Q4 2020 Fortis Inc Earnings Call
[music].
Ladies and gentlemen, thank you for your journey by my name is Michelle and I will be your conference operator today welcome kits Fortis Q4, 2020 conference call and webcast. During the call all participants will be in a listen only mode. There will be a question and answer session. Following the price.
And patients at that time, those with questions should press star followed by the number one on their telephone if at any time during the conference you need to reach your two and operator. Please press star zero at this time I would like to turn the call from shopper.
Stephanie and Mimo. Please go ahead Mr Mimo.
Thanks, Michelle and good morning, everyone and welcome to Fortis is fourth quarter and annual 'twenty and 'twenty results Conference call I'm joined by David Hutchens, President and CEO, Jocelyn Perry Executive VP and CFO other members of the senior management team as well and Ceos from certain subsidiaries.
Before we begin today's call I want to remind you that the discussion will include forward looking information, which is subject to the cautionary statements contained and the supporting slide shop.
Actual results can differ materially from the forecast projections included in the forward looking information presented today, all non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U S. GAAP financial measures and our 'twenty and 'twenty annual MD&A also unless otherwise specified all financial information referenced is in Canadian dollars without.
I will turn the call over to David.
Thank you and good morning, everyone and happy to be hosting today's call from Snowy St. John's as Fortis as new President and CEO following very Perry's retirement at the end of 'twenty and 'twenty before.
Before we get started today I hope, you're all staying safe and healthy as we continue to manage our way through this pandemic.
As we look back on 'twenty and 'twenty. It proved to be a successful year at fortis on many fronts. Despite the challenges of the year presented the value of our locally driven business model has never been more evident.
Our teams across North America leaned on our shared values and each other to find the best solutions to navigate through the year.
We continued to demonstrate our commitment to safety, while delivering a central service to our customers with the high level of reliability that they have come to expect even with the pandemic and record weather impacts and several of our subsidiaries and we kept moving our business forward, we invested $4 $2 billion and our systems our largest.
Annual capital spend to date, increasing our rate base by 8%.
And the sustainability front, we announced a corporate wide target to reduce our carbon emissions 75 per cent by 2035 compared to 2019 levels. We also saw the constructive resolution of key regulatory proceedings, including T. P's recent general rate application, which Jocelyn will speak to shortly.
2020, with a strong safety and reliability year for Fortis and fact that we recorded the best safety performance and our history with safety incidents decreasing 25% over the prior three year average this was a significant accomplishment during a pandemic and the execution of our record cash.
Investment plan.
On the reliability front, we remain consistently and the top quartile relative to our Canadian and U S peers.
This continued focus on reliability doesn't go unnoticed last month, two of our utilities I T C and central Hudson, We're presented with the Edison Electric Institute Emergency response Awards.
P. C was recognized for its quick and safe restoration, following the ratio windstorm, and Iowa and Central Hudson was recognized for its outstanding storm recovery performance following tropical storm and <unk>.
And we're incredibly thankful for the cruise and customer service teams and this would not have been possible without their hard work and dedication.
And 2020, our management teams were able to tap into a vast network of expertise across the Florida group to stay focused on what matters most to our employees customers and local communities approximately half of our 9000 employees transitioned to working from home, while our field operations and critical ones.
Site functions adapted operations to ensure we safely kept electricity and natural gas flowing to our customers. We supported our 3 million customers during the pandemic by offering flexible payment options suspending disconnections waiving late fees and deferring scheduled rate increases and and the <unk>.
<unk>, we serve we donated over $15 million throughout the year, including $5 million, specifically for COVID-19 community support.
As we have noted in the past our sales are trending consistent with the industry. Generally speaking we continued to experience higher residential sales tempered by lower commercial and industrial sales and 2020, 83% of our revenues were from residential sales are protected by regulatory mechanisms with.
You and us and our other electric segments, having the most exposure to changes and sales.
During the fourth quarter retail sales at these segments increased by 1%.
Favorable weather and Arizona contributed to higher sales that you and us, but excluding weather related impacts sales that you and us were still up 2% over the same timeframe in 2019.
For our other electric segment sales were down 3% and the quarter driven by reduced tourism and the Caribbean.
During the year, our utilities invested $4 $2 billion into our energy systems. This record level of capital was $400 million higher than 2019 increased rate base by eight per cent and represents investments to support delivering a cleaner energy future notably.
Notably, we invested $500 million during the year and also ground day wind project in Arizona. This 250 megawatt wind generation facility is owned by Tucson Electric power and will complement their existing solar generation portfolio commissioning is expected to be completed and the first half of 2021.
And 2020, we establish a corporate wide carbon emissions reduction target of 75% by 2035, all of our utilities will contribute to the corporate wide target with the majority being underpinned by TPS integrated resource plan.
This plan calls for an additional 2400 megawatts of wind and solar and 1400 megawatts of energy storage to support the closure of all of <unk> coal generation assets by 2032, TEP alone will almost quadruple the current renewable energy generation capacity of Fortis by <unk>.
35.
Additionally, <unk> integrated resource plan calls for adding 170 to 200 megawatts of solar by 2035, we expect 99% of our assets will be dedicated to energy delivery or carbon free generation.
We remain focused on continuous and continuously improving our already highly ranked ESG profile from a governance perspective, we are consistently recognized for our practices that are grounded and local leadership and independent board oversight and 2020, we launched our corporate wide inclusion and.
Diversity Council sign the Black North initiative and continued our focus on gender diversity.
Day, 60% of our utilities have either a female CEO or board chair and women represent 40% of the Fortis Board.
Turning to slide 11, this past September we rolled out our new $19 $6 billion five year capital plan, reflecting approximately $4 billion of annual investment and our utilities virtually all of our planned investments are regulated and consists of a diverse mix of highly exits.
Beautiful low risk projects needed to maintain and upgrade our energy infrastructure. The capital plan is expected to grow rate base from $35 billion in 2022 over $40 billion and 2025, an increase of $10 billion or nearly one third this.
And this yields a five year compound annual growth rate of approximately 6%.
Within our portfolio of utilities, there are several opportunities to expand and extend investments across our businesses, including connecting renewable energy resources to the grid, adding LNG infrastructure, increasing investments and energy efficiency and expanding low carbon transportation.
And.
Additionally, the bite and administration has proposed the sustainable infrastructure and equitable clean energy plan, calling for net zero emissions and the U S by 2050 and carbon free power from the electricity sector by 2035.
This could accelerate capital investments and our U S utilities through transmission interconnections of renewables that ITC clean generation and energy storage, and Arizona and electric vehicle infrastructure and the non U S States we serve today.
And the fourth quarter, we increased our quarterly dividend by five 8%. This marks 47 consecutive years of dividend increases.
With our low risk energy delivery business and strong growth outlook, we remain confident and our ability to execute on our 6% average annual dividend growth guidance through 2025.
I will now turn the call over to Jocelyn for an update on our fourth quarter and annual financial results.
Thank you David and good morning, everyone.
For the quarter adjusted net earnings of $320 million or 69 cents per share $43 million or seven cents per share higher compared to Q4 2019.
For the year adjusted net earnings was $1 2 billion or 7% higher than 2019 adjusted earnings per common share was $2 57.
This represents a two cent increase compared to last year. Despite the significant equity issuance at the end of 2019 and I'll get into the details of the drivers of earnings and EPS growth and the next two slides.
Slide 15 highlights the EPS drivers for the quarter.
Starting with our largest utility ITC contributed a five cent EPS increase for the quarter the increase related primarily to rate base growth and timing of earnings associated with the November 2019, FERC Roe decision.
And our U S electric and gas utilities contributed a three cent EPS increase for the quarter, our Arizona business contributed a two cent EPS increase driven by higher retail sales and an increase and the market value of certain assets held in trust to support retirement benefits.
The increase was tempered by rate base growth and not yet included in rates and incremental credit losses associated with the pandemic.
In New York Central Hudson increased EPS by a cent driven by rate base growth.
And the two cent EPS increase for our other electric segment was mainly attributable to timing of purchase power costs at Newfoundland power.
Our energy infrastructure segment contributed a two cent EPS increase driven by production at the Belize Hydro electric generating facilities due to higher rainfall and you might recall believes experienced drought like conditions from most of 2019.
The one cent EPS decrease for our Western Canadian utilities was mainly due to timing of operating expenses at Fortis, BC and and our corporate and other segment. The one cent EPS decrease was mainly due to a lower income tax recovery offset by lower finance charges and operating costs and lastly, a higher number of shares contributed.
<unk> and EPS decreased for the quarter.
Now to slide 16, adjusted 'twenty and 'twenty EPS increased <unk> <unk> to $2 57, compared to 2019 EPS contribution from ITC was 6% higher compared to last year, driven by strong rate base growth as a result of record capital investments of $1 2 billion made and <unk>.
2020.
Higher base ROE and lower business development expenses also contributed to the increase.
Our U S electric and gas utilities contributed a <unk> <unk> EPS increase compared to last year.
A two cent EPS increase and Arizona that was driven by higher retail sales, mainly due to favorable weather and as you recall Tucson experienced its hottest summer on record in 2020. The increase was offset by similar items, we noted for the quarter, including regulatory lag and incremental pandemic related costs.
The ones that EPS increase that central Hudson was driven by rate base growth offset by an increase and costs associated with COVID-19, Central Hudson continues to track all COVID-19 related costs in conjunction with the generic proceeding initiated by the New York Public Service Commission.
Our western Canadian utilities contributed a three cent EPS increase driven by rate base growth offset by the impact of the P. B our efficiency carryover mechanism recognized at Fortis, Alberta and 2019.
Our energy infrastructure segment contributed a <unk> <unk> EPS increase driven again by increased hydroelectric production.
And the ones that EPS increase for our other electric segment was mainly attributable to higher income from believes electricity offset by lower commercial sales in the Caribbean.
Next a higher U S dollar to Canadian dollar foreign exchange rate favorably impacted annual results by one thing.
Lastly, a higher weighted average share count from the advancement of our equity funding and late 2019 lowered EPS by 15th and.
And we look across all segments in 2020, COVID-19 impacted annual EPS by approximately <unk>.
This mainly related to the decline and tourism in the Caribbean as well as incremental pandemic related costs that you and us energy and central Hudson.
And you can see on slide 17, the bulk of our five year capital plan is expected to be funded with cash from operations and debt issued at our regulated utilities with the remaining 6% funded through our dividend reinvestment program.
With the recent reinstatement of the 2% discount on the drip program participation has increased to approximately 35% consistent with 2019 levels. This level of participation and provides additional funding flexibility reported.
We continue to remain strong liquidity with over 4 billion available on our credit facilities.
Our utilities were active and the debt capital markets and 2020, taking advantage of favorable pricing and issuing approximately $3 5 billion of long term debt, including the issuance of green bonds, and both Fortis BC and TEP.
Our funding plan and strong liquidity positions us well as we continue to work through the pandemic and execute on our capital plan.
And 2020, we achieved a cash flow to debt ratio, just over 12% and our holding company debt ratio of 34%.
Back in 2018, we indicated that U S tax reform was and expect it to temporarily impact our cash flows and credit metrics.
Since 2018, our cash flow and holding company debt ratios have improved by 170, and 500 basis points respectively.
These improvements mainly reflect actions we took in 2019, including the accelerated equity issuance and the sale of the Juanita expansion along with the strong credit profile of our regulated utilities.
And even through the pandemic, we maintain a strong credit profile as our utilities manage cost and regulatory mechanisms that served to stabilize cash flow and earnings have operated as expected.
In addition, a number of our key regulatory proceedings have concluded with constructive outcome.
Overall, our credit metrics, coupled with Fortis is low business risk profile positions us well within our existing investment grade credit rating.
Now to the recent changes and the U S dollar to Canadian dollar about two thirds of our earnings and a similar portion of our five year capital plan come from the U S and.
And as a reminder, our five year capital plan and is currently based on a foreign exchange rate of $1 three to two.
To help mitigate foreign exchange exposure, we do use natural hedges, including approximately $2 billion and U S denominated corporate debt and forward foreign exchange contracts.
With our hedging strategy and.
Every five cent change in the U S dollar to Canadian dollar exchange rate is expected to impact annual EPS by approximately <unk> on average and would result, and a $400 million change and our capital a five year plan.
On balance we remain comfortable with our hedging strategy, but we will continue to monitor exposure going forward.
Okay.
As David mentioned earlier 2020 was a busy year as many key regulatory proceedings concluded.
Most recently, the Arizona Corporation Commission issued a constructive rate order in the Tucson Electric power General rate application filed in early 2019.
Overall, we were pleased to bring the rate case to conclusion at the end of 'twenty and 'twenty.
The new rates effective January one reflect the requested rate base of approximately $2 7 billion U S equity thickness of 53% and allowed ROE of $9, one and 5%.
Return on fair value increment of 20 basis points.
TEP also received approval of two new adjusters and the first is a tax expense adjuster mechanism and the second is the transmission cost adjustor, both helped to reduce regulatory lag at the utility.
Now turning to an update on some of our ongoing regulatory proceedings at ITC. The notice of proposed rule, making on transmission incentives remains outstanding. This item was on <unk> January open meeting agenda, but was deferred with no clear visibility on timing of next steps.
In August Central Hudson and filed a general rate application with the New York Public Service Commission as its current three year rate plan concludes on June 32021 settlement disclosed settlement discussions commenced last week and we expect a decision in 2021.
Last month, the British Columbia Utilities Commission announced that a generic cost of capital and will be initiated in the spring for all regulated utilities in BC, including our gas and electric businesses to set cost of capital parameters effective January one 2022.
In Alberta, we received a decision on the 'twenty and 'twenty, one generic cost of capital proceeding current cost of capital parameters remain in place on a final basis for 'twenty and 'twenty one indeed.
In December the AUC initiated a new proceeding to establish post 2021 parameters with a decision expected by the end of the year.
And lastly in November the AUC issued a decision on the Alberta independent system, operator, tariff application, resulting and Florida's, Alberta, and retaining approximately 400 million and transmission related investments and <unk>.
New preceding was initiated by the AUC to assess whether the customer contribution policy should be modified on a prospective basis for future transmission related investments and a decision is expected in the second quarter of this year.
And with that I'll now turn the call back to David.
Thank you, Jeff one or 2020 results are a testament to our business model and our people demonstrating what we can achieve when we come together as one strong company per.
Personally I'd like to express my sincere thanks to our 9000 employees they have shown tremendous commitment and dedication and serving our customers throughout this pandemic and I'm proud to be part of this team as we move forward safety affordability and reliability will continue to be front and center and everything we do as we grow our.
Mhm energy delivery business with the tremendous potential and that our company coupled with our low risk growth platform and strong ESG profile I couldnt be more excited to be leading fortis I will now turn the call back over to Stephanie.
Thank you David This concludes the presentation at this time, we'd like to open the call to address questions from the investment community.
Thank you, ladies and gentlemen, we will now conduct a question and answer period. If you would like to NAV Register for a question. Please press star and the fact that number one on your telephone keypad. If your question has been answered and you would like to withdraw your registration cash question. How key if you are using a speaker phone. Please lift your handset before entering.
And request.
And just wait a moment to compile the Q&A from.
And your first question will come from Ben Pham from BMO. Your line is open.
Alright, thanks, and good morning.
I know you mentioned, the <unk> and factor.
From COVID-19.
Does that include the expected impact of the.
Delay and.
The tax rate cases, and and that's not being able to actually quantify what that impact was for 2020.
Yeah, no that doesn't include the TEP delay impact and Jocelyn can fill in the second half of that question. Yeah. No ban. It just includes the I guess the lost earnings and the Caribbean are due to tourism and also credit losses, mainly per central Hudson and you and that the.
T. P rate case, yes was effectively delayed because of COVID-19, but it was substantially offset by the hot weather that they had so we didn't classify that a T. P was disadvantaged because of COVID-19, because they've made up for it and warm weather.
Okay.
So when you look at the impact and the warm weather that that gives you a day or actually what the impact of the temporary case, Wisconsin, Yeah for sure I mean, there was delayed because of the pandemic and so yes, you are right. It is and Covid related impact for TEP. It's just that it was offset by the fact that they had obviously.
The heart of the temperatures and record.
Okay.
I know from your slide mesh and.
99% of assets regulate and and that's our target for 2013 cash of 35.
What is your appetite.
And for nonregulated assets and in this environment, whether it's.
E V vehicles hydrogen.
And you will assets Nonregulated I mean is there any appetite for you guys and this market.
Yeah, Ben so yeah.
I think theres, a theres a lot to unwrap, there and that question because theres a whole bunch of different sort of unregulated investments that you listed there when you think about hydrogen or some maybe even renewable natural gas that we might be doing out there we could be looking at doing out and are in B C. You know there are some things around the edges of our normal business that we continue.
To look forward and look at obviously, our priority is executing that $19 6 billion capital budget and then also looking at how we can extend and expand that based on the drive for more renewables and the U S and and across Canada. So are our main focus is execution on deregulation.
Eregulation rate base that we have and and adding to it where we can as far as the unregulated and you know.
Assets and we will look at doing them, if they make sense right. They have to have the right risk and return.
We have to have the expertise and be able to being able to execute it and if those things match then we'll look at doing it other than that we want.
Okay very good thank you.
And your next question will come from Robert Kwan from RBC capital markets. Your line is open.
Good morning.
Just wondering if you've got some thoughts on the early actions under the bite and registration and the impact and the utilities, including any commentary on your part.
Policy and how you think that might play out.
Yes.
Yes, Robert.
Good to hear from you. Yes. This is this is obviously a big item of conversation across our industry.
And to all figure out what all of the all the executive orders mean, the policy changes the the new commissioners at FERC and the new chair at FERC.
We I think we all get the fact that Directionally, where this is going.
Obviously with the bite and administration coming in very very focused on it.
Reducing greenhouse gases are very strong push towards electrification and things like transportation.
It means it means that there's going to be a lot more and our electricity sector. That's gonna be need that's going to need to be invested in over the next few years I mean, when you think about not just the regular transition that has already been laid out by so many utilities from coal to renewables, including us and Arizona now.
So youre looking at not just that transition, particularly and itc's footprint.
Big utilities and their footprint and are looking at doing the same thing not just that transition from coal to renewables, which needs renewables and of course, then needs to transmission and connect those renewables to where the to where the customers are but also it's going to be driving a lot of electricity demand as we look at electrification.
Efforts. So directionally, we know it's going up it's really hard to determine at this point, what the magnitude and the speed of those changes will be and that's what we're working hard on doing across our different jurisdictions. This could be and acceleration of the transition plan that we have at TEP.
And from coal to renewables as Youll recall, and and we've talked about quite a bit we have a lot of investments for it is $4 billion to $6 billion level of investments that we would need to do in order to get to that transition.
And most of that is outside the five year capital plan. So maybe some of the things some of the incentives that the bite and administration does brings us closer in and maybe there's incentives that can go for you know the impacted communities, where those power plants are that could allow us to accelerate some of that stuff.
Hum.
The Big E V push there's a conversation on social cost of carbon where is that going to go so.
So we don't we can't quantify it. Unfortunately at this point Robert but we are we are working on figuring out how that will drive our business going forward.
Anything specific policy.
Yeah.
And first policy I mean, I, just actually was reading an article last night and interview with our chairman Glick and I and I think they did that.
And that article will say and all the right things I wouldn't interpret it for you, but I mean, it's out there it was and SNL article.
But and that interview he was talking about the importance and things like incentives, obviously and trying to figure out how we get.
Power lines permitted we're back to having the conversation again and the U S of the.
Not just the transmission that we need it but how can we build it better and back in the day and the energy Policy Act of 2005, there was a requirement for the department of energy and the U S to create these national interest corridors I think that thing has to be kick started again, so that we can figure out how to build the bigger backbone that are that our transmission.
System is going to need to interconnect markets.
And to go long distances to connect and the regional renewable energy resources to where we need them. So I think that that policy is all going and the right direction and it's gonna be a democratic led FERC and I'm sure they'll end up with a Democratic majority later this year and in that they're going to they're going to they're gonna have to be addressed.
And the policy and the incentives that are needed to increase transmission. That's everybody is aligned with that.
With that thesis and that's aligned with the bite and energy transition plan. So I expect to see some good things coming out of FERC kind a going forward basis.
And I guess, maybe just to finish Dave now that you are and the CEO chair and while the valuation differentials have narrowed and what are your thoughts on payout ratio and leverage.
And I guess ultimately.
Do you view the Q.
And utility stocks or the U S utility stocks as your peers.
So yeah, we look at our book right I mean, we obviously have both Canadian and U S utilities and from a peer perspective, we look at we look at everybody and my goal as CEO is for them to all be looking at US right. So at the end of the day, we want to be the peer that they're looking at how are they doing so well how do they get and the tray.
And the multiples they are because we have the right story from a growth perspective, we have a rights and the right story from a greenhouse gas ESG perspective, we get we got to get out there and tell that story more.
And so I'm not necessarily as concerned comparing us to them I just want to make sure that there that we're looking behind it behind us to see them.
It's just the comments on cash and leverage.
Say that again.
Specific comments and your payout ratio and leverage Oh, yeah yeah.
Yeah, Robert with payout ratios and what we've said is that we and we're comfortable and the 65% to 75% payout ratio, which.
And it's pretty consistent with and the Canadian utilities, obtaining until these are higher and U S ones are bit lower we've said from 65 to 75, we're comfortable with it.
You know and.
And as we looked like David talked about with respect to the capital plan that we have and the opportunities that we have in front of us and yeah, we're comfortable with that range.
Okay. Thanks very much.
Thanks Robert.
And your next question will come from Rob Hope from Scotiabank. Your line is open.
Good morning, everyone and your test.
One question from me how are you thinking about the potential Arizona legislation that would take away generation planning away from the regulator and put it kind of more in the hands of the.
Of the policymakers.
Would it be fair to say that your generation and investments in the region may not be altered given that it's not necessarily being driven by we'll call. It. The regulators' stated goals about your own internal view of economics, and where you want to take that so yeah.
Yeah, Rob you nailed it and your note. This morning that it actually has nothing to do with what we're doing because when we put our integrated resource plan out at Tucson Electric power. It was all about what we needed to do from an economic standpoint from affordability clean energy reliability, we got everybody in the room, when we develop that integrated resource.
And it was what our customers our community our regulators.
The consumer advocates this was something that we all circle down and said that's the right plan had nothing to do with the energy rules because there weren't any energy rules at that time and it was substantially greater than the existing renewable portfolio standard that exists and Arizona, So and.
And which is which is actually a very low standard is 15% by 2025, we're already.
We're already past that so in my mind, and and and our team's mind and and Arizona It doesn't matter.
We built that plan and stood it up before the energy rules.
This is all about us executing on that plan because it's the right plan.
Alright, that's great. Thank you. Thank you.
And your next question will come from Michael a follow up on your from your line is open.
Hey, guys. Good morning, good morning, Michael Good morning.
Yeah and wanted to circle back to the FERC transmission question, there and I know, it's hard to really predict but as you mentioned theres been a lot of talk around it and.
And just any thoughts on timing.
Is it going to take into and we get a democratic majority of FERC and then.
Hum.
How does it affect your weighted exit from FERC is there something from higher up within the body and administration, just maybe a little more context, there would be helpful.
Yeah.
That's a great question, Michael the timing on what can be done and what will be done is obviously still up and the year I think the by the administration wants to move things as quickly as possible. So we're hoping it's quicker, but you got to remember too that as you said policy. It takes a long time for it to be.
We roll out through the industry, we are hopeful that at the end of the day, we see some action on it.
The big things right. There's there's things that we're looking for from from FERC in order to streamline things like planning and citing as debt that I mentioned on the National corridor conversation looking at how we better manage queues within the RT OS for interconnecting renewables.
Cost allocation is always a big deal incentives all of those things have to be addressed and frankly in our mind the sooner the better because like I said, we know we know the direction, we'd like to see one get the pace of that direction and two what's the magnitude for us and how do we get in there and that's why we're working behind the scenes and and push.
And to get some of these things done through the various trade groups as well.
Great. Thanks, and and then my other question was just on I O I.
And you guys didn't give official guidance for 2021, but just any.
To help on and on key drivers, we should be thinking about and things.
Earnings growth has been.
Relatively muted in recent years and now that you've got this arizona rates and effect should we be expecting a pretty material step up.
And the context around that.
Well, Michael you're right, we don't give earnings guidance. So my fall back as always that over the long term you know earnings should proxy and.
And they see us over the long term, but it is not linear as you say.
With things like the UNF rate case that was concluded they had a decent year, mainly because of weather and so as they head into next year with new rates and I would say that we all have to make our own assumptions with respect to whether because it's tough for us to sit here and make those Nathan.
And those calls, but I would say that all of our utilities have cleared the slate and uncertain regulatory proceedings Theres no cost of capital hearings for 'twenty and 'twenty, one with the exception and central Hudson and I don't expect any material change there and so I would say all utilities are set up for us for good growth and.
And we've also level set with respect to the equity that we've done because so that was 2019 and so no no major drag there from an equity perspective, so we're looking forward to 'twenty and 'twenty one.
Okay, great. Thank you. Thank you.
And your next question will come from Mark charity from CIBC capital markets. Your line is open.
Thanks, and good morning, everyone maybe.
Yeah come back to them to the transmission incentives.
Beat a dead horse, but just that article that came out last night and you referenced David and just maybe just reconcile we think in terms of you know prior to sent from chairman and click around participation adders, but supportive of it but he seems like supportive of incentive. So if you had to stand here today, when you kind of square it all up and is your view still that is upward.
<unk> on the total instead of.
The ICC.
Yeah. So.
You guys aren't like and my answers, so I'm gonna kicked us and over to Linda to provide a little bit additional color because he's obviously got this topic front and center, Linda obviously, Linda Linda as our CEO of I D C.
Yeah, great. Thanks, Dave and thanks, Mark for the question.
Look I would I would.
Put it in and put it in context, and clearly we don't know right in terms of exactly why and collect.
And they really wanted to do with respected and notebook or and certainly I think you know it time and time moves on we'll learn a little bit more in terms of at least what next steps are with respect to the timing of and know for and ultimately you'll kind of decisions from Marin.
And I guess, how you wouldn't say or what I would emphasize I mean, I know like has been certainly you know public and his comments and the path he's probably not and the biggest fan of.
Specific aro and incentives.
But I would say you know.
Clearly understand the need for investment and transmission infrastructure.
Particularly to facilitate renewable and so you know.
And I my belief is and I remain very optimistic in terms of the cash.
And the actions that FERC will take to continue to drive investment in transmission.
And behaviors that will drive and bathroom and transmission and while it may not be what I would say you know it could it could modify slightly from sort of the typical all in ROE adders.
And two you don't really want I think ultimately, it's really going to be making the transmission pie bigger.
And so I think it's safe and a nice job leading to you know.
We're going to see the transmission landscape and the transmission Pi.
Get significantly bigger because I think everyone recognizes.
The transmission is a key enabler to the bite and kind of cool.
Clean energy plan.
And so you know.
Me and he will be exactly what we've seen and the path, we don't know but.
But what I do know is that it does understand both the role of incentives and driving investments in transmission as well as you know and I think Dave alluded to the energy policy and she's mandated he's required to offer incentives for transmission investment.
And obviously, we'll have to take a wait and see approach to see what comes out of there, but I am more optimistic than ever.
In terms of sort of I think how the landscape is evolving I've never heard I think so.
You know focus and conversation about sort of the central role that transmission plays and meeting our future day carpeting nation calls and the transmission incentives and Ofer plays a huge role and that so I'm extremely optimistic about how that and know for Kent.
Help drive future investment and transmission and frankly make the transmission pipe.
Realized growth.
Quicker faster and sooner than it otherwise could have that.
Yes, Mark I would I would just add I know, we're talking about the same articles. So it seems that you read it but I think it was clear and I'd I'd hate to quote a article on us on an earnings call, but it said that chairman Glick, who said that the incentives and the no per the reason that he descended from it before is it didn't go for.
Far enough to incentivize lines built.
Pursuant to state and federal policies or guess, what we're looking at a whole bunch more state and federal policies in order to get renewables, where they need to be in order to get transmission built how it needs to be to meet the policy requirements and states and federal governments and.
And that to me was a real positive comments.
Got it thank you both there and Linda.
Follow up question and maybe just on central Hudson and just.
It sounds like they have entered from settlement discussion that you guys have timelines and and give a sense on whether or not it's a pursuit of a multi year rate plan or would you go shorter term sure Michael.
Mark sorry, we're going to turn that over to Charlie friendly who's the CEO and central Hudson and he's on the line to answer that one.
Good morning, Mark.
Settlement discussions have just begun.
So at this point and time and now we're optimistic that we'll work through it and hopefully come to a settlement before the July time frame, but and we have been it has been signaled to us that it will probably be a process that will take more than 11 months and typically.
And we haven't made the make whole provision if it goes beyond.
And have a rate year, whether its multiyear or not I mean that does come out of the settlement conversation as well.
And quite likely it will be a multi year that generally and part of the conversation.
Okay. Thank you.
That's all I had thanks Mark.
And your next question will come from Andrew <unk> from Credit Suisse. Your line is open.
Okay.
And I guess the question is really about alternative capital pools, and and it's something from produced in the past.
And when we looked at the Duke deal with GIC, Duke energy and Deanna.
How do you think about that from a standpoint of.
Central.
And the use of surfaces and value and a portfolio of expenses today or just for capital deployment and one of the future of true.
So let me sum that up I don't think Jocelyn was able to hear the question looking at alternative capital pools, like GIC, and and Duke and you know bigger picture of how we look at that capital going forward Yeah. Andrew We're always looking at that every time, we go through our capital planning exercise so.
And we've often said that everything goes back on the table. So it's interesting that these deals are being done to them too.
Two I guess.
And <unk>.
Delay any further.
Equity issuances, which you know for the right price I think it's a fair thing to do I mean, we clearly went to market with our equity requirements and 2019, and so we're set up nicely for them, our five year capital plan, but listen if we can we can grow even further from where we are today then everything goes back on the table and all of them all of them.
Things are things that we consider every time, we look at funding options.
Okay. That's that's helpful and.
But different direction from my second question, it really relates to cyber and cyber security and obviously, that's an important industry issue, but kind of a pandemic environment.
You should have your employees effectively working from home.
How has the cyber security changed over.
Over the period of time.
Oh, yes, yes.
Definitely.
And our attention to and.
From a cyber perspective was already ramping up extremely fast and I'll say, even over the past more than five years, but the conversations that we have and boardrooms and conversations we have within our utilities, having cio's and our large utilities have and Ah Ah Ah Ah.
Chief Information officer at Fortis to help coordinate all those efforts.
And then two obviously you had the complexity of having.
Almost 4500 people working from home over the past year all of those things have amped up our focus on cyber security and then of course, there's the there's world events to that obviously make you pay more attention to things, particularly us we do have the.
Criteria are the critical infrastructure.
And we have meets the criteria for federal government.
Requirements and so we keep a close eye on that but we have to continuously go above and beyond that because there is nothing more critical than our infrastructure because at the end of the day. Our infrastructure is what provides everybody else's infrastructure the ability to work if you don't have.
The energy flowing then you will not have and economy flowing so it is extremely important and right in the center of our Bull's eye from a from a strategy conversation.
And that's great. Thank you. Thank you.
And your next question will come from Jason <unk> from Raymond James Your line is open.
Thanks. Good morning, everyone. My first question here just on on the Lake Erie Connector I'm wondering if you've had any engagements with the Ontario government recently.
And what kind of timeline or hurdles you'd be looking at over the next year just in terms of potentially moving forward there.
Yeah, I'll I'll turn that over to Linda because she's the one who has her finger on the pulse on that project and Linda hopefully you heard that got that question. It was about the lake Erie connector and status.
Okay, Yeah and.
Thanks, David for the question, Yes, I mean, we're in continual engagement with the Ontario government as long as the eye and so with respect to the Lake Erie Connector project and.
And while I don't have any specific kind of status update that certainly I can share.
And I can continue to say that you know we continue to remain optimistic based on sort of what I would say are the conversations the tenor of those conversations and and the progress with and those conversations at.
At the time that and not able to specifically say you know timeline wise when we will have any any type of meaningful update, but I would say things remain optimistic and wisely.
Excellent. Thank you for that and then David maybe just one for you I guess you've been in your seat now for about six weeks I'm just curious.
How you are planning to allocate your time over the next day I don't know 100 days say and.
And what would be your initial focuses now that your and your rule.
Yeah that day.
Thanks, David it's it it's actually a great to be here and in St. Johns and I've been here for as of today 30 days.
So it was great to get here and do my quarantine period, which you have to do when you come into Canada, and particularly and the St. John and so it was glad to get you know and the office and be able to meet with the team and have some from some good conversations and you know our focus is is beefing up.
And the strategy that we currently have.
We are we are we are very focused on our organic growth strategy and we basically have you know a whole lot more opportunities that we see that I mentioned earlier coming from to push towards a clean energy transition and it's all about our business. It's all about what we do and when Youre looking at electrification.
It needs it needs renewables and each transmission and he's distribution that's the business that we're in when we're looking at growing.
The demand that's a great story for us when we're talking about you know.
Electrification of transportation and that's a that's a huge story for anybody who has anything to do with electrons and that's a that's a way for us to pick up wallet share of our customers and reduce their overall net bills. So that that's the that's the focus that we have is to look now I think and a much more target rich and.
Environment for investments on a going forward basis, and a growing environment from a from a from a let's say to use per customer basis.
I think that's that's that's been my focus it's been the team's focus and were really getting after it.
That's great color. Thank you very much.
Yeah.
And your next question will come from Matthew Weekes, Syngas and Carol Alliance. Your line is open.
Good morning, I just had one quick question and sorry for the collection of our COVID-19 related costs going forward.
And we're tracking those hot from accounts and sort of going through the proceedings and I was wondering if you'd be able to quantify the upside there versus maybe downside that you'd see and costs that you're tracking that maybe arent related to bad debt or that may not be recoverable and going forward.
Yeah, So really the only the only company that we have that's focused on that and central Hudson.
And Jocelyn has got the numbers on that.
Yeah, Matthew at Central Hudson is still accumulating and them and providing it to the commission and potential upside at clubs the two penny and probably and you know so I would say that's a potential upside I won't make any guess as to the trucks.
And we're gonna have but that's the potential upside.
Okay. Thank you that's it for me.
And if I can if any if anybody.
Like to ask a question. Please press star one on your telephone keypad your.
Your next question comes from Julien Julien Dumoulin Smith from Bank of America. Your line is open.
Good morning, everyone. This is Ryan Greenwald on for Julien.
And I appreciate you taking our questions.
So just to follow up on the earlier question around the unregulated asset can you provide a bit more color around the right risk return and potential assets you'd be looking at and that given how low the cost of capital and from renewable buyers and it seems like it would be tough to be competitive, but just curious how you frame and saying yeah. That's just said it is tough to be competitive and we'll know a good deal and.
See one but we are we really haven't seen one yet and then and frankly the thing that we need to focus on is the supporting infrastructure around those investments so the actual investments and.
Wind projects and solar projects, where as you know we can let other folks a race to the bottom on and returns on those what they need is all the good regulated infrastructure to get it from that site to a customer's door and that's what we focus on is built and all of that stuff around it and there will be enough of that starts to build around it that supporting infrastructure.
Whether it's transmission distribution and storage ancillary services, all the things that we need to do and provide us as utilities.
That's gonna be real fertile ground. So we don't feel that right now that we have the need to go into that last little bit and that.
So that's where I'd leave that.
Are you guys looking at actual RMG at all.
Yes, yes, up and up and BC Fortis BC, Roger Dow and Tony and his team had been had been looking at that they actually have a goal already.
And they were one of the first I mean, they were they were they were out on this stuff before it was a topic really and set a 30 by 30 goal to reduce the.
And the greenhouse gas emissions from their customers and a lot of that has to do with focusing on things like energy efficiency like renewable natural gas.
And we're looking at having I think it's 15% of their supply from RMG, which opens a lot of opportunities for us to invest and that.
And if we can do it within the regulated utility we have we can always do that as a combination which we have to date of basically ppas or purchases or have the opportunity to invest in and of course, we're kind of.
And we're around the edges on the hydrogen conversation to we actually have a very active and in D. C. On those conversations looking at studies on how we would do it but of course that's early days.
And is getting a lot of a lot of attention, but that's I think it's early days and that conversation, but all of that stuff provides opportunities for us to stretch out a little bit beyond just the just the pipes up there in BC and start getting into the supply a little bit.
But are you guys any particular focus on the non utility side.
Just in terms of exploring Orange, you more broadly as and unregulated asset.
No no no and that's why it's one of those things you gotta get expertise and experience and before you want to do it outside.
And I'll get out of your your knitting and you got it you got to get that expertise you got to create your own competitive advantage. Then you see what you can do with it.
And it's still early days on that too.
Got it fair enough and then maybe just lastly on the FX. It seems like a wait and see from the status quo right now around exploring further hedging strategies, but any more color you can add there around your thought process, given the unfavorable and inflection.
Well, Brian we we did take advantage of the market earlier in 'twenty and 'twenty and we did put in and some additional hedges so we continuously.
And watched the watched the market right now we're comfortable with what we have and but we do continue to just watch it and and if the time is right and the market conditions and line. We are we may do a little more hedging.
Great I appreciate the time frame.
Thanks Ryan.
Yeah.
Thank you everybody Tonight, but I have no further question and thank you I turn the call back over to Mr. Mimo for closing remarks.
Thank you Michelle we have nothing further at this time, thank you from participating in our fourth quarter and annual 2000, and 'twenty results call. Please contact Investor Relations should you need anything further. Thank you for your time and have a great day.