Q4 2020 Atmos Energy Corp Earnings Call
Greetings and welcome to the Atmos energy fourth quarter earnings call.
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A question and answer session will follow the formal presentation.
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I will now turn the conference over to our host Benazir Vice President of IR and Treasurer. Thank you Sir you may begin.
Thank you Diego good.
Good morning, everyone and thank you for joining US today with me. This morning are cabin acres, President and Chief Executive Officer and Chris for.
Hi, Senior Vice President and Chief Financial Officer.
Our earnings release and conference call Slide presentation, which we will reference in our prepared remarks are available at Atmos energy Dot com under the Investor Relations tab.
Today's presentation also includes references to non-GAAP financial measures.
So my first hear from actually think tank in the slides accompanying today's presentation for Definitionally information and reconciliations of non-GAAP measures to the closest GAAP financial measure.
As we review these financial results and discuss future expectations. Please keep in mind that some of our discussion might contain forward looking statements within.
Should any of the Securities Act and the Securities Exchange Act.
Forward looking statements and projections could differ materially from actual results factors that could cause such material differences are outlined on slide 43 and are more fully described in our SEC filings I will now turn the call over.
Over to Chris for site.
Thank you Dan and good morning, everyone. We appreciate your interest and the synergy and are happy that you could join US This morning, yes.
Yesterday, we reported fiscal 2020 diluted earnings per share of $4.89 compared to diluted earnings per share of $4.35 reported in the prior year.
As a reminder.
After our fiscal 2012 results included a onetime noncash income tax benefit of $21 million or 17 cents per diluted share that we recognized during the third fiscal quarter related to a legislative change in Kansas that reduced our state deferred tax rate.
Excluding this nonrecurring benefit diluted earnings per share for fiscal 2020.
It was $4.72. This represents the 18th consecutive year rising earnings per share and.
In summarizing the year dependent imec began to impact the economies of the states. We serve at the end of our winter heating season.
By that time, we had earned 70% of our distribution center revenue for fiscal 2000.
Given the economic.
Any uncertainty at that time, we were conservative about the anticipated non residential load loss for the third and fourth quarter.
And we plan to reduce on them activities during the third and fourth quarters to keep our employees healthy into align spending with anticipated revenues.
Our residential loan loss during the last six months of the fiscal year was less severe than we had originally.
We anticipated.
And we maintained our own end spending in the back half the fiscal year in line with the revised guidance, we issued after our service our second fiscal quarter.
As a result, our fiscal 2020 EPS came in at the higher end of our earnings guidance range of $4.58 to $4.73.
Taking a closer.
Sure look consolidated operating income rose over 10% to $824 million slides five and six provide details of the year over year changes to operating income for each of our segments.
I will touch on a few of the fiscal year highlights.
Rate increases in both of our operating segments, driven by increased safety and reliability capital spending totaled.
$140 million we.
We also experienced a $14 million increase in distribution operating income primarily due to customer growth in our mid Tex Division.
During the 12 months ended September 30, our mid Tex Division experienced net customer growth of 1.5%.
On a consolidated basis, we experienced net customer growth.
Total 1.2% over the same period.
We did experience a $6 million reduction in operating income primarily due to a 13% decline in commercial consumption in our distribution segment during the last six months of the year.
We also experienced a $6 million decline in service or revenue, primarily due to the suspension of collection activities since March.
For this year.
In our pipeline and storage segment, we experienced a net $14 million decrease it through system revenue.
Volumes declined 17% in prices declined 13% due to reduce associated gas production in the Permian basin consolidated.
Consolidated revenue expense for fiscal 2020 was flat compared to 2019.
In line with our expectations.
On M. and our distribution segment was about $8 million lower than the prior year, reflecting lower employee travel and training costs, partially offset by an increase in bad debt expense.
Lower spending in our distribution segment was offset by higher spending persistent maintenance activities in our pipeline and storage segment.
Most of which was completed during the first half of the fiscal year.
Consolidated capital spending increased 14% to $1.94 billion with 88% of our spending directed towards investments to modernize the safety reliability and environment environmental performance of our system.
With this spending our team replaced approximately eight.
845 miles of distribution and transmission pipe and 55000 service lines across the eight states in which we operate.
In fiscal 2020 over 90% of our capital spending began to earn a return within six months and the test period end.
We accomplish this by lending $160 million in annualized.
Operating.
Income increases and since the end of the fiscal year, we reached agreement with our regulators to implement an additional $106 million in annualized operating income during our fiscal 2021 first quarter.
As of today, we have three filings pending seeking about 12 and a half million dollars slides 30 to 40 to summarize our record.
Inventory activities dirt.
During fiscal 2020, we successfully executed our long term financing strategy, while maintaining the strength of our balance sheet and further enhancing our liquidity position we.
We completed over $1.6 billion of long term debt and equity financing.
We fully satisfied or fiscal 20 equity needs through our ATM equity sales.
Program are.
Under the program, we issued 4.8 million shares under stored agreements for $523 million unsettled 6.1 million shares for net proceeds of $624 million as of September Thirtyth, we had about $345 million remaining under equity forward arrangements.
This equity finance.
Sensing complemented the $800 million in long term debt financing, we issued last fall and the $200 million term loan we executed in April.
As a result of these financing activities or equity capitalization was 60% as of September thirtyth.
Additionally, due in part to be additional addition of $700 million of new credit facility.
So the capacity.
We finished the fiscal year with approximately $2.6 billion liquidity, including cash held in escrow under equity 400 rayment generations. The.
The strength of our balance sheet and liquidity leaves us well positioned as a new into fiscal 2021.
Details of our financing activities, including our equity forward arrangements as well as our finance.
Answer profile can be found found on slides nine through 12.
Looking forward fiscal 21 will represent the 10th year of executing our operating plan to modernize our distribution transmission and storage systems. The fundamentals our operating plan remain the same.
Yesterday, we initiated a fiscal 21 earnings per share guidance.
The range is $4.90 to $5.10 concern.
Consistent with prior years, we expect about two thirds or earnings will come from our distribution segment.
Over the next five years, we anticipate earnings per share will grow 6% to 8% per year by fiscal 2005, we anticipate earnings per share to be in the range of $6.30.
$6.70.
From a revenue perspective, we've seen no material changes on residential revenue has result, COVID-19.
We continue to remain cautious about our non resident fee revenue due to continued economic uncertainty.
That you are now heading into the winter heating season.
Although it is difficult to precisely estimate the potential.
Potential bode loss that we might experience, we perform multiple sensitivity scenarios as we consider the fiscal 21 earnings per share guidance.
Slide 18 summarizes our key distribution segment revenue attributes and provides EPS sensitivities for the full fiscal year for each 1% change in sales volumes by customer class.
And as you are aware influencer of pipeline storage segment is predominantly driven by 80.
As a reminder, over 80% of ABTS revenues earned from delivery services to ldcs, including our mid Tex Division under straight fixed variable rate design.
Remainder of ABTS revenues relates to three system business and other ancillary.
Fund services.
Only keeps 25% of the difference between actual revenues earned from these activities and the approved $69 million benchmark in its rate design.
Our fiscal 21 guidance reflects current market conditions for the small portion of that business.
From an OEM perspective, we have assumed that X.
Our normal own end program as we continue to focus on compliance next activities that address system safety. These.
These activities include enhance leaks surveys pipeline integrity work work to address them as new integrity management rules that became effective July one 2020 and continue records this establishment and retention.
Similar to fiscal 20, we do have some flexibility around the timing of this on them spending which could help us align spending with potential changes that revenue EPS.
We continue to focus on safely operating our system, we continue to assume all in inflation of 3% to 3.5% annually through fiscal 25 addition.
Additional details can be found on slide 16 and.
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Fiscal 21 capital spending is expected to rise about 7.5% and is expected to range from $2 billion to $2.2 billion approximately 85% of the spending will be dedicated sales safety and reliability spending which also reduced message methane emissions from our system.
Approximately 73% of spending will be.
Allocated to our distribution segment over 90% of our consolidated capital spending is expected to begin earning return within six months of the test period end.
Continued spending per system replacement monetization will be the primary driver for the anticipated increase in capital spending net income and earnings per share through fiscal 25 at.
As you can see on slide 21, we anticipate capital spending to increase about 7% to 8% per year off with fiscal 2020 spend levels for a total of $11 billion to $12 billion over the next five years. This.
This should support rate base growth and about 12% to 14% per year.
This translates into an estimated rate base at $19 billion to $20 billion in fiscal 2000.
25 up from about $11 billion at the end of fiscal 2020 as you can see on slide 22.
Annual finally mechanisms will be the primary means to which we recover our capital spending.
These mechanisms enable us to more efficiently deploy capital and generate returns necessary to attract the capital we need to finance our investments.
And these mechanisms produce a smaller impact to customer bills, while providing the regular rate adjustments that support our ongoing system modernization efforts.
We have assumed no material changes these mechanisms to fiscal 25.
In fiscal 2021, we anticipate completing filings for $195 million to $215 million.
Utilized regulatory outcomes.
Packs fiscal years 2021 and 2022.
Moving to slide 24, the LIBOR financial performance in fiscal 2020 yesterday Atanas Energy's Board of directors approved 140, eightth consecutive quarterly cash dividends. This.
This the dollars that indicated dividend for fiscal 2021.
And dollars and 50 cents and 8.7% increase over fiscal 2020.
We continue to expect dividends per share to grow in line with earnings per share over the next five years, and we will continue to target a payout ratio of approximately 50% and it strikes the right balance between using funds to invest in the monetization or system and providing and reduced.
As to return to our shareholders, we support our operating plans with their investments.
This five year plan also continues to financing strategy, we've been executing over the last few years it balances the interest of our customers and our investors, while preserving strong credit metrics and minimize the cost of financing.
Based on our spending assumptions.
We anticipate the need to raise between 6.5 and $7.5 billion the incremental long term financing over the next five years. So.
The strength of our balance sheet enables us to can you continue to use a prudent mix of long term debt in equity in.
In order to maintain a balanced capital structure with a targeted equity to total capitalization ratio range.
With that 50% to 60% inclusive of short term debt. This.
This strategy is summarized on slide 25.
And consistent with prior year plans, our financing plan has fully reflected in our earnings per share guidance to fiscal 2005.
In October we completed a $600 million 10 year senior note issuance with a coupon of one point.
In July percent as.
As a result, our overall weighted average cost of debt as of October Onest 2020 stands at 3.94% and our debt profile remains very manageable with a weighted average maturity of 19 years from an equity perspective, the equity forwards we executed during fiscal 20, well senesac significant portion of our expected.
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We expect to razor razor remaining equity needs for fiscal 21 through our ATM program.
To recap the execution of this plan to modernize our system through disciplined capital spending timely recovery of those investments through our various regulatory mechanisms and balanced long term financing.
All support our ability to grow earnings per share in dividends at 6% to 8% annually through fiscal 2025.
And as you can see on slide 20 to 26 the execution of this plan will also keep customer bills formal which help us sustain this plan for the long term. Thank.
Thank you for your time this morning, I will now turn the call.
Thanks, Kevin for his remarks, Kevin.
Thank you, Chris and good morning, everyone. We appreciate you joining us today and your interest in Atmos energy.
Our success in fiscal 2020 reflects the talent and dedication of our 4700 employees.
I said, it before and I'll say it again today.
They are the heart and soul.
Advertisements energy and provide the foundation for sustained long term success of our company I'm.
Im extremely proud of their commitment to keep our 3.2 million customers.
1400 communities in.
In sales and their families healthy and safe.
I'd also like to take this opportunity to thank our state regulatory commissions.
Our many.
With that here companies our.
Our state gas associations.
As well as the American gas Association for their assistance and support during these challenging times.
Our robust risk management process has served us extremely well.
During this pandemic and will continue to guide us as we navigate our way forward.
Shared previously through the outstanding work of our risk management and compliance Committee and our senior leadership team. All 4700, Atmos energy employees were well prepared when we transition to digital work environment.
As you can see in our fiscal year operating and financial performance. Our team has proven their ability to execute.
At the highest levels on all facets of our business.
Our move to digital work environment in March for.
Provided opportunities for us to leverage new tools.
Virtually connect with one another.
One of the areas I want to highlight today its technical training to date, we have trained over 900 employees utilizing a.
Is that our tool format.
Designed by our workforce development and curriculum design teams. This has created exciting possibilities for us as this training is a critical part of our vision of being the safest provider of natural gas services.
We play a vital role in every community we serve through our safe delivery natural gas Sir.
But it's also important is our time, our talent and our resources invested in bringing out the best in our community. So they can thrive.
For example, during September Thats Hunger action, we joined forces with hundreds of local school districts food banks and other essential.
Organizations that provide breakfast lunch snacks and healthy meals that all children need to grow develop and succeed.
Finally, we provided resources that help students read on level about third grade.
Furthermore, during our annual week of giving in September our employees generously pledge nearly.
The $900000 in donations to benefit no Kid hungry, United way and the Salvation Army.
Atmos energy will match, our employee pledges to further support the important work. These agencies do every day.
We also donated $1 million to more than 100 local energy assistant agency.
In non profit organization to help customers stay warm this winter or weatherize their homes.
As Chris mentioned over the next five years, we plan to invest $11 billion to $12 billion with 88% of that capital spending focused on safety and reliability investments identified by our rich.
Risk based capital allocation strategy that includes replacing industry identified materials, such as bare steel vintage plastic can cast iron.
Our Atmos pipeline, Texas investments in addition to the safety and reliability will continue to focus on serving a growing demand, particularly in north Texas.
And as Chris mentioned earlier, our mid Tex Division had a 1.5% net customer growth this past year.
As you can see on slide 19, we anticipate our capital spending plan over the next five years will support the replacement of five to 6000 miles of distribution and transmission pipe.
Or about 6% to 8% of our total system.
Included in this amount is the replacement of the remaining cast iron pipe in our system.
And the replacement of all bare steel main outside of our mid Tex Division.
We also plan to replace between 100000 and 150000 steel service lines, which is.
Expected to reduce our inventory between 20% to 25% this.
This level of replacement work is expected to reduce methane emissions from our system by 15% to 20% over the next five years.
On the technology side as part of our wireless operations network.
We anticipate 70.
5% of our system will be equipped with wireless meter reading at the end of fiscal year 2025.
Additionally, through this network, we are testing the ability to wireless they received to Thoday protection monitoring data from a cost our distribution and transmission systems.
In addition to modernize.
Housing our systems, we have been focusing on other ways to further reduce our carbon footprint.
We categorize our environmental focus into five areas gas.
Gas supply.
Operations.
Eight facilities and customers.
For example on a gas supply is our in G.
Todays.
Our to say before we transported approximately five bcf across our system, which is about 2% of our distribution sales volumes.
We have identified several opportunities to increase the amount of RMG on our system.
For example, we have just signed an interconnect agreements with renewables company for an additional level of.
She brinci from three dairy facilities.
Although it is too soon to commit to how much R&D can ultimately be transported on our system. We.
We will be working with regulators.
And all stakeholders to help develop frameworks for commercial viable RMG solutions to support our customers and improve the environment and.
Additionally, under the category of facility, we have 13 leadership in energy and environmental design or LEED certified facilities and have four additional LEED certified facilities plan.
Of these 13 lead facilities for certified goal in seven are certified sales were.
Lead is a globally recognized green building certification rating system developed by the U.S. Green building Council that provides third party verification of efficiency and emissions reductions.
For example, our annual water use at these facilities is reduced 50% to 60% and our carbon dioxide.
Revenue I mentioned, our reduced approximately 600 metric tons per year.
In closing the long term fundamentals of our strategy remains the same and as you just heard our employees continue to execute at the highest levels and provide the foundation for sustained long term success of our company.
Our strategy.
Medical quoted by the fact that we operate in constructive jurisdictions and several of our markets continue to have a long strong term growth potential most notably in the DFW metroplex, the fourth largest metropolitan area in the country.
The successful execution of our strategy the strength of our balance sheet and our strong liquidity.
Yes leaves us well positioned to continue to safely deliver reliable affordable efficient and abundant natural gas to homes businesses and industries the fuel our energy needs now and in the future.
We appreciate your time this morning, and your interest in Atmos energy and we'll now take any questions that you may have.
Thank you.
At this time, we'll be conducting our question and answer session if.
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Our first question comes from Insoo, Kim with Goldman Sachs. Please state your question.
Morning. Thank you My first question is on.
Your 2021 guidance appreciate the commentary you gave on the sensitivities on what could happen with coated during these winter months, but as we think about the midpoint of that guidance are you able to give us a little more specificity as to whats.
Think about it in terms of any demand impact net.
Hi, Good morning, and say this is Chris I, just said earlier, we did a number of different sensitivities and rather than debating it with with individuals we thought by putting that sensitivities out that you see in slide 18.
I would provide FFO.
Thanks, Rick fee.
The the data that they can do to make some assumptions around what they want to think about the non residential load loss, but said, we ran multiple scenarios and and we feel like our guidance.
Is reflective of those various scenarios.
Did you want.
Want to point out that we we've assumed a full I want to end program. This year.
And to the extent that we need to to pull levers a little bit to align.
Spending with with revenues as well as the keeping our employees safe.
That opportunity exists for us as well.
Got it and.
On top of that what markets are you seeing the greatest risk to demand as we enter into the into the winter months.
I mean.
When we looked at our markets you know in the back half the year, Louisiana, Mississippi or mid excuse me mid Tex a word to that so most of our the commercial dikla.
That I commented on earlier.
But.
Right now.
Towards the back half of the year it wasn't nearly as severe as we anticipated. It certainly recovered as we moved along through the third and fourth quarters and we'll.
It does have to continue to watch and see I think it's also going to contingent upon how the yes.
The buyer spreads how states may respond to to containing the spreads projecting the citizenry and and also balancing the needs of the economy. So.
Understood.
And then.
Looking at the longer term guidance.
You guys have been so consist.
Lines, and historically and giving the 6% to 8% EPS achieving most of the times at the end or even above the upper end of that when.
When we look at the five year take or through 2025 off of the 2020 actuals.
Doesn't imply a cake or that's around six and a half.
Percent, a little bit less than some of the cake or excited we've been calculating in prior years.
How much of this is you being more just conservative versus some law of large numbers kicking in terms of how much capex you are able to do or the financing plans I used you currently have in place.
Yeah, I think theres.
There's an element of conservatism in our in our numbers. This year as I mentioned, because remember we are going to be cautious about what we're seeing around the the non residential load loss as we go into the winter heating season. If you go back to the kind of the midpoint of the guidance for fiscal 20.
Had we achieved that.
And then you kind of extrapolate that out that would get you closer to 7% I believe.
Yes, understood and just one more.
And what point do you think and if this in consideration when you look over this new five year timeframe.
And create creating a potentially a holdco structure too.
That help you guys you know create additional financing capacity.
Yes, the holding company structure, we get that question from time to time, we like the transparency that our current.
Structure provides for a regulatory environment it minimizes the.
The question that you get there.
Balaji what are you doing at the parent level versus at the operating level in terms of equity capitalization debt financing so on so for that.
We've seen instances where.
The regulators have tried to kind of peer set at operating company level and.
And try to get to be at the parent level to impute.
A capitalization at the Opco level, so we feel like having a transparent capital structure. The way. We do today. Just just takes one last question on one last question off the table and because we remain focused on talking about what we're doing with the spending in terms of modernizing system to make it to before.
For me, a more safely more reliably and more environmentally responsible.
Got it thank you so much.
Okay. Thank you into.
Our next question comes from Stephen Byrd with Morgan Stanley. Please state your question.
Hey, good morning.
Hi, good morning.
Good morning, Congrats on the continued very good results wanted to to build on.
A couple of questions. There that were just ask just overtime.
How do you think about the delta between rate base growth and EPS growth I think you've had a fairly consistent.
Didn't approach there I was just curious as you continue to get bigger if you know if there are any sort of changes to your thoughts around that delta between rate base and EPS growth.
Oh, yes, as we've talked about before see then they are that large delta largely reflects the financing plan that we've assumed over.
Over the next five years.
Errors and and we certainly believe that.
Certainly over the next five years that we continue to operate.
In financing the corporation in a balanced fashion using a mix of long term debt equity and the strength of the balance sheet is.
Is is important as we saw earlier this year with.
The chart to the markets the ability to access the commercial paper markets.
We really didnt have much material impact as a result of the strike that balance sheet and it also gave us the opportunity.
To further enhance our liquidity by 700 million.
Because because we didnt have that that equity capitalization.
Nice.
Understood that balance sheet your consumer balance sheet, certainly it's been a nice asset for you all to have.
No that makes sense.
I wanted to shift over to to M&A, which is some.
I know you all don't really need any kind of inorganic growth you've got great organic growth really.
Or at a high level when you think about the skills and the capabilities that you've developed overtime and you think about sort of.
Applying that skill set to others do you do you often sourcing a gap in that skill set where you could add value are there certain their cap sort of categories of value add you could provide or is that.
Well not something you spend much time kind of thinking about in the context of sort of inorganic growth.
Well Stephen as Kevin Let me, let me start with and take US back to its Christmas in early over the next five years, we plan to invest $11 billion to $12 billion and you know our rate construct very well.
Within six months, we start earning on 90% of that 99% by the end of 12 months. So that's where we're going to continue to focus right. There. That's our strength, we've proven that over the last decade, or so that we can execute at that level. It's a very understandable story for our employees.
For investors and for regulators to follow.
You know I think everybody is working hard now around the regulations at the state and federal level to make compliance a lot I think to our associations to our peer group meetings and everything else I think our industry is at the top of its game.
Right now and its ability to operate and deliver safe reliable natural gas service every day.
Understood under.
Understood.
Okay, and then maybe just lastly.
I know this is not likely to be relevant anytime soon but we do think longer term about about green hydrogen and.
I was especially interested just given your geography and in some cases your proximity to sort of a pure hydrogen infrastructure.
Nearby and I was just curious your latest thoughts on sort of you know that the cost to be able to accommodate green hydrogen what percentage could be blended eni.
Jay Decreeing hydrogens quite expensive compared.
Compared to natural gas I don't not really thinking in the near term, but also beyond sort of what you can do with your own system, whether there might in the future be some potential.
To combine your capabilities with the capabilities of sort of pure hydrogen infrastructure nearby to create really a backbone that could.
Could allow for.
A larger conversion to green hydrogen and usage of your systems on I know thats, a fairly broad, but just curious your thoughts on that.
Sure and.
As we said before too we are certainly plugged into watching all the projects that are coming online, particularly here though.
Sales in the states as you are aware and most of those are what I would call single point source are there particular turban or particular smaller scale project here, they're not anything on a wide distribution and transmission level. We're also watching very closely what's going on in Europe around particularly in Germany right now there are several projects.
On a little bit larger scale, if you will of lending and delivering that hydrogen so were stayed.
Staying plugged in to the American Gas Association through the gas Technology Research Institute and other associations to continue to monitor those projects. So we can take a look at such things.
As you just mentioned what is the appropriate blending right, how and where do you do that what's the impact on the infrastructure the steel of those systems and the burners on the end use equipment those sort of things so where we're plugged in we are continuing to monitor that and we'll we'll continue to test.
To stay in touch with those groups and as necessary continue to our valuation of our systems and what that may look like for a longer term.
Okay makes sense Thats all I had thank you.
Thank you David.
Our next question comes from Ritchie to directly with Bank of America.
Police to your question.
Hey, good morning, how are you all doing.
Good morning, Richard.
No.
Thank you taking my question here just wanted to follow up a bit on Steven's question, if I could.
We obviously have a robust capex line in front of you there are few.
Players in the space looking to divest some LDC assets summer.
Adjacent to your service territory, and just given where your multiple is relative to those carriers. It would seem like an acquisition could be quite accretive. So just curious how you guys are thinking about the strategic landscape.
Exactly.
<unk> as a as I said before we're focused on that 11 to 12 billion going back into our system modernizing our system both at the distribution transmission and storage levels. If you will.
And again, you look at that regulatory construct on the times, we just talked about that coming back to us and rate recovery. It's.
It's hard for.
To say that you could get that type of recovery through an acquisition.
We've been part of several as you know over the years and they are extremely difficult at times to integrate both from a operational perspective from an employee perspective, and a cultural perspective.
Right now we have shown a debt.
We are mid to long ability to execute on this strategy and that's what we're going to continue to focus on making sure. We are investing in the right things getting the right recovery for that and modernizing our system. So we can be environmentally sound as we continue to go forward and tighten our system up for our for our customers our communities and our investors.
Got it that's very helpful focus on the organic profile here and then just separately on.
The equity needs remaining for 2021, I think you've executed on a roughly 345 million in equity forwards. So is the remaining amount through the ATM program is it roughly in the.
To $70 million to $300 million range.
That's a pretty good assumption.
Okay. Thanks, and then just last one on the Oh on M. front I'm, just an inverse a response to what your I'm talking about with into earlier on the levers there.
Think about that.
Basically that you can offset in tivo, one and flat relative to this year if sales.
Figures don't come in where you expect.
Yeah, I think we'll just have to see how the year unfolds Ritchie <unk> versus.
She most we still have to maintain compliance throughout the entire system and we don't want to.
Achieve compliance you know just by just by barely achieving by barely making it. If you will so we'll just have to continue to to look at that in terms of yeah. We do have just general in place.
Fortune as everybody does and in some of our just just general costs as they continue to go up so well just continue to monitor that see where the where the fiscal year takes us in terms of revenue looking at the portfolio of owned and activities and we will yes to the extent that we.
I need to just we'll we'll update at the appropriate time.
All right great. That's all I had thanks a lot.
Oh.
Thank you.
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Our next question comes from Charles Fishman with Morningstar. Please state your question.
Good morning.
Slide 19.
For new.
Five to 6000 miles of Ah.
Pipe replacement.
And over the next five years, where we stand at the end of 2025 as far as how.
How many miles of pipe rollout or how many years of that kind of pace goes on when the.
What are we looking at post 2025.
But Charles this case.
Uh huh.
We have a runway right now steel service lines at about a 15 to 20 year right. So you look at that that will get us down about five years off of that young like it says there about a 22% reduction.
And then we've got about the same timeframe on industry identified so well.
So well have a little over a decade or so left and let's keep in mind. That's at today's regulation right. You know what I mean by that rules are always updated on types of equipment various materials and in addition, we weakness.
We've now gotten into this this past decade, the system modernization where.
Previous years under the old rate construct if you will people it would stay out invested smaller levels and try and work back through OEM reductions to do that that model has long since gone you have got to continue to invest in their system to keep it modernized to keep the equipment up and leverage technology win.
Where you can so I think these are at the current regulations. The current identified materials, but also you got to keep this other construct in mind of wanting to keep their system is up to date as possible right.
Okay, and then Kevin with that argument I mean, I look at the average monthly Bill slide on.
On 26, and I realize you have older that are forward.
Now you're starting up.
20, Oh nine isn't as good as 20, all eight when it was much higher I was comparing them, but you do have significant increases is it would you just told me is that the argument.
To municipalities you Sir.
From regulators.
Well I don't know that I'd.
Quite stated as an argument I think it's on our investment strategy and again I I think when you look at the the household build there that's the lowest bill in.
In the household today for customers and you compare today, so price that we have on the sheet and that for now.
Dollar and a half to 550 range, you're you're talking about a equivalent.
Somewhere.
Around noon.
11, 12 dollar gas.
When you compare that to the old clip on electric side. So if you convert that over.
Yeah, you're looking about.
6789 cents on the on the electric side. So I think we're we're continued to be affordable at this investment progress that we're making we continue to do it on an annual basis only send the right signals, there and obviously that paired with the.
Production in the basis of where prices are today are certainly a help for us as well.
Continuing on that affordability issue.
We've seen some electrification mandates on the coast I don't believe there has been anything in your services.
Territories, correct me, if I'm wrong, but.
It is.
Let me ask you this how're you.
Your market share with respect to new construction are you maintaining your market share with respect to single family and multi multifamily with respect to competing against an all electric.
New home or new apartment.
Absolutely as you just heard us talk about the organic growth, particularly here.
Here in the Metroplex area and in addition, there.
The territories, we serve in middle, Tennessee, and around our load late the Kansas area continue to show good growth as well there. So our market share continues to be strong and when you look at what the metroplex is it and how its to continue to.
Two.
Grow here I think we've got a good long horizon of customers wanting and demanding our natural gas product as you've seen from from those percentage increases there and as you said, we havent seen that.
That electrification.
Discussion that push yet we continue to talk with our customers.
We continue to serve our customers and they like the value of the product brains and at the price as I said today.
So the $4 to four and a half to five dollar 50 cent rage adequate.
You know again to 10 11 cents per kilowatt electric right and you show me you know somewhere where we are.
Our solar or or getting that today. So.
Yes, I think we continue to make remain competitive.
And continue to have strong market share.
Well I would think it Kevin with the you know with respect these electrification mandates the amount of energy.
The new is the gas utility deliver.
Over on the coldest day.
The electric utilities would be hard pressed to come up with that it's a huge increase in their.
Capacity is that correct.
Correct.
Yeah, you're exactly right.
You've seen the challenges, particularly on the west coast that Unfortunately some of those.
Folks are having during the peaks right now so you you draw parallels back to a winter period and trying to meet that that demand in those peak needs. It is going to be even more challenging but.
As you've heard me, probably say before right now the population of the U.S. is about 333 and $35 million and due to head tool.
As for 360 million by 2030 and.
On chart, that's adding a Texas.
30, plus million people here in less than a decade, so where are you going to get that energy natural gas as we just talked about is abundant it's affordable and reliable so and as the pool.
Or just.
Proven reserve country in the World I don't know why we wouldn't continue to leverage that asset and find ways to continue to grow that when we're thinking about a diversified energy portfolio going forward. So I think you're spot on with that and.
And that's how we view it we view it.
First let me a week the industry serves 70 75 million customers today, where we continue to grow with that and we are in the right place at the right infrastructure today to continue to provide that reliable service.
Okay very helpful. Thats, all I have thank you.
Thank you there are no further questions at this time I'll turn it back to management for closing remarks.
We appreciate your interest in synergy and thank you for joining us a recording of this call is available for replay on our website through December of 2020 have a good day.
Thank you this concludes todays.
Lafrance all parties may disconnect have a great day.