.
And there are a number of uncertainties inherent in such comments, although we believe that our expectations and beliefs are based on reasonable assumptions actual results may differ materially.
We direct you to our earnings release slide two of the Investor presentation on our website and our most recent form 10-K and form 10-Q filed with the Securities and Exchange Commission for a list of some of the factors that could cause future results to differ materially from our expectations.
I'll now turn the call over Tendyne Evans.
Thank you Jerome good morning, everyone. Thank you for joining us today moving to slide four I'd like to start as we always do a black hills with a focus on safety the.
The safety and the well being of the people we work with.
And the communities. We serve is Paramount and we are committed to being on the forefront of safeguarding our coworkers and our customers at all times and especially now.
We continue to monitor the pandemic and its impact to our business our customers and our communities.
Well some of the service territories are experiencing an increase in infection rates, we're not anticipating significant lot sales to close our local economies.
For customers, who need financial assistance, we are continuing to support them as well as local nonprofits and our communities.
I'm extremely proud of our team's dedication to support and serve our customers. They truly are going the extra mile to provide safe and reliable energy that our customers depend on as we improve life with energy every day.
Overall financial impacts from COVID-19 are trending as expected for the year.
We continue to maintain strong liquidity to support our businesses.
And our supply chains and capital projects are operating with little impact.
Moving to slide six we had an excellent third quarter, we executed operationally and exercised diligent expense management delivering a 32% increase in earnings over the same period last year.
Based on the strength of our earnings and outlook. We are increasing this year's earnings guidance to a range of $3.60 to $3.70 per share.
We're also introducing guidance for next year in a range of $3.75 to $3, a 95 cents per share, reflecting our expectation for solid growth year over year.
We also increased our five year capital forecast to continue serving the growing needs of our customers and communities we.
We've identified an additional $239 million of capital projects and that increases our total five year forecast a $2.9 billion nine.
95% of that $2.9 billion will be invested in our utilities.
Slide seven lifts the excellent strategic progress we made this quarter.
We obtain final approval from FERC for the Y. Gen. One power purchase agreement.
The approval of this agreement allows us to continue to provide critical base load capacity and energy for our Wyoming electric utility.
We filed our new rate review and rider request for Colorado gas.
Last Wednesday in Nebraska, we had a constructive hearing on a settlement agreement regarding our pending rate review.
We also maintain strong liquidity to support our capital investment program.
We are delivering on our promise to enhance communications on our EPS Ci initiatives. We recently disclosed new E.S.G. reports using the E Bay and AG, a qualitative and quantitative templates.
And we will announce our greenhouse gas emissions reductions goals later this week in tandem with our updated corporate sustainability report.
I'm very pleased that we welcome two highly experienced corporate leaders to our board of directors.
We also marked an historic milestone for our dividend track record.
Not only did we announce a 5.6% increase in our dividend we.
We also completed 50 consecutive years of annual dividend increases a remarkable achievement that exemplifies our legacy of sustainable growth.
Overall, it's been an outstanding quarter of strategic execution.
We are confident in our strong outlook and continued success in delivering what we told you we would accomplish now.
Now I'll turn it over to rich for a financial update rich.
Thanks, Lynn and good morning, everyone.
I'll start on slide nine.
As Lynn noted, we delivered strong financial performance for the quarter with EPS as adjusted of 58 cents up 14 cents from last year.
Driven by strong year over year Q3 results at our gas utilities.
Notable in the quarter were returns on invested capital there utilities.
Trouble weather impacts customer growth and favorable tax items.
We estimate weather positively impacted Q3, EPS by five cents compared to normal and by 11 cents compared to Q3 2019.
Results for the third quarter. This year include negative cobot impacts of approximately three cents per share in line with our expectations.
Net income as adjusted increased 35% quarter over quarter, while EPS as adjusted increased 32% quarter over quarter. The difference driven by dilution from additional common shares outstanding from our equity issuance earlier this year.
On Slide 10, you see we increased our 2020 earnings guidance and initiated our 2021 earnings guidance as Glenn noted earlier in his remarks.
Our earnings guidance assumptions are shown in more detail in the appendix.
On slide 11, we reconcile GAAP earnings to earnings as adjusted a non-GAAP measure we do this guy slate special items and communicate earnings that we believe better represent our ongoing performance.
This slide displays the last five quarters and demonstrates the seasonality of our earnings there were no special items in the third quarter. This year.
Slide 12 is a waterfall chart illustrating the primary drivers of our earnings results from third quarter of 2019 to third quarter of 2020. All amounts on this chart are net of income taxes, while I talk through the gross margin comparisons I will refer to pretax margin impacts.
Our electric utilities gross margin benefited from rider revenues power marketing results in a pickup related to the tax cuts and job Act, which I will cover more in a moment.
Our gas utilities gross margin benefited from new rates favorable weather conditions that increased agricultural loads customer growth and mark to market gains on gas commodity contracts.
A bit more color on agriculture loads last year was a record precipitation year in our Nebraska service territory and our irrigation loads were correspondingly low in the third quarter. This.
This year was hotter and drier than normal in Nebraska.
Compared to normal for agricultural loads last year's Q3 pre tax margins were negatively impacted by approximately $5 million. While this year's Q3 pre tax margins were positively impacted by approximately $2 million. So.
So we had a $7 million pretax swing related to the agricultural loads comparing Q3 2018 to Q3 2020.
When looking at weather overall for this year's Q3, including the agricultural impacts our electric utilities gross margin benefited by $1.6 million pretax compared to normal and our gas utilities gross margin benefited by $2.6 million pretax compared to normal.
A final comment on our utilities gross margins relates to cobot impacts, which generally played out as we had forecast.
The combination of coal that net load impacts for given late fees impacted our utilities gross margin by approximately $1 million pretax.
Our nonregulated margins were slightly higher than last year, reflecting higher revenues from our new wind assets in our power generation segment, partially offset by lower tons sold at our mining segment.
Total AUM increased compared to the prior year, largely driven by a 2.4 million after tax expense from the retirement of certain assets at our power generation segment.
Net covert related on M. of 800000 after tax resulted from higher bad debt expense accruals and sequestration of essential employees.
Mostly offset by lower costs related to travel training and outside services.
Depreciation increased as a result of additional plant placed in service.
Interest expense increased due to higher debt balances, resulting from new debt issued to fund our capital investment program.
Other income expense was unfavorable to the prior year, reflecting additional expense for our non qualified benefit plans this year related to stock market performance and higher pension expense.
We had a favorable effective tax rate in Q3 compared to the prior year. This was driven by additional production tax credits from our wind assets placed in service last year and the release of reserves associated with the tax cuts in jobs Act a bit more color on that we finalized certain regulatory proceedings around the Tc.
Hey, during the third quarter and were able to release associated reserve amounts benefiting our electric utility gross margins by $1.5 million and income taxes by $2.1 million.
Additional third quarter detail on segment earnings can be found on slide 24 in the appendix you can also find additional details on Q3 year over year changes in gross margin and operating expenses in our earnings release and in our 10-Q that we will file later today.
Slide 13 shows our financial position through the lens of capital structure credit ratings and financial flexibility. We are in excellent shape from a debt maturity and liquidity perspective.
We continue to maintain solid investment grade credit ratings in.
In February we issued $100 million of equity to help support our 2020 capital investments, we don't expect to issue any more equity in 2020.
You'll note in our 2021 guidance assumptions in the appendix, we expect to issue $80 million to $100 million of equity through our aftermarket equity offering program in 2021.
We've mentioned previously the need to issue up to $50 million of equity in 2021 based on our previously disclosed forecast.
And the addition of $142 million to forecasted capital investments for 2020, and 2021 drives the increased equity needs.
In June we issued $400 million of 2.5% 10 year notes to term out our short term debt and support our ongoing capital investment program further enhancing our liquidity position.
This debt issuance was a great outcome and provides our customers low cost debt for the next decade at.
At quarter end, we had $84 million of borrowings on our credit facility with no material debt maturities until late 2023 as of the end of October we continue to have over 600 million of liquidity available from capacity on our revolving credit facility.
Slide 14 illustrates our dividend growth track record, we completed 50 consecutive years of increasing dividends in 2020 with strong and consistent increases the past few years, we maintain our target for a long term dividend payout ratio of 50% to 60% of EPS, demonstrating our confidence in our long term.
Earnings growth prospects.
Turn it back to Lynn now for his strategic overview.
Thanks, Rich moving to slide 16, our customer focus strategy is designed to deliver sustainable long term value growth for customers and shareholders.
We're aligning our people processes technology and analytics to serve the growing needs of our customers and our growing communities.
We are investing in our customers' needs for safety reliability resiliency growth and an overall positive customer experience.
These investments for our customers positions us to deliver both long term earnings and dividend growth for shareholders.
Our programmatic approach to these investments also provides greater consistency and clarity for the benefit of all of our stakeholders.
Turning to our capital investment plan on Slide 17, we added $239 million to our five year forecast for a total of $2.9 billion focused on projects and initiatives that maintain customer safety and reliability and foster customer growth over the next five years.
Most of the increase capital is related to additional programmatic investment in our gas utilities and more than half of the increase is planned for this year and next year.
For this year, we are increasing our capital investment by 64 million to $733 million.
And for next year, we're increasing our capital investment by $78 million to $633 million.
Going forward, we fully expect to invest at least $500 million annually to support our customers.
We continue to take a relatively conservative approach to our capital forecast. We include opportunities that have a reasonable degree of certainty and then we add capital as we gain more clarity around incremental projects that will support our customers. We anticipate that additional capital opportunities are likely over the plan period, especially.
In the outer years.
Slide 18 illustrates that our capital plan as utility focused with timely recovery on most of our investments 95% of our forecasted investments are for our utilities, and we anticipate 83% of our gas utility investments and 51% of our electric utility investments will receive timely recovery.
On the regulatory front Weve listed our current activity on slide 19.
As noted earlier rate reviews are underway for our gas utilities in Nebraska, and Colorado. We appreciate that we had a constructive hearing last Wednesday in Nebraska. The hearing focused on our settlement agreement for the rate review the rider, we requested and for the consolidation of our two utilities in Nebraska.
In other regulatory initiatives, we continue to advance our renewable advantage program to add up to 200 megawatts of renewable energy in Colorado.
We're currently negotiating with the winning bidder on a 200 megawatt solar project to be constructed and plug low Colorado were excited to complete our renewable ready subscription based program for our South Dakota, and Wyoming Electric utilities.
Our 52 and a half megawatt Corey to wind project. We are building to support that program is nearly complete and we expected to be in full service prior to year end. The wind facility is located near Cheyenne, Wyoming, one of the best wind resources in the United States.
On the EPS GE front, we have a strong legacy of sustainable growth and were guided by our core values to safely and cost effectively serve our customers as we provide opportunities for our people to develop and advance their unique skills.
At Black Hills, we have a strong EPS GE commitment and we're prepared to tell our story more holistically.
An important initiative for US was the publication of our first SG reports, we use the E Bay and AG eight templates that I mentioned earlier, which will soon be followed by our greenhouse gas emission reduction goals, which we will release later this week we.
We are adding or expanding renewable energy and all three of our electric utilities, and Colorado, South Dakota and Wyoming.
This year, we were once again award and Gold Star status in Colorado is environmental leadership program Gold stars the highest achievable status and I am proud that we have held this distinction since 2014.
In fact, we were the first utility in Colorado to achieve this designation.
We also recently voluntarily joined EPA methane challenge program to reduce methane emissions beyond regulatory requirements in our gas utilities.
We continue to rigorously promote our strong safety culture with a goal to be the safest utility in the industry.
Our team is already delivering results better than industry average and they are staying on the forefront of processes and safeguards to keep people safe during the ongoing pandemic.
We're also very engaged in serving the needs of our customers through financial aid and supporting organizations like the United way that offer critical assistance in times like these.
In 2019, we provided over five and a half a million dollars in charitable giving and we continue to support our strong commitment to the economic viability of our customers and our communities.
On the governance front, we're pleased to welcome very Granger and Scott Prochaska to our board of directors. They are impressive credentials and experience are already being instrumental in driving future growth, while fulfilling our ESG commitments.
They participated in our board meeting last week and are already adding value.
In closing we are confident in our future.
We are well positioned as a low risk utility investment and complimentary gas and electric utility business and we're privileged to operate a stable and growing territories, which continued to be resilient even during the ongoing pandemic.
We have a solid financial position and liquidity and we are investing and being ready to serve the growing needs of our customers and communities as we improve life with energy.
That concludes our prepared remarks, and rich and I are happy to respond to questions.
Thank you.
Ladies and gentlemen, we are ready to open the lines for your questions. If you wish to ask a question. Please press star followed by one on your Touchstone telephone. If your question has been answered or you wish to withdraw your question. Please press pound again press star one to ask a question. Please.
Please standby for your first question.
Our first question comes from Michael Weinstein with Credit Suisse. You May proceed with your question.
Hi, guys good morning.
Good morning, Mike.
Hey.
Hey on the easiest to your view and now on the greenhouse gas review that's coming up.
Maybe you can give us an idea of where where you're headed especially after announcing coal freight Colorado generation fleet.
Going to be something you can hear it.
Targeting over long term to replicate in other states as well.
Just curious.
Thanks, Mike Good question and good morning by the way, Yes, we're very excited to announce our EPS goals, which will do on November five Thats. Our current plan we've been working on those very hard for about a year, we really started digging into.
What we could do with respect to ESG via the more holistic in our approach and how we talk about DSC and setting some goals.
As you'll see on a couple of days only with share those goals. We are sharing goals that are true to our values and that you're not going to see a lot of caveats in those goals are going to be goals that we can achieve through current technology and things that we are currently doing and considering the life of our plants that were currently operating.
We are going to remain committed in the as you'll see in the short term as to our coal plants. Those are vital to our customers in terms of the low price energy that we're able to provide them, especially reliable energy, but we've learned a lot about adding renewables, especially adding renewables that have been cost effect.
Dave, especially for our customers and as you pointed out in Colorado, Colorado have taken a very aggressive approach and a different approach and we've been very much at the at the helm with respect to that.
We now have by far as well the cleanest utility perhaps in the country certainly there in Colorado. So you'll see again, you will see a lot of caveats about the technology, the yet to be invented things of that nature, but you're going to see goals that are aggressive and ones that we can achieve and then importantly.
The next element of our EPS to you, especially with respect to our stakeholders shareholders and customers will be when we plan or prepare the integrated resource plan will be filing a ERP in Wyoming in mid July will also do South Dakota with that because we do those typically simultaneously and together.
So that will be when we will then approach the commissions with the.
Additions of renewables and things of that nature like.
Yes, the extra gas gas utility programmatic capex for the next two years is that mainly surrounding areas that for nothing leak reduction or is that just something that we can expect to.
Then another year or two you will be rolling forward Neal have that you'll be increasing the plan again.
And another two years or is this something very specific to the next two years fares that you're focused on right now.
Yes, good question, Mike and Thanks for that you were you will see a very programmatic approach to our pipeline replacement. We've got about 4000 miles of steel that we need to replace again about 2500 miles plastic pipe in pipe and then by the way we've got over more than 160000 meters that we call that risks that we replacing as well so.
Kroger medic approach is really replacing that pipe along the way.
As you'll see in our EPS goals later this week, you'll see that we get the benefit of reducing greenhouse gas emissions through that investment and we see this as a essentially a multi decade type of investment.
Going forward. So while we've shown you we anticipate we will do for frankly.
Frankly, a couple of decades.
So I mean is it another way of asking that is can we expect additional increases in the five year plans as with every every roll forward that we see going forward.
Yes. Thank you Mike for clarifying that yes to answer that question as well, we certainly anticipate yes, just like you've seen in the past right.
Right right.
Okay ill step out for now thank you.
Thank you Mike.
Thank you. Our next question comes from Julien Dumoulin Smith with Bank of America. You May proceed with your question.
Hi, good morning team and Frank Congratulations all around here.
Good morning, Good morning, Jay Thank you.
Not really.
Question.
You talked about no material net impact from Covance on your 21 earnings guidance.
How are you thinking about the various puts and takes and I want to acknowledge you talked a little bit about this but I just want to think about the various.
Sort of offsetting factor that you have explicitly reflected in that quarter as things move around here into 21, what's your level of confidence through most of the sustain that no material net impact if you will.
Well.
Yes. This is rich Julian I'll start in inland can fill in the blanks.
What we've seen.
Is.
Really nice trend relative to loads certainly in the second quarter, we saw the load impacts pickup on the small commercial side and a few large industrials.
With residential loads offsetting that partially but as we work through the third quarter and now into the fourth quarter, we really seeing those load trends improve.
Most of the large industrials are fully back online.
The small commercial loads of comeback is our economy's reopened and residential loads of remained strong.
So.
That's the load side of things on the bad debt.
We think we've got pretty good accruals at this point, we accrued 3.7 million additional bad debt above what we normally would year to date through September.
And then on waved customer late fees. This is on slide 38 by the way in the appendix on wave customer late fees.
We think thats pretty much done now given that we were able to reinstate disconnect policies for all of our utilities, except Arkansas through.
Through the third quarter Arrearages have come down substantially from peaking out in the third quarter.
We're not quite back to normal, but getting much closer to normal there.
So when you when you look at all of those together the last one being sequestered sequestration costs, we incurred were done with that as well. We believe when you look at all that together and then consider that we're continuing to save costs on travel.
And outside services we.
We think the impact in the fourth quarter is going to be pretty minimal and as we work into 2021, the net impact is going to be immaterial as well.
And what would you add to that I think rich has done a nice job answering your question Julien I'd say, we've learned a lot we've learned a lot about the virus certainly more than what we knew back in may when we did some of our initial.
Forecast with respect to the impact of I know how to keep our employee team safe, we know how to keep our customer a team safe we know more about how the virus spreads things of that nature and our frankly, our customers have learned a lot more about and how they operate and that size. So shines through through their usage and the loads that we are seeing beginning to.
Really come back as rich indicated bad debt is declining or bad debts have been down about 20%.
Our Arrearages Arrearages apologize Arrearages is down about 20% from the from our from the height of the pandemic and as Rich said also some of our largest expenses were relative to sequestering employees now that we have processes and understand that in place and the more about the virus, we don't anticipate having to do that.
As we go forward either.
Got it excellent well get stuff you listen if I can pivot a little bit more strategically here there is more of a.
Glenn question, perhaps.
How do you think about the bifurcation valuations out there across the various kind utilities certainly.
I'm curious to hear how you think especially if this is a bad administration how de carbonization. The gas utilities proceed but separately how do you think about the sharp deviations out there in this mid capsule, especially your gas utilities today.
Comment a look at it.
Thank you for that Julien Yeah. We've got questions. Just like you do we were kind of surprised frankly by how spreads have not seen valuations respond to our business essentials our business.
Metrics are very good right now very solid as we've been able to establish over the last couple of quarters as we've dealt with a pandemic you mentioned the Biden administration and we've been watching that very closely.
Very engaged in terms of the campaign promises and statements that have been made we'll see how that actually translates into either legislation orders assuming that it becomes president biden in the White house.
We think that typically that means we might have to accelerate some of the.
EPS GE goals that were going to express next week as we as we drafted those we did not try to consider a change in the white house, we make goals that we felt strongly that we could do and we could accomplish with current technologies and what we know today should there be a much more aggressive stance against against climate change and.
Greenhouse gas emissions et cetera, we may have to accelerate some of our investments on behalf of our customers and you mentioned natural gas specifically.
We see natural gas as a long term fuel I don't see it simply as a bridge fuel, especially in the territories that we currently serve.
We take that very seriously when it comes to customer choice, we have pulled our customers and things of that nature across our northern great Plains tiers. The Rocky Mountain region is very clear to them that their natural gas and that choice around natural gas is very important to them, especially when it comes to heating bills and things of that nature. So were.
We are certainly not to an ostrich with our head in the sand around natural gas. We're at the table with the American Gas Association other entities. When it comes to the use of hydrogen things of that nature. So we have a group of people very focused on what we call forced electrification across organization, how we actually combine.
In our efforts with other utilities in the region, we partnered with other investor owns especially in Colorado in response to for example, the the commission information meeting that the PSC is going to have their shortly part.
Partnering also with the FDA in terms of our comments et cetera, So kind of a broad question broad answer, but maybe that is shared with using the thoughts I have in my head and how were looking at our strategy here at Black Hills.
I appreciate it actually started go back real quickly on just a detailed question for rich here, if you don't mind.
On on the equity you, all obviously tweak that a little bit here.
How about like the timing, perhaps a little bit you all did quite well this year. So I'm just curious on thought process. There and then more importantly, as you move out right. You, obviously ratings as well can you talk about that $5 billion range give or take what.
What do you thinking out there this quarter EPS.
Yes, so what we've said in the past is that you know what the previously disclosed capex, we would need upwards of $50 million of equity next year and then we would meet 25 cents to 30 cents on the dollar for additional Capex of which we just disclosed.
An additional 239 million about a little over half of which $142 million in 2020 and 2021, So thats really what drove the 80 to 100 million next year that.
That math should make sense and then when you think beyond next year, we did add about $100 million of capex to those years.
So we probably will need some equity after next year not a substantial amount, but again as we continue to increase capex, we're going to continue to sprinkle equity in there to help them.
That makes sense Julien.
Absolutely no. Thank you for the clarity rather I appreciate your all's patients and that's why we'll see.
Finished jewelry under that up.
Thank you. Our next question comes from Andrew Weisel.
From Bank you May proceed with your question.
Thanks, Good morning, everybody.
First question just to elaborate on that last comment youre, making going forward should we still think of 25 to 30 cents of equity for every incremental dollar of Capex is that still a good rule of thumb.
Yes, I think Thats fair Andrew.
Okay great.
Next I wanted to ask about the Capex recovery, you talked a bit about this but it looks like the numbers have moved around with less spending now considered eligible for timely recovery looks like it's about 70% average 80% previously just wondering have you reclassified certain projects or is something else going on there may be something to do with recovery of the incremental.
Spending.
Well, our our gas utilities are over 80% timely and electrics over 50% total.
Is it.
I think similar to past quarters I'll have to verify what you're asking.
Well I just mean you have in the past you've talked about 80% is being recoverable and now you're saying, it's about 2 billion out of the 2.9 and just based on your disclosures on page 32, you can sort of care I'm getting that around 70%, 80% in the past just wondering if there's anything noteworthy there.
The $2 billion, a new sub after we added there's probably some rounding involved there I would say Andrew but when you think of the timeliness of recovery I think the reality is it's fairly consistent with what we've seen in the past disclosures.
Yes.
Okay, Great maybe I'll follow up on the numbers offline then one last one with the new Capex outlook, what's your latest thinking as far as rate base growth going forward.
Well, we haven't disclosed the specific rate base growth rate as Lynn said, we plan with our year end earnings release to put some more color around long term growth rates, whether thats earnings growth or rate base growth, we're going to give you some more color in a quarter on that.
As you just work with the information we've disclosed obviously our rate base growth spend very strong.
In 2019, 2020, and it's looking good in 2021.
And as you think about the opportunity to increase capex in those out years, we think it's going to remain strong so.
That's the employee you got to work with right now more to come.
Yes.
Sounds good I'll do my best to be patient for a few more months. Thank you guys very much.
Thank you Andrew.
Thank you and as a reminder, that Star then one to ask a question. Our next question comes from Brandon Lee with Mizuho. You May proceed with your question.
Hey, good morning loan good morning rich.
[music].
First question is around.
Okay, good and the impact on your loan.
Since the third quarter it looks like.
The cases have picked up in your service territory have you seen any changes and.
Loan.
The end of the quarter.
We have seen actually while we've seen a tick up in cases, you are correct. There. We continue to also see load usage continued to rebound through the third quarter and into the fourth so they don't necessarily seem to be connected at least in our in our territories doesn't mean they could not.
At some point, but currently as I indicated before it seems our customers are learning how to operate.
In spite of code if you will and so we're seeing the residential load continued to be strong we anticipate us can to people continue to work from home.
In much of our territory that will remain strong and that will probably translate perhaps into the natural gas side of the business as well in the early her heating season as people might be staying home. We're also seeing very.
Very strong.
Industrial loads in Wyoming, that's probably because of our strong focus it is because of our strong focus on data centers, there, which is offsetting some softer loads that we tend to be still be seeing in Colorado in South Dakota.
But overall, we're seeing a good load increases.
Trending very much back toward normal and frankly growing especially on the natural gas side hopefully that helps you there.
Yes.
And then.
Also given the decline in the LDC multiples have you noticed any change to new jurisdictions regarding.
Capex or any pushback from regulators on your planned capex.
I would say the short answer is no, but it's obvious in Colorado that the commission is looking at how they implement the clean energy plan is what I will call. It the clean energy plan does not necessarily does not call out natural gas. It really focuses on the electric business the given the.
Because the commission or information meeting those scheduled to come up soon.
Be watching that very closely.
There with respect to our ongoing opportunities I will put it with natural gas, but again, our customers in Colorado are pretty enthusiastic about their natural gas usage and really want that customer that mix of energy available to them. So much more to come with respect to that.
Great. Thanks, that's very helpful. That's all I have thanks a lot.
Thank you.
Thank you and as a reminder to ask a question you'll need to press Star then one on your telephone.
One moment.
And with no further questions I will turn the call back over to the Evans for closing remarks.
Thank you Josh. Thank you all for joining us. This morning, I will look forward to sharing our ESG goals. Later. This week, we are really looking forward to virtually seeing many of you at the financial conference next week.
Thank you all for your interest in Black Hills Corp.
Please remain safe healthy enjoy a safe day and thank you again.
Thank you for your participation in today's conference. This concludes the presentation you may now disconnect good day.