Q4 2020 Emera Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the mirrors Q for 2020 analyst call.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
The time, if you have a question. Please press star one on your telephone keypad.
Please be advised that today's conference is being recorded Tuesday February 16, 2021 at 930 alongside of the tough.
I would now like the hand, the conference over to your Speaker today Air and power some of as manager of Investor Relations. Please go ahead.
Thank you Chris and thank you all for joining US this morning for a mirror of fourth quarter of 2020 conference call and live webcast.
Webcast.
<unk> fourth quarter earnings release was distributed this morning by of Newswire, and the financial statements management's discussion and analysis and the presentation being referenced on the call are available on the web site at a mirror of Dot com.
Joining me for this morning's call are golf ball for the mayor of as President and Chief Executive Officer, Greg Blunden, and Theres, Chief Financial Officer, and other members of.
Okay.
Before we begin I will take a moment to advise you that this morning's discussion will include forward looking at the nurse and which are subject to the cautionary statements contained and the supporting slide.
Today's discussion and presentation will also include references to non-GAAP financial measures you should refer to the account growth for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure and.
And now I will turn things on for Scott.
Thank you, Eric and good morning, everyone.
Let me start with this overarching message.
And we never could have anticipated at the start of last year, when 2020 would bring.
And then quite incredibly proud of the way the Mira team responded and continues to navigate through the unprecedented challenges COVID-19 pandemic.
The financial results, we achieved this year and the significant progress we made on the advancing our strategy are a testament to the strength and resiliency of our people our portfolio and our strategy.
Overall I am pleased with the financial results, we delivered in 2020.
While the results for some of the utilities fell short of expectations, we set for ourselves before the.
Our adjusted earnings per share for the year was almost exactly in line with our plan for the year.
The key within that our overall regulated portfolio performed very well and collectively delivered over delivered year over year earnings growth of 13% no small feat considering the additional challenges our businesses faced last year.
Our regulated portfolio continues to be the primary driver of our growth.
The regulated earnings contributions have been steadily and predictably, increasing as we can use to make rate based investments to reduce carbon emissions and increase for liability all while keeping customer rates affordable.
And a mirror our priority is always the safety of our employees customers and the communities we serve.
Last year with the onset of the COVID-19 pandemic, we adapted quickly to change the way we work introducing mandatory safety protocols and in many cases.
The work from home.
These measures have been successful and.
And our teams haven't missed a beat.
They continue to safely deliver the affordable reliable energy our customers count on while advancing and their strategy and supporting our communities notwithstanding the multitude of challenges brought upon by the pandemic.
At the same time in order to support those most impacted by the pandemic and mirror, our operating companies and our employees donated over $6 million last year at the organizations, providing critical aid, including help with energy costs food shelter and mental health.
I'm proud of our team stepped up in 2020 to help our communities and to make meaningful progress on of mirrors capital plan strategy and other objectives.
In March we completed the sale of a mirror of Maine, which concluded our assets sale program.
Our successful execution of this program significantly strengthen our balance sheet and positions <unk> well for future growth.
We executed on the largest annual capital program, and our history and even with the additional health and safety protocols in place and kept our large capital projects on schedule and on budget.
This included the final portion of the first 600 megawatts of solar generation of Tampa electric and putting 6 million solar panels into service.
This is a significant milestone and notably Tampa Electric now has more solar generation and service on a per customer basis than any other utility in Florida.
And we're not stopping there.
Last year, we announced and began construction on another 600 megawatts of solar for benefit of Tampa electric customers.
We also made great progress on the modernization of Big Bend station.
And we remain on track to bring the first phase of the project online later this year.
We continued to deploy smart meters, and Nova Scotia, Florida, and the Caribbean with well over $1 million now and operation.
On the regulatory front peoples gas and new Mexico gas, both negotiated constructive regulatory settlements with new base rates going into effect.
And we further enhanced our environment, social and governance commitments and disclosures issuing our fourth sustainability uptake update last fall, which incorporated the FASB and Tcf the disclosure frameworks.
We're proud of our ESG track record and we believe that we have a great story to tell.
And we're working hard to tell it back and providing the data the matters most to our stakeholders and being transparent about our performance.
The climate commitment, we announced today is an important step and articulating our decarbonization journey over the past 15 years as well as our commitment to do even more.
Our strategy is designed to both prepare for and capitalize on the trends facing our industry day.
Carbonization decentralization and digitalization.
The carbonization has been central to Amira strategy for over 15 years.
It's more than what we do it's part of who we are it's been a key driver of our growth and it's been inspiring us to keep innovating to deliver the energy the energy our customers count on while never losing sight of affordability.
With our dedicated team strong track record and our investments in renewables low carbon energy sources transmission and grid modernization, we've already transformed the way we deliver energy since 2005, we have reduced our <unk> emissions by 39% and we produced our coal use by almost seven.
The percentage.
And we have what it takes to do even more of.
This morning, we announced our climate commitments.
Free new clear de carbonization goals.
And our vision to achieve net zero carbon emissions by 2050.
With the existing technologies and resources and the benefit of supportive regulatory decisions and we plan and expect to achieve the following goals compared to 2005 levels.
The first we're on track to achieve a 55% reduction and carbon emissions by 2025.
Second we're also on track to achieve and 80% reduction in coal usage by 2023, and the retirement of our less existing coal unit no later than 2040.
And we plan to achieve at least and 80% reduction and C. O two emissions by 2040.
Last month, we announced the Tampa electric will permanently shut down Big Ben unit, three and 2023.
Nearly two decades ahead of its scheduled retirement and.
In Atlantic Canada, The Atlantic Loop is one such way, we could accelerate our coal retirements here in Nova Scotia.
While this remains a complex idea we are encouraged by the momentum we have developed and with the level of engagement by the federal government provincial governments and the region and our utility partners.
More broadly we will achieve all of these goals and seek to realize our net zero vision by adopting of emerging technologies and working constructively with policymakers regulators partners investors and our communities and.
And every step of the way, we're committed to never losing sight of affordability and reliability for our customers.
Our seven point for $1 billion capital program supports our climate commitment.
Over the next three years 60 per cent of our capital investment will be directed towards projects that were by and so on coal and improve reliability for customers.
By the end of 2023 coal will account for less than 10% of the mirrors generation, while the renewable energy production will double from 12% today to 27% in 2023.
This is a mirror of strategy and action.
Militating, our transition to lower carbon and improving reliability.
And while never losing sight of customer affordability.
And by doing all of this we are and turn delivering growth of earnings cash flow and dividends for shareholders, creating shareholder value.
And this slight our baseline capital program is expected to drive rate base growth of seven five per cent from 2019 to 2023 and.
And we see further upside.
We've identified an additional $1 2 billion capital investment opportunities that if successful could increase our rate base growth to eight 5%.
We will continue to update our capital forecast and the future to keep the market up to date significant developments.
Beyond 2023, I see opportunities to extend this growth well into the future.
To deliver on our goals and realize our net zero vision, we will continue to make investments to decarbonize our portfolio.
Including investments in renewable and renewable generation and energy storage and transmission.
We are also focused on capitalizing on the other industry trends of digitalization and decentralization debt will continue to provide investment opportunities.
This year, we will be focused on the successful completion of the base rate application.
Rick.
Florida is one of the fastest growing states and the nation and Tampa Electric serves nearly 800000 customers and the fastest growing region and the state.
To continue delivering value for our customers, we must plan for the long term, making investments now the create a better energy future if.
If approved the rate application, we will make later this spring will increase base rates, enabling us to continue to make significant investments and cleaner greener and smarter energy solutions, all while keeping rates, among the lowest and Florida and well below the national average.
The ask outlined in our test of your letter reflects the relatively straightforward rate case.
Since our last base rate increase and 2013, we've made significant investments to enhance the grid improve reliability and reduce our reliance on coal.
Our rate case is about having these investments and the investments will make over the next three years put into base rates, it's about the capital being invested in projects like Big Bend modernization automatic smart meters and in additional solar generation.
The straightforward nature of our case combined with the deep regulatory experience of our team and our history of constructive regulatory outcomes and leaves us confident and the regulatory path in front of us.
2020 was without question and unexpectedly challenging year for all of us, but I'm incredibly proud of the success we achieved.
As we look forward to 'twenty 'twenty, one and I expect this year will continue to be challenging and.
We remain confident that amira is well positioned and continue to advance our strategy and deliver on our financial commitments.
Before I pass the call the Greg I'd like to take the opportunity to highlight a new board of appointments and and important leadership announcement.
And I'd like to welcome Karen Sheriff two of mirrors board of directors and care.
Erin is an accomplished senior executive who brings deep experience and driving innovation growth and corporate strategy to the board.
And it's my pleasure to share of the Archie Collins will be appointed as the next president and CEO of Tampa Electric on May 3rd.
Archie brings more than 30 years of experience and the energy industry.
And I am confident the he is the right leader to maintain the positive momentum of Tampa electric.
Nancy Tower will officially retire from Amira and at the end of June.
And this will be her last analyst call with us.
And while I know, we will have plenty of opportunity to formerly celebrate nancy's contributions came before Vishal retirement, let me say this today.
Over the past 24 years, Nancy has been a key leader and our business and an important part of of mirrors growth story and success.
I know I speak for the entire team when I say he will be truly missed as the leader.
Colleague.
And as a friend.
Welcome, Karen and congratulations Archie and Nancy.
And with that I'll turn it over to Greg to take you through our financial results.
Thank you Scott and thank you all for joining US. This morning, we accomplished a lot and 2020 and very challenging.
Our strong regulated portfolio continued to perform well, allowing us to deliver on.
Stuart.
We delivered strong earnings growth from regularly the portfolio Scott highlighted our portfolio delivered annual adjusted earnings growth of 13%.
We raised our dividend by 4% keeping our commitment to provide the predictable sustainable and growing income stream to our investors.
We improved the quality of our future earnings and cash flow by negotiating a constructive settlement agreements of peoples gas and new Mexico gas.
And we stressed and our balance sheet, completing or asset sales program retiring $390 million holding company debt and issuing $490 million of common equity primarily through our dividend reinvestment and at the market for appropriate.
This morning, we reported fourth quarter adjusted earnings of $188 million and adjusted earnings of 75.
For the year adjusted earnings were $665 million and adjusted earnings per share was $2.68.
Growth and the mirrors adjusted earnings per share for the quarter and year to date were primarily driven by favorable results of temple.
And the other segment and the.
Now, let's get into the details about the results.
The sales of our unregulated gas plants and the mere main business continued to provide our cause variability in our quarterly and annual results normalized for normalizing for their losses operating earnings contributions better highlights the performance.
When normalized for asset sales for fourth quarter 2019 results would have been and 56 cents.
And for the full year 2019, the asset sales normalized adjusted earnings per share was $2.31.
We'll use these normalized results as the starting point to compare our performance for the fourth quarter and full year 2020.
Adjusted earnings per share growth and the fourth quarter was largely driven by strong operating results.
The recovery of and Outstanding Litigation Award and lower corporate interest costs, partially offset by higher preferred.
And the quarter Tampa electric contributed $101 million of version or the $80 million on the quarter of 2019.
Consistent with past quarters, Tampa Electric's growth was driven by increased sales from residential customers.
On your silver revenues higher Ham D. D C earnings from the Big Bend modernization and non sober solar projects.
And we will weather and customer growth.
Excluding the timing impact of the preferred share dividends and fourth quarter earnings from.
Improved largely due to the receipt of an award related to Danny and legal claim of Teco and lower corporate interest costs and the fact that Q4 2019 results include the onetime expenses related.
And Dorian and Grand Bahama Power company.
Other changes and the quarter, including the remaining and Mary utilities and shirt for a net decrease of $6.
Excluding the Teco legal award on the normalized basis of the mirrors Q4 adjusted earnings per share grew by 7% to 60 cents compared to <unk> 56 and the for.
Quarter of 2019.
Growth and the annual adjusted EPS was driven by many of the same factors in 2020 Tampa electric.
<unk> contributed $501 million of earnings and increase of 20% over 2019.
This growth was driven by higher base from news related to favorable weather customer growth and a greater mix of residential sales.
In addition, Tampa Electric's earnings benefited from higher average received from the Big Bend modernization and non sober on solar projects.
The impact of the favorable weather on Tampa, Electric's 2020 and results is noteworthy.
Impaired to 2019 favorable weather conditions increased annual earnings by approximately for it.
As a result, we expect sales volumes and earnings.
In 2021 will be modestly lower than in 2020.
Our remaining electric utilities had lower annual adjusted earnings per share of approximately <unk>.
Those Scotia Power's annual earnings contribution was down $8 million.
Suddenly mild weather conditions and lower commercial sales to the COVID-19, pandemic, partially offset by decreased operating costs and higher residential sales.
These negative impacts of the Nova Scotia power were partially offset by higher equity.
Timely.
Thank you for investments.
Results from Nova Scotia power are below our expectations, but we do expect the earnings to improve next year, assuming normal weather conditions. We expect the earnings will be higher in 'twenty, one and then they were and point.
And then there are.
And.
And the Caribbean annual earnings decreased by $7 million.
The lower commercial sales, partially offset by higher residential sales volume and recovery and load Grand Bahama power company following hurricane Dorian.
Our short term earnings expectations for the Caribbean are muted, but we do expect earnings to increase marginally in 'twenty and 'twenty, one as local economies begin to recover.
The team pandemic and Grand Bahama continues to recover from Hurricane Dorian.
Our gas utilities performed well this year and challenging conditions when normalized for the onetime tax benefits of new Mexico gas and 2019 earnings from our gas and infrastructure segment were consistent with 2019 results.
And notably and notably New base rates went into effect of both peoples gas and the new Mexico gas last month.
Beginning this year of peoples gas will be allowed to earn between 9% and 11% on and equity thickness of 54, 7%.
And you'll also be permitted to reverse 34 million U S of accumulated depreciation through the twenty-three largely at our discretion.
These new rates are expected to be in place until the end of 'twenty and 'twenty three.
And new Mexico gas 2021 rates were set based on the implied ROE of nine seven and 5% equity thickness of 52% compared to an ROE of nine 1% in 2020.
And these new rates are expected to be in place until the end of 'twenty and 'twenty two.
New base rates continued customer growth and a recovery from the COVID-19 pandemic are expected to increase 2021 earnings at the gassy.
Peoples gas expects to earn with and it's allowed ROE band and new Mexico gas expects to earn at or near its allowed return on equity.
And finally annual earnings from the other segment improved largely due to the receipt of an order.
Name of Teco, and lower corporate interest costs and the fact that the 2019 results include the million dollar one time items related to the impacts of Hurricane Dorian on Grand Bahama.
This was partially offset by the $10 million gain on sale of the Florida property and the first 2019.
On the normalized basis of the mirrors annual adjusted EPS was $2 66, as compared to 31 from 2019 of growth rate of 15%.
Moving to adjusted EBITDA and cash flow annual EBITDA, that's earnings before interest taxes, depreciation and amortization was modestly higher than in 2019.
Higher EBITDA contributions from Tampa electric more than offset the lost EBITDA from the mirror Mi and the sale of our unregulated gas plants.
Pre working capital and operating cash flow and 2020 was down $118 million or 11% for up to 2019.
And as anticipated most of this decline through the sale of the mirror, Maine and Q1.
And our unregulated gas plants and the first quarter of 2019.
Over the past couple of years, we have been focused on strengthening our balance sheet. Since 2018, we have successfully executed on our asset sales program and reduced our consolidated leverage by over 700 basis points.
As a result, we are now back to our targeted capital structure and our cash flow debt metrics have been steadily increasing.
But we have more work to do.
We have improved the denominator of of our credit metrics and now we are focused on strengthening the numerator.
Over the next two years, we expect to see an increase and our annual regulated cash flow as a result of new base rates of peoples gas and new Mexico gas and Tampa electric and increased cash flow from a mirror of neutral and with the completion of Muskrat Falls later this year.
These factors are expected to drive a meaningful improvement and are operating cash flow and so that's on the clear path to achieve the targeted metrics on the credit rating agencies.
Management continues its focus on strengthening cash flow and mitigate short term cash flow.
The 36 million dollar of outstanding Legal award that we collected and the quarter is an example of ease of efforts this incremental cash flow as the source of funds to finance, our capital program and to mitigate the impact on.
On the COVID-19 pandemic on our business as we transition to new base rates of Tampa Electric and 2022.
Executing on our funding plan, we outlined last quarter will allow us to it.
Credit metrics.
And for $7 $4 billion capital program is expected to come predominantly from reinvested operating cash flows and debt issued at the regulated operating companies.
The balance is expected to be funded through common equity from our dividend reinvestment and at the market programs and preferred equity to balance us to our targeted capital structure.
And as we've noted in the past we continually monitor the hybrid security market.
The opportunity based upon the investor demand.
And we've known and and improving tone for preferred shares and we view this as a positive development for the industry and market access overall.
Our approach the hybrid securities offerings, it's always been disciplined and who historically involve the use of the base shelf prospectus program.
I am pleased with how our resilient portfolio performed in 2020 and the financial results, we delivered for our shareholders.
We were entering 2021, well positioned to capitalize on the tremendous growth opportunities, we see in front of it.
We will continue to execute on our proven strategy, which will drive growth and investment for our investors and deliver cleaner reliable affordable energy for our customers.
And with that I'll turn the presentation back over to Eric.
Thank you Greg This concludes the presentation.
Now I'd like to open the call for questions from analysts.
If you have a question please pick up the receiver and press star one on your telephone keypad again that of Star one.
And your first question comes from Linda <unk> of TD Securities. Your line is open.
Thank you.
And I'm wondering how you're thinking about the outlook for your operations and the U S with the.
New buying the administration, recognizing that there's going to be and accelerated.
I guess drive to reduce greenhouse gases and the energy transition and addition to just general electrification driving demand and how might this influence and merits business and strategy.
And kind of where you've taken out and where do you expect to see the largest benefits of you grow your franchise.
And thanks, Linda for the question look I think.
As you point out the the bite administration plans to look to accelerate the carbonation decarbonization of across the broad economy, frankly is directionally positive for for us and certainly aligns with our strategy of of of Decarbonising and continuing the journey to reduce the carbon intensive.
<unk> of the energy that we're delivering for our customers. Obviously, we will continue to pay attention to.
Policies as they as they develop and looking to true that we're capturing them and to the greatest extent possible those that can benefit our customers and.
Allow a tampa electric, but frankly peoples gas and new Mexico gas as well to do our part to do their part is as we look to.
Continue the de Carbonization journey, and if if the government policy mandates.
A faster path and that were already on and obviously, we will execute that and from a investor perspective that creates more opportunities and our job and running the utility to make sure.
We're transparent around cost impacts and making sure that we're constantly working to manage of affordability impacts for customers.
Thank you and as you see these opportunities beyond 2022, I'm wondering what factors you will consider to either extend your four to five per cent dividend growth or you know what.
What might cause you to revise that and when might you delivering upon that and can you comment on I guess payout ratio of balance sheet foreign exchange and other factors.
So look I mean, obviously all of those things and shouldn't go oh into our considerations around.
The financial policy and targeted capital structure and.
And and dividend policy and I think obviously dividends get set by the by the board of directors and.
And typically we do that and.
In the fall of of each year I would expect that as the timing.
And that we would do that again this year, but I'd also remind you that when we when we pivoted from the previous dividend growth rate target to the for years to 5% target that we have now we did that with the view, obviously, we put a time bound to it but we did it with a view as to establishing a dividend rate that we thought was light.
To be sustainable over the longer term with an objective that our earnings growth will be higher than our targeted the dividend growth and that allows us to effectively grow our payout ratio down over time and that all of those things continue to remain true today.
And today, but but as to the root of your question and I would expect we'd see some clarity on that and the fall.
Thank you and maybe more of our operational on a follow up question.
And I'm, assuming that the energy marketing and trading business is off to a good start this year given the cold weather we are seeing.
Any commentary about what Q1 is looking like what would help us kind of fine tune our expectations for Q1.
Linda it's Judy so youre right that.
And we're having a solid start to 2021.
But really I wouldn't do anything beyond that if you kind of I know that there's some markets that are ripping into 100 dollar price points, that's not happening in new England and Buck.
And there has been you know a healthy trading ranges between seven and $15, which does provide us with some opportunity on the way things have worked out we've had access to transportation capacity.
Under severally amazed that we've been able to deploy profit so.
And.
And we'd be very reluctant to start to try to provide quarterly guidance on the mirror energy, but I will say that it has been a decent winter so far January.
So we would just normally continue to guide that we would expect to be within our normal earnings range of 15 million U S. At this point.
Thank you Judy and congratulations to Nancy on the successful career on her retirement and I'll jump back on the Q.
Thank you Linda.
Your next question comes from Ben Pham of BMO. Your line is open.
Hi, Thanks, Good morning, I wanted to touch base, a lot of loop, but any updates.
Actually since the throne speech last year and also been some changes that the infrastructure bank.
Yes, Ben it's Scott.
And Peter Peter Greg is on two and Peters.
And I've been immersed obviously and this project initiatives along with the.
The other of our colleagues within a mirror and Nova Scotia power.
And is there anything as advanced commercially Ben I think you know this is still at this point. This is about shaping shaping the opportunity in terms of assignments of of.
The opportunity that it can create for the region as a whole obviously and we're focused on what it means for Nova Scotia, but we know for this program to two come together it needs to provide benefits too.
Two new Brunswick too.
To Quebec and to Newfoundland Labrador as well and so we're working with with those provinces as well as our utility partners and the federal government.
To capitalize on this opportunity to accelerate the decarbonization and Atlantic Canada.
From what would otherwise be of 2040 time frame to as early as 2030, and we're encouraged by the momentum that we seem to be building with this and the <unk>.
On the engagement.
The all of those government parties and.
And others have.
Expressed so far but it's you know what's the long road ahead, it's very complex given the multiple nature of.
The of the project and we're hoping to be and a place where we can talk with some more clarity around it by the third quarter, but at this point and time, we're just continuing to advance the shaping and discussions and try and see if we can get this altogether.
Okay and then so if.
Theoretically if this project were to be commercialized and and Directionally Your and your net zero carbon Todd.
<unk> targets.
And it could be of 10 year debt.
And I saw ration at potentially.
Yes. This is this is about.
Both the the addition of additional transmission or the can see the availability of additional transmission.
And as well as of.
The additional infrastructure.
The infrastructure build in Nova Scotia, and putting more renewable generation, including storage technologies. The combination of all of those things could position us to enable Nova Scotia power to retire coal plants 10 years earlier than what is currently.
The envisioned through the equivalency agreement that is in place between the province of Nova Scotia, and the government of Canada, So could see it accelerate from 2040% to 2030 and that's the effort that we put put forward, but as I say, there's there's lots and lots of lots of steps to line up still and hoping we have more clarity.
And prospective that we can share by the third quarter of the.
Okay.
And it made us the questions for for Greg next and you add the commentary around the profit market and.
Improving is that is that mainly a function of of.
The cost of capital or the cash tax situation and that's true.
Wrapping up on and.
And can you also share your thoughts on the mandatory convert says that the potential lever that you could look at.
Adding to your funding plan.
Yeah, and I think I.
The way to interpret the comments is when we look at how our existing preferred shares are trading and extrapolate that on what we think of new issue would look.
It starts to become.
Pretty competitive versus the other sources of capital that's available to US I think at this point and time, although and we always look at other products that are out there, it's probably reasonable to assume that we will probably be fairly consistent with what we have done and the passengers and two of traditional Canadian dollars preferred share offering.
We haven't concluded on that at this point and time.
Okay, that's great and also on the extend my retirement, the arc to Nancy the best wishes to retirement as long.
Thank you Ben.
Your next question comes from Robert Kwan of RBC capital markets. Your line is open.
Good morning.
Maybe I can start with the Tampa electric rate case, you called it.
And as being straight for it but I'm just wondering what your thoughts are on a potential negotiated settlements and specifically.
Our custom features attractive to use such as.
Protection against higher interest rates are immediate.
Ex increase.
Recovery.
And the types of things that we saw on the Duke settlement.
Nancy.
Yeah, I will I'll take that and good morning, Robert.
And.
The negotiated settlement is definitely a possibility here and as.
As he said Duke.
Got a negotiated settlement they negotiated the settlement of an advance of even filing a rate case and so you know the the timing of that might come after discovery.
You know I think we're in it now we filed our test of your letter will file a rate case soon and I suspect and intervenors will want to get a sense of our case.
We were very confident of our case of course and and so.
And and of course, that's P. L. It's filed as you know like and no don't know that they filed as well. So it's a busy agenda for the Sps the here in Florida, and and so I think that also.
It's likely that the.
The the intervenors will want to settle.
That's great and maybe if I can just finish for the question.
On the funding and leverage and payouts.
There was the question earlier just on on the bite and administration policies as you look at those with respect to decarbonization.
And with that renewables and electrification.
And quite possibly and biased upside and future Capex I'm just wondering.
What's the strategy.
In terms of responding whenever that shows up or do you feel it's prudent and started taking action.
In the near term to help getting in front of balance.
Well I think I'd answer it this way Robert and you know maybe Nancy has as the bids.
They show perspective that I encourage you to share, but I think largely Robert we're already on a path right and but where we're very focused already on on Decarbonising and if you think about it.
The Tampa electric and for years ago, when and what a mirror of acquired them at very little renewable generation and and the mix today as you heard we have more solar generation on a per customer basis than any other utility we're looking to effectively double what we now have in place while at the same time.
Retiring coal units and replacing that with faster acting <unk>.
Modern efficient gas generation and.
And of course, making reliability investments so I think in many ways.
I think we're aligned with the objectives of the of the by the administration and.
Our job as we as we do that and meet the customers' needs and desires for improved reliability and and cleaner energy. We also have to make sure that we're being transparent and upfront as to the impact on on.
On cost and.
And and so you know that largely comes about making sure that we're doing it at a pace that.
Doesn't sacrifice of affordability and that's that's very much of our focus and the plan that Nancy and her team of put forward of Tampa Electric which is consistent with how we think about it across all of our utilities. If there is something that that requires us to move faster by way of government policy that obviously will respond to that but in the meantime.
We're going to continue to execute our strategy of continuing to make.
Cleaner and reliable focused for liability focused investments.
Without sacrificing affordability and so I think we're aligned we wont get ahead of the and getting ourselves to a point, where we're going faster than what our customers would otherwise wanted to do but I think directionally aligned with.
With the bite administration, and frankly, I think the same thing is true and and climb.
Climate policy and energy policy here in Canada as well.
So if I get what you're saying Scott basically it sounds like.
Recognizing it's early days, but what youre kind of getting out of the policies might the upside might just be crystallizing.
Right.
Capital spending upside that you've already set out but not likely.
Five of about that high and so you don't see all of the need to be out in front of it from the perspective of the funding or.
Leading balance sheet.
Yeah, I mean first of all of its I mean, its obviously early days and so we don't have there's.
There is no legislation and placed or anything like that so so what we're what we're responding to and and I think broadly I think the the questions for our investor from our investors is about <unk>.
Directionally is this going to provide more opportunities for Amira and are you total needs to make investments and I think it probably will but as to the quantum of that the exact triggers for that the the <unk>.
The timing of that obviously remains very uncertain in the meantime, we're focused on executing the strategy that's in front of us.
Broadly aligned with the initiatives.
And what kind of legislation or the like does.
Does come into place both in Canada, and the U S is equally true in Canada.
And and respond to that once that's clear, but in the meantime, keep focused on what we always have which is making reliability investments, making cleaner energy investing and making sure. We're doing it at a pace and with the transparency of our cost that's clear and affordable for our customers.
Understood and Nancy thank.
Thank you for the the answer earlier and all the best in retirement.
Thank you Robert.
Your next question comes from Mark Jarvi of CIBC capital markets. Your line is open.
Thanks, Good morning, everyone.
I wanted to go back to the Tampa electric and the rate case and in the context of of the Duke settlement.
And the are we ban and and then also the gist.
Just her to the treasury yields or is that something the Europe and two in terms of those.
Or are we adjusters and then just when you think of the where the ban was put in for Tim.
From your position is that something that you think is the similar benchmark for you or are there and argument made from Tampa Electric's perspective to argue for a higher midpoint.
So thank you Mark it's Nancy.
We obviously watch all of the regulatory proceedings pretty closely Duke did have the you know what we would say is that is the headline on row below 10, but as you point out had the rest of the mechanisms and the settlement to allow them to earn about that similar to the peoples gas settlement that happened earlier.
Would we be open to something like that.
Yeah.
It's hard to tell outside the context of a full settlement.
And we believe.
We've applied for and her higher or are we as you can see and our tests letter.
And.
And and of course the F. P. L is is there with US are also applying for higher or are we so and and we believe that we can justify that based on the amount of capital that we we.
We will put in into the the utility over the next number of years. So.
And I think it all and you know it all remains to be seen but we feel we're on pretty solid GAAP ground with our evidence and our ask for a week.
Okay and the size and then just on the maybe this is for Scott and the net zero by 2050 and incredible metrics in terms of the milestones as you think about 80% reduction by 2040 to go from that 80% reduction and net zero for 2040 to 2050 does that require of technology improvements of what helps you cut out.
Post the close of that final and GAAP tickets and net zero.
Yes, the market. It's an important question and I think we've tried to be clear and our distinction between the.
The the goals that we've set out for 2023 and 2025 and 20.
Where.
We have of path there we can see we can see the path. We're on track and we can we can clearly see how that gets achieved but the the the truth is that that transition debt.
The step from 80% carbon reduction to net zero the <unk>.
And as clear as we sit today at least at least not without sacrificing affordability for cash.
And so clearly we remain open to all of those things in terms of.
The emerging technologies in terms of offset markets.
And other factors that are going to help us to achieve that vision and broadly from our perspective, and we look at it debt as you heard me say earlier in the prepared remarks that we've been executing of de carbonization strategy for 15 years, and we're now setting a target that we.
We believe we can achieve and 80% reduction by 2040, but clearly we're not going to stop when we get there and we're going to continue to execute on that strategy of of Decarbonising and and that vision that ambition for us to achieve net zero. It has very high.
And at about it.
But the fact is the path to get there without sacrificing affordability today, yes will we will need to rely upon things like emerging technologies, continuing reduction and cost for those emerging technologies as well as looking at offset markets and.
And other.
Leavers, so it will be important not just for us but for everyone who is looking at executing our path to two net zero and particularly while we remain focused on ensuring that we're not sacrificing affordability to achieve that.
And then just a follow up in terms of getting to the 80 per cent reduction that can be done and with the existing technology. It's really just balance of affordability or or do you still feel like that 80% reduction is still of a bit of a stretch goal by 'twenty for you.
Well I mean, I think I think there's a bit of a stretch and the sense that there's a lot of work to do cheap that I think it's definitely counting on continuing to see falling prices for things like storage technology frankly.
And and factors like that but largely as is.
It is.
In place with a vision around technology that exists today, we're not sort of looking for.
And for miracles to appear in order to achieve that 80% reduction we see.
On both upon the continuation of the path that we're already on with benefit of the generation planning work and the ERP work the integrated resource planning work, that's been done across our utilities and we can see the path to achieve that just based on naturally what we're doing within the generation profile, particularly for Tampa electric and for Nova Scotia power.
And so for there were we're counting on existing technologies, albeit counting on continuing decreasing pricing again in order to make sure that we're constantly keeping customer affordability and site.
Okay, Thanks, Scott and all of the best and enhancing and retirement.
Thank you very much mark.
Yeah.
Your next question comes from David Quezada of Raymond James Your line is open.
Thanks. Good morning, everyone. My first question here, just just on the $1 2 billion of.
Of projects under development that are kind of the upper bound of your Capex plan. Just wondering if you could touch on how maybe the key elements of that.
We have progressed over the last few months since you first outlined them and maybe just the thoughts on timing about when you would add them does that sort of base capital plan.
And David It's Greg.
I cant say theres anything explicit the call out on on anything over the last couple of months would likely provide and update on that consistent with the annual update every fall.
I think you've heard us talk about it before roughly half of it would be related to the Atlantic loop or something like that more regional transmission.
And the early stages of that about.
About 25% of of that 1.2 is any number of projects at Tampa electric over the next few years, but that represents less than 10 per cent of their capital spend and for T cell.
The last balance of it is spread across all of our other businesses, but there's nothing outside of the comments that Scott had around the Atlantic look there is nothing significant to highlight at this point.
Okay, great. Thanks for that and then maybe just other one on one other one just on the general pocket topic of the decarbonization.
Of the Carbonization I know you already have 30 megawatts of battery storage planned at Tampa Electric.
Just curious if you have additional sites that you think could move forward. If we were to see some kind of a tax credit or <unk>.
Something like that and potential upside I guess to that that target.
And so you wanted to the yeah I know David is it the other solar sites is that what's your of battery storage sites. We you know as you know if that was your question as you know where we've been on the very aggressive.
On solar build here and.
And and Tampa 600 megawatts, and we're now into our second and 600 megawatts we.
We continue to look for land and.
And and in fact, we're going to do with very small.
It's sort of water.
The old or on on water to see what that is what the how that works for us.
And and we're also going to do a study of this year to understand how we integrate even more solar into our system.
Solar and battery storage et cetera. So we continue to work every day to understand how we can put more renewables on our system here and and work to make sure that you know we've got the capacity to do it and both from a land perspective and from a system operation and technology perspective.
And but we've got 600 megawatts to build and right in front of US now over the next three years and and we're very focused on executing that.
Excellent thanks for that color and and I'll Echo the comments and antique congratulations on the retirement.
Thank you very much David.
Okay.
Your next question comes from Patrick Kenny of National Bank Financial Your line is open.
Hey, good morning, I guess, just on the retirement of of unit, three and a big Bend and I guess coming back to the conversation around achieving net zero.
And you just remind us of the the current timeline for retiring unit for.
Or at least transitioning the units of full natural gas.
And I guess outside of the you know those emerging.
And all of Gs or sequestration and becoming affordable maybe you can just comment if you're starting to build up your inventory of the mission offset credits as we speak just as the.
Say, a backup plan for achieving net zero by 2035.
Patrick I'll answer, it's Nancy I'll answer the the big been three and for so as you say we are of retiring the big been three early on.
The big Ben for today as you know operates on on coal.
And we intend to retire that.
Sort of it'll be it's on a path for its useful life.
We are doing some work this year, though that will allow us to operate that at full power both on coal and natural gas. So it will have the ability to be at full load on natural gas this year.
I think the other question was.
And it's likely for Scott.
Yeah, and I think.
Patrick I think so at this point no we're not building up and inventory of credit.
Credit at this point as I say clarity of legislation is still there's still the waste a ways away, but I.
And I think back tight end of the previous question knows.
Climate policy as energy policy becomes the becomes more clear obviously, we will respond to that in the meantime, we're just continuing to focus on and on our own decarbonize.
Okay. That's helpful and then.
And I guess more broadly speaking of Scott just wondering if you could provide a bit more color on some of the opportunities youre seeing out there around decentralized generation, maybe as well on energy efficiency programs.
And just maybe clarify how these trends are supporting a tailwind for earnings going forward as opposed to being a risk to your base of outlook.
Yes, and it's a.
It's a really good question and one that you.
Describe greatly in the context of of.
The strategic in nature and thinking about it.
And our efforts are focusing on capturing that as of as an opportunity and managing managing the risk. Obviously, some would look at decentralization and thank for what that means is rooftop solar well, yes, it might mean that but it can mean, a whole bunch of other things to where we are very focused on whether that's in.
And community solar based.
Initiatives in.
In Tampa.
Whether it's in looking at distributed battery storage.
And the flu.
Florida and in Nova Scotia power of that.
The initiatives that are underway right now and then additionally, it's it's looking at.
The emerging technology and technologies that we're looking to advance and you've heard us talk before about our.
Block energy and and what the team here led by Rob and it has been been doing and looking at taking the day.
Centralized the distributed concept and thinking about it and.
Front of meter kind of service, where we can look to utilize rooftop solar combined with residential.
<unk> battery storage interconnected within a community to community backup generation and maybe even more community renewable and based generation with and enter tie to the grid and this is technology that we've.
We've developed is now working.
And has actively been working at a demonstration site and air.
And for space and.
And I'm Kirkey, New Mexico and is now in deployment and a pilot.
Net interest.
In Florida and partnership with one of our homes one of the largest homebuilders.
And the U S and Tampa Electric currently has a filing in front of the Florida Public Service Commission and looking to support through the regulatory environment effectively the rate basing of that infrastructure, where the utility and then operate that clay.
Clean distributed generation source interconnect customers provide of reliability.
The two customers that is very difficult to achieve within the existing technologies.
And so we're excited about that prospect and the early days.
But I'm looking forward to advancing that project in and.
In Florida and continue to advance the story of block energy as we see as to whether that's a potential and meaningful opportunity for us and the.
The centralization.
Great much appreciate it and go out and the all the best and that's in your retirement congratulations.
Thank you Patrick.
Your next question comes from Andrew Koski of Credit Suisse. Your line is open.
Thanks, Good morning, the SKU.
Got it. Thank you mentioned earlier on despite all of the health and safety protocols. This year, which all of this was challenging and still managed to execute the largest capital program ever.
So the question really becomes you know given what you've learned over the course of the challenging here, where and when we return more to normal.
Does that allow you to scale the capital program to a greater degree with a higher degree of confidence.
Yeah, I mean, it's an interesting question, Patrick I mean really of Sir.
Patrick Andrew.
It's you know I think I think largely as it relates to the.
And the operations and construction.
And activity that was in execution of the capital plan was was really largely about additional protocols that were put in place.
How do we manage social distancing, ensuring we've got basking in place.
And obviously being being a couple of key examples as to the implications of that but also even managing supply chains.
And when when those things became more and more strained and making sure that we're managing that to avoid impacts on our construction activities.
I guess Notionally you could look at it and think that the.
That should provide and enhancing impact to our ability to to manage these programs, but I think more broadly it was really more just about.
And sort of looking at these things from the perspective of of maintaining efficiency.
Even in the face of changes and.
So I think from that Theres lots of good learnings for our teams and I'm sure you know not not dissimilar for all of our industry peers about the ability to respond to those changes to adapt our processes and continue to execute.
Near flawlessly, frankly, while keeping our team.
And and the community safe.
Through that I think really was the biggest the biggest learning as opposed to.
Any meaningful impact on the ability to scale that execution.
Okay. That's helpful color and context, maybe if we ran with the argument that there's green stimulus and you could actually ramp your capital program given what you've learned.
How do you think about funding and and maybe just some color on what we saw with Duke and GIC.
Is that an alternative for an approach that you would potentially contemplate the help surface value and just have additional flexibility.
Yes, I think I think it's premature to say that Andrew it's Greg obviously.
Efforts to sell some assets and particularly our merchant gas plants and a mirror of Maine.
And our business going forward.
And have no plans to.
We're complete that side of it so we have no plans to do anything further at this time.
Selling of minority interest and one of our regulated.
It's not something we've looked at before.
And I'm not sure quite frankly, how I feel about it but and the event that we see some acceleration of our capital plan. We will do what we always do at that point in time.
What's the most effective way of raising that capital and the most cost effective way as well.
But I think it's just kind of premature to draw conclusions on what we may or may not do.
Okay. That's very helpful. Thank you very much.
Yeah.
Your next question comes from Matthew Weekes of <unk> capital markets. Your line is open.
Good morning, I was wondering if you'd be able to provide a little bit of granularity to sort of your FX.
Hedging program and.
And going forward, we're seeing a bit of.
The sort of weakness and in the U S. Dollar of how we could expect that maybe impact on earnings in 2021.
Yeah Matthew.
Greg certainly.
I mean as always we'll see volatility and the Canadian dollar and and that's you know and.
And that certainly has been the case over the last year or so.
And most recently, obviously some strength.
The rough numbers kind of the kind of think of it as every penny change in the currency, so $1 30 to $1 29.
Example would be about a penny of EPS.
And we do some earnings hedges, we have about 25% to 30% of our business.
In 2021 net debt rates are north of 140, right now and we will.
We will continue and we look at opportunities if we see some additional weakness and the.
Canadian dollars and put on some incremental hedges.
Okay, Thanks, very much and and I was wondering as well.
If you'd be able to provide the sort of similar rock.
A breakdown of how may be weather impacted our earnings and.
Tap of electric specifically and.
And how may be that could reverse going forward with us and normalization.
Yeah outside Matthew of what we've already provided.
I'm not so sure I can I can be.
The much more helpful. So.
We certainly saw some benefit on a year over year basis, probably about $14 million after tax so on the U S. Dollar so think of it more of like probably $20 million pre tax or.
$18 million pre tax.
And from weather related.
If you're trying to equate that to load.
Probably the easiest thing and I haven't done the math and go into the segment information in the MD&A and you can see the change and load on that.
And on a year over year basis, but in general we would expect debt load in 2021 is probably going to be more like 19.
And less like what we experienced in 2020.
Okay. Thanks, very much that's it for me and the Nazi congratulations on retirement and all the best.
Thank you Matthew.
Your next question comes from Elias for schools of Industrial Alliance. Your line is open.
Hi, Good morning, just wanted to follow up on the <unk>.
Macro question and first of all of Archie and and Nancy both of you congratulations.
On the macro side are you seeing any inflationary pressure.
Particularly in the U S and how would you classify that as you do see it.
I'll leave it at that.
So the license.
As Scott certainly certainly nothing that is.
And is driving any particular focus of attention of our concern.
And my level.
But I know.
Nancy and.
And Ryan are both on and I don't know, whether theyre seeing anything as it relates to their supply chains or anything that would.
Would give any clarity of answer to your question, but I certainly.
And I, there's nothing nothing that's caught my attention yet and.
Yeah, I would concur, Scott and nothing that's really caught our attention here for sure.
Brian I think and anything on your.
Yeah, no we've not seen anything here as well so I would concur.
Okay I'll leave it at that I appreciate the color. It's just we were hearing from our chief economist today and.
And they said that the U S.
The focal point for the U S fed.
I thought I would bring more of them so well leave it at the half, but thank you very much.
Okay.
There are no further questions at this time I will now return the call to our presenters for closing remarks.
Thank you, Chris and thank you everyone for joining us this morning and for your continued interest and support and the mirror.
Ladies and gentlemen, this concludes today's conference call.
Your participation is appreciated you may now disconnect.
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