Q1 2021 Canadian Utilities Ltd Earnings Call

[music].

Thank you for standing by this is the conference operator.

Welcome to the first quarter 2021 results conference call for a Canadian utilities limited.

As a reminder, all participants on the only spend only mode and the conference is being recorded.

After the presentation, there will be an opportunity to ask questions.

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I would now like to turn the conference over to Mr. Myles Dougan director of Investor Relations and external disclosure. Please go ahead Mr. Dougan.

Thank you Claudia good morning, everyone. We're pleased you could join us for a first quarter 'twenty One conference call.

With me today is executive Vice President and Chief Financial Officer, Dennis Champlain.

Dennis will begin today with some opening comments on our recent company developments and our financial results.

Following prepared remarks, we will take questions from the investment community.

Please note that a replay of the conference call on a transcript will be available on our website.

Canadian utilities Dot com.

It can be found on the investors section.

The the heading events and presentations.

I'd like to remind you all of that our remarks. Today will include forward looking statements that are subject to a important risks and uncertainties for more information on these risks and uncertainties. Please see the reports filed a Canadian utilities with Canadian Securities regulators.

And finally I'd also like to point out that during this presentation. We may refer to certain non-GAAP measures such as adjusted earnings adjusted earnings per share funds generated by operations and capital investment. These measures do not have any standardized meaning under a high for us and as a result, you may not be comparable to similar measures presented in other entities.

Yes.

And now I'll turn the call over to Dennis for his opening remarks.

Thanks, Paul and good morning, everyone.

Thank you all very much for joining us today on our first quarter 2021 conference call.

Canadian utilities achieved adjusted earnings of $191 million or <unk> 70 per share on the first quarter of 2021.

Which is $12 million or four cents per share higher than the first quarter of 2020.

The $12 million growth in first quarter earnings was in part as a result of cost efficiencies and continued growth in the regulated rate base on our Alberta utilities.

Our Australia, a natural gas utility also had earnings growth this quarter from a higher inflation rate and a stronger Australian dollar compared to our Canadian currency.

Economic activity in Western Australia has really improved over the last couple of quarters mining activity has been picking up due to increasing iron ore in copper prices and the Australia and the economy appears to be improving hopefully this trend continues through 2021.

In Puerto Rico, we continued operations and maintenance transition work and are preparing to assume full operation of the electricity transmission and distribution system in June.

Yeah.

And our energy infrastructure business higher earnings for due to demand for natural gas storage services and recover a business development costs.

On a resilient financial performance. This quarter is a continuing testament to our business model as well as our people who remain focused on delivering reliable service to our customers.

On the regulatory front, we are seeing a return of prospectively with a number of a positive decisions received in March.

We received a decision from the Alberta Utilities Commission or AUC, a proving our electricity transmission revenues until the end of 2022.

We also received a decision from the a C approving revenues for for our natural gas transmission business until the end of 2023.

And the distribution utilities, the AUC initiated a process to set customer rates for 2023.

This process will also determine the regulatory framework for the distribution utilities after 2023.

And last but certainly not least the EC was certainly does any of this last quarter. They issued a 2022 generic cost of capital decision extending the current return on equity of eight 5% and the equity thickness ratio of 37% for 2022.

Having clarity into the future from these regulatory decisions helps us plan more effectively.

Creates a more stable business environment that encourages investment a.

And creates certainty for our customers.

We do recognize that the economics of <unk>.

Situation currently here in Alberta.

<unk> is presenting many hardships as a result of the pandemic.

And it's been very challenging for our customers.

In March we filed the 2021 rate relief application for electricity distribution and natural gas distribution to postpone the rate increases for all of 2021.

We proposed to collect the deferred amounts commencing in 2023.

While this application will impact of Canadian utilities cash flow on the short term it does align with our long standing social practice of supporting the communities, we have the privilege to serve.

In terms of capital investment.

We invested $220 million this quarter in our core utility businesses to generate stable earnings and reliable cash flows and we continue to explore opportunities in renewable energy.

A recent example of this is our newly announced agreement to acquire the rights to develop the 325 megawatt central West pumped Hydro storage project, which is located 175 kilometers west of Sydney, Australia.

This acquisition marks our first renewable energy investment on Australia's East coast.

The project is close to a significant renewable energy resources and would support the development of new renewable generation capacity in the state of New South Wales.

A final investment decision on the project is not expected until 2023.

All in all Canadian utilities had a solid first quarter of 2021, all of our businesses performed very well and we received important regulatory decisions, which allow us to plan more effectively for the future.

That concludes my prepared remarks, and I'll turn it back over the mouse.

Thank you Dennis and the interest of time, we will ask you to limit yourself to two questions. If you have additional questions you're welcome to rejoin the queue.

Turn it over to the conference coordinator now for questions.

Thank you the joined the question queue. You May Press Star then one on your telephone keypad.

You will hear a tone acknowledging your request.

If you're using a speakerphone please pick up your handset before pressing any keys to.

A withdraw your question. Please press Star then two.

Webcast participants are welcome to the type of question in the ask a question box and hits a meet the Canadian utilities Investor Relations team will follow up with you by email after the call.

Once again anyone on the conference call, who wishes to ask a question May press Star and one at this time.

Our first question is from Mark Jarvi with CIBC capital markets. Please go ahead.

Okay. Thanks, good morning, everyone for.

First question Dennis is on the amount of a joint venture limited to the fact that you will take over the 15 year. One in the agreement is on the transition phase just can you give us an update in terms of where you are on the incentive criteria and also just PREPA the coming out of bankruptcy I think that was one of the criteria in terms of where you are the kinds of that transition work.

Good morning, Martin Thanks for the question sorry, what criteria of what was the first question Dana Glenda criteria I think for wisdom debate around what were some of the the <unk>.

Center of metrics, which we've determined on your ability to earn a bit more under that contract.

And the bankruptcy Okay gotcha.

Yeah.

Our joint venture with Qantas services to to run the the Puerto Rico T&D systems.

On our CEO Wayne Stansby.

Usually starts off most of the meetings with a safety moment and then reminds us how many days a.

Until the end of front end transitioned and then where were 33 days out right now.

The those incentives criterion that youre talking about Mark we have filed all of that with the.

The Puerto Rico Energy Bureau of the prep on the equivalent of the C of the regulator down there.

And we found that back in February they have yet to make a final determination as to what those incentive criterion the.

The the base amounts will be set up so we don't know that yet.

A.

I was talking to the guys yesterday on over the weekend and there is a there is a line of sight to get those approvals from the prep by June one. So unfortunately, we don't know now and we do expect to receive the ruling from the prep before a before the end of the front end transition.

In terms of bankruptcy.

The.

The prep is still a PREPA.

PREPA, sorry, the Puerto Rico Power authority.

The they're in bankruptcy, we anticipate that they will they will continue to be in bankruptcy.

There are provisions in the agreement that we can exit the front end transition and an end.

Enter into operations under a supplemental agreement.

Until the until.

Until it does come out of bankruptcy. So we anticipate that as of June when we get the keys, there will still be in bankruptcy.

Views right now as to when they could come out of bankruptcy and we anticipate that sometime next year.

And one day didn't come out of bankruptcy you can you can explain in terms of of how that moves back and forth between the supplemental is it sort of immediate is it subsequent quarter. Just wondering if there's any sort of timeline in terms of how you're transitioning between two different types of structures of the contract.

I'm not sure as to the exact date.

But we will I'll say a.

Immediately I don't know if thats. The following month, a I don't think it's for the quarter, but we when we come out of the supplemental agreement, we would enter contract year, one and that contract year would run until it would.

Say, it's January one of next year contract year, one would run from January.

Until the end of June and then we would get into a contract to your two of the agreement and the and go on that 12 month cycle from there.

So it wouldn't necessarily extend the full duration of the O&M the agreement.

A.

Well today.

It depends on how long, we stay and we.

We stay operating under the supplemental agreement for operating for for a year under the supplemental agreement and then we have a 11 months of the of contract here one on.

It could extend it but you know you're only really talking about it a year.

Got it.

And then your comments about Australia and the results out of the International got just for you should tell you shouldn't really strong year of the improvement you talked about the commodity market impacts.

So the view would be the you've kind of hit a bit of an inflection on that it's a sustainable for that business and then maybe beyond your existing assets your views in terms of.

Willingness to deploy more capital on Australia, whether on a regulated assets or contracted assets are a U.

On a more constructive on that market today than we would have been a few months ago for a few quarters ago.

With regards to Australia, I mean that inflection point I mean, because they are for regulated based on a.

A real return to convert the earnings on to nominal at a.

It's kind of dependent on the Australian CPI.

Yeah last year I think the total CPI for the year was 0.3%.

And that's what we had recorded in Q1 and then the the bottom.

Came out of when COVID-19 hit and there was no no overall inflation for the remaining three quarters of 2021.

For this this first quarter the inflation rate in Australia with 0.6% for just for the first quarter.

So that's the kind of like the uplift year over year, the big banks down there they're forecasting about a you know of.

2% to 2.5% inflation rate for the year.

We were kind of thinking that the inflation rate for Q1 would have been a little bit higher.

There were some federal and state subsidies to keep the the cost of new dwellings down.

Year over year.

So that that may have.

All of that that did mute the CPE the overall CPI for the for the first quarter.

But given the a.

As I mentioned in the.

In the opening remarks, the the <unk>.

Copper and iron ore price was down there.

It's a.

I'm not going to say, it's booming our guys down there would say it's booming.

You know, it's a getting getting birth for the for the ships to land pipe and we're seeing increases in cost of pipe there, they're all manageable increases, but just that that real heightened activity.

It gives us a.

Cause us.

Some of some tailwind as I'm going to say for a for Australia of the rest of this year a certainly.

In terms of.

Kind of redeploying capital and kind of the right.

Either of the regulated or non regulated space.

I think we've been we've been consistent where we have been saying that we are looking to.

Expand geographically, we're looking to expand into kind of more a renewable power generation. The example of the central West pumped hydro.

And it's very early days on that project a F ideas and.

It for a few years yet.

Just goes to show our willingness to deploy capital in that area.

Theres a lot of.

Items on that particular project that we need to to get comfortable with but.

Yeah. We are a we are comfortable in deploying capital in that.

And that's on probably more on the non Reg areas as opposed into the.

The regulated given the the low rates of return that we have down there.

Got it that's very helpful. Thanks, a lot.

Thanks Mark.

Our next question is from Linda if the Guy Lisa with TD Securities. Please go ahead.

Thank you I just to build on on Mark's question about a geographic expansion and opportunities. Sometimes it's also interesting to hear what you're not commenting on the in your prepared remarks and I'm. Just wondering if you can also touch on you know some of the real.

The developments in Mexico, and how that might change your outlook for either new investments or the merits of potentially exiting your presence there entirely.

Also you on one of your affiliates and not cool a stroke she's on logistics.

As well as its the other investments you have in South America, a three year of affiliate or your affiliate has I'm just wondering a what the opportunities there might be long term for energy infrastructure in South America for Canadian utilities, and then in the mix a closer to home a while a short term in the.

Western Canada, there are some a.

Challenges Unfortunately related to the pandemic.

We are seeing a more than green shoots a in the oil and gas industry a.

And initiatives there to make a transitions to a lower intensity energy sources of long term as well. So can you comment on a the relative a scale of opportunities and how you see those having a shifted recently.

Yeah.

Thanks, Linda Yeah, I don't know I wouldn't put too much stock in the and the stuff that I don't say.

But I will I will I will get to the Mexico.

Yeah, I mean, Mexico has been a been very tough for us I mean, we still have a.

An outstanding arbitration decision.

A decision award on the two of the pipelines.

You know we.

I I Kid, our guys keep getting updates and it's going to be this quarter and then it's going to be the following quarter on the following quarter.

And they're taking their time getting to that ruling.

And that was permitting delays.

And in a in our MD&A this quarter we've a.

We mutually agreed to cancel on our agreement with <unk> due to permitting.

Issues, so there's a little bit of a recurring theme.

We got all of our money out from that a <unk> investment.

So we are so we are covered there.

Given those.

A.

The experiences.

We are we are probably waiting to redeploy capital into into Mexico.

On the structures on the alcohol side with structures.

There isn't there isn't a concern with the the the Mexican environment. They are.

Subsidiary down there is.

It's doing well on getting new orders and kind of expanding their of their line of business. So there isn't a concern on the on the structure side.

In Latam, we are continuing to explore other renewable energy projects.

Down there you know the.

The announced central West Palm Hydro on Australia isn't the only cause of iron in the fire that we have we do have other projects that we are looking at.

And in the region.

But certainly the.

Okay Mcculloch of those permitting issues.

We are a particularly attuned to as we are as we look to to further build out our businesses there.

In terms of Western Canada, and the the green shoots of the oil and gas for the movement to a low.

Of our intensity I mean, there's a.

The there's great opportunity here we.

We could be a.

On a major hub for Blue hydrogen you know we've been.

We've had hydrogen blending in Australia for a number of years for our clean energy innovation hub and now park, where we do have a blending project in Fort Saskatchewan, a small blending project.

With with hydrogen so when it comes to the renewable energy space with the decarbonization.

All of our.

Uh huh.

Energy that we provide for our customers. That's certainly an area that we are looking out.

And we think we could add at a lot of value.

And especially in the Alberta marketplace, given a given our footprint that we have here.

Okay.

And in terms of organic opportunities you know clearly.

Are those that are have historically been a focus on I'd expect would continue to be but the what are you thinking in terms of maybe portfolio management I just as a follow up question to my prior one portfolio management in terms of what might be a little bit less core a versus where you might a fill in a.

On a white space a in your current a core strategy and operations in terms of potentially some acquisition opportunities as they might arise opportunistically.

Yeah.

We we like we like the cards that we're holding right now in the in the energy infrastructure space with regards to our our storage facilities and processing facilities that we have here in Alberta.

As for for looking for any kind of a white space.

Kind of a small tuck in acquisitions, we could be looking for.

Call. It late stage solar wind developers in order to add to our renewable energy portfolio. So if that the.

In terms of portfolio management, those would be one of the areas that we would a that we would be looking at to round out our.

Product offerings.

Thank you my second question relates to the a Alberta regulatory environment, a definitely positive to see it a moving to more prospective a decisions and in fact, a the fact that they are now contemplating a.

What sort of regulatory framework, a might be a appropriate for the distribution utilities in the province mm for 2020 three.

I'm wondering in a perfect world, a what a Canadian utilities views to be.

Now if it's if you can influence that decision or a advocate for something how do you see a an appropriate regulatory framework evolving beyond 2023.

In Alberta.

Are you referring to the other.

The distribution side of the house or the transmission side or.

I was referring to distribution, but if you want to expand your response to include transmission I'd I'd be interested as well.

Yeah.

Yeah. It was a we're very pleased with the a the progress of the AAC has made and a and their efforts and actions to reduce the red tape and to try to help expedite approvals to get back to prospectively.

Our natural gas transmission business has had a kind of.

More success than on the electricity transmission side.

All of the bright lights for on transmit electricity.

The transmission as we went through the big bills.

There is a little bit of the.

Infrastructure that was built up Wayne.

That.

The regulatory process down.

We're happy that we have three year test years for both of those.

The businesses in order to help maintain that prospectively.

On the distribution side.

Again, a 2023, one year of cost of service.

Application that the commission is looking to here for all of the distribution utilities.

We've all put in our comments as to what we would like to see whether its a full scale.

Cost of service review detailed line by line or more of an expedited highbred between a detail and.

Leveraging excuse me some of the costs that we have incurred.

The fact that the AUC has asked for a one year cost of service in my mind leads to a transition into PBR three yes.

Yes. They didnt think there are merits in P. B R. I suspect they would have gone back to a.

On a longer cost of service term for the distribution utilities, so while I don't want a handicap the outcome.

I do believe that it will end up as a as a return to a kind of a third generation of PBR.

And then it gets to the Devil is in the detail.

So going in rates will be.

Fundamental to whether we have an opportunity to earn a fair return on our capital, especially given the changes that we're seeing in the industry on the electricity side Theres a lot of modernization that needs to be done to the grid to allow for a bidirectional flow of.

The electrons.

On the gas side.

Additional investments to allow for the blending of the gas system with a renewable energy to help lower emissions.

So we would be looking.

To allow for those types of new.

New investments and not be hamstrung with what has been done in the past.

And the only other element that worked out.

We would like to see her on a wish list or which we think is a imminently prudent is to allow us for the adjustment to our depreciation rates to allow for the mitigation of the prudent the risk.

Against the prudent cost recovery to ensure that we don't get hit with any extraordinary retirements.

Without a legislative change, we're continuing to work with the Alberta government Department of energy and what have you in order to get a amendments to the legislation to allow for the recovery of our prudent costs.

That's been a long term goal on we continue to work on that with the.

The powers that be.

Thank you. Thanks, Linda Thank you I'll jump back in the queue.

Yeah.

Our next question is from Matthew Li with I, a capital markets. Please go ahead.

A good morning, Thanks for taking my question I'll, just ask a couple of really quick here.

I was just wondering with the postponement of upgrade increases to help customers out youre, saying thats kind of going to be a bit of a short term impact on on the cash flow does that impact the earnings profile at all in the short term.

It does not impact sorry. Thank you for the question Matthew It does not impact our adjusted earnings.

We'll continue to record the impact.

We will continue to record the revenues for the all of.

That rate increase on an adjusted earnings basis for the Ifr S statements. We don't record the revenue until it's built so that would not be in the ifr S revenue I R. S earnings, but it will be in the adjusted earnings.

Okay. Thanks for the clarity on that.

And just my second question was just about the natural gas transmission general rate application for for 'twenty, one to 23 of the it looks like there was a bit of an impact from sort of a.

Cost savings being passed on to the rate payers now what was that a something that that can be expected to continue through the rate period.

You work through 2021 to 'twenty to 'twenty, three and continued to impact the rate profile and the.

The transmission there.

Yeah, I mean, that's a.

But it will continue to.

The impacted.

We always see the savings flowing through to customers and that's exactly how the regular regulatory compact has set up a whenever we have a a reset there typically is.

The the flowing of the benefits through during the taste test period through to customers. The challenge for us and our management is to restock the shelves for a new savings and that's what the the management team and the the gas transmission business has always done.

And is continuing to look at so.

Over the last 10 years, we've consistently.

Outperformed the approved return on equity. Despite these a rate resets where we are.

So the cash it's slowed the savings back through to the customers so while our.

2021 to 23 earnings.

[noise] wont enjoy the benefit of the of those cost efficiencies that were identified in prior years. They are.

Identifying new.

Cost savings are example of that is a a workforce asset management.

Systems on the.

The gas side and on the electricity side covering T. Andy.

To allow for the call.

A lot more.

The effective management of the assets and more effective management of our people who are maintaining those assets.

Okay. Thank you I appreciate that I'll now turn the call back.

Thanks Matthew.

Our next question is from Andrew Kuske with Credit Suisse. Please go ahead.

Thank you good morning, a Dennis can you, maybe just give us a bit of it the discussion around how you think about carbon as it relates to future capital investments or acquisition of a potential and I asked the question just in part because you've obviously gone through a really meaningful decarbonization of that for with the sale of other coal plants.

Yeah on a while back and then how do you really lineups just perspective of investments and I know you mentioned renewables you have some focus on that but looking at energy infrastructure or maybe more carbonite carbon intensity of utilities on an acquisition basis, but have a path to become a much cleaner.

You could just give us some color on that that'd be great.

Thanks, Andrew.

Yeah, if we got presented with an opportunity to buy a a vertically integrated.

Utility with a whole bunch of coal.

And a path to decarbonization I think maybe a few years ago, we would have we would've looked at that path.

Right now.

The.

The leaning I'll say is more towards a renewable energy.

When the.

When coal was in the cross hairs too to.

To get those emissions out of the out of the.

Energy chain.

Many thought that natural gas would just be the the next coal and that appears to be the case for the striving to meet a kind of net zero targets or a 45% reduction in carbon emissions to do it with a more natural gas.

Fire generation.

May not achieve the results for for the long lived assets.

For that reason.

The <unk>.

More focused on the renewable side as opposed to either greenfield or acquisitions of a.

A carbon intensive business on the on the energy.

The structure side.

Okay. That's very helpful. And then you did mentioned some comments around you have a shorter duration projects or potential.

On a acquisitions on the renewable side, it's a good maybe just give us a bit of color on the balance of Ipos.

Clearly about the pump storage project under the future you've had other long date of projects in the past.

That didn't work out on on the hydro side.

But of just sort of curious a how do you think about the balancing act of you know clearly of the group always has had a long duration view and has really played through cycles, but we see pockets of a frenetic activity on shorter duration of renewables, but.

[noise] of with some really interesting opportunities for a longer duration of basis, you know how do you bridge that or how do you balance that from a capital allocation perspective.

Yeah I mean.

In order to get into that a renewable space.

Okay.

To be a half projects and to.

Be able to go market a power purchase agreements with customers you need some.

Generation two to go market. If we started to do the wind studies in the solar studies now it would take quite a bit of time before we we had an opportunity to redeploy that capital into the new areas for that reason we are looking at a.

Late stage.

Projects that are under development.

Through the acquisition will say similar to the to the group in Australia, where we have just a credit acquired some Reits.

We can we'll say a bridge some of that GAAP and get a.

The.

The short of projects that could start to deliver earnings within say a year's timeframe that for on projects that are almost shovel ready or are shovel ready.

Of compared to the we'll call it five six year.

Michael that we are continuing to look at that through some of the some of the longer plays like the central west of the potential for central West pumped Hydro in Australia.

Okay. Thank you very much of that that's very helpful.

Thanks, Andrew.

Once again, if you have a question. Please press Star then one on your telephone.

Our next question is from Maurice Choy with RBC capital markets. Please go ahead.

Thank you on my first question is just a.

Along the lines of capital allocation as well and I recognize that all of the commentary that you have about renewable energy in the.

The markets are quite a few of them about where the returns are for some of those projects.

And all of a sudden recognized that still most of Q4, if we purchase some of your own shares in Q1 as you look at your capital allocation the option.

Yeah, it'd be something that ranks well well high on the pecking order for differently, what should we expect in terms of in CIB for the the rest of this year.

Or is that activity in managing the stake held by a go into you.

Oh, Hi, Morris on thanks, Thanks for the question Yeah, we did.

We did start some buybacks last year and continuing into the first quarter. This year and a Canadian utilities, we haven't really done any buybacks, let's say in the last 15 years or so.

The primary motivation on the buybacks is to offset the dilution from stock options and those have been accumulating over that decade, and a half of what.

This program is looking at is tough.

All right the ship and to offset the the dilution that that has eroded to our shareowners over the over the last decade and a half.

A lot of let's say a lot of things gotten a way like you know.

The big build in transmission primary primary one of them.

We we have purchased a think of it about one 8 million shares in Q1 under the NCI B. There's about another one 7 million shares and the potential that we that we could do until the end of CIB runs out in a.

June or July.

Just as a matter of course, we're probably looking to renew that NCI be just as a as a matter of the as a matter of of course, but in terms of capital allocation of where are we looking at a rate considering.

Considering taking a big hunk of the of the cash on the balance sheet in a on our capacity and plow it into buybacks, that's not really the case.

And just a follow up on that like recognizing you've got 1.7 million less but you're removing the N J b.

How much more do you need to do in order to offset I guess, a decade and a dilution.

Uh huh.

Well, a well we'll take a look at that as a as we go Maurice.

I suspect a fair chunk of it.

Okay all of what was that.

Off the call on the second question is.

It was the pickup on Puerto Rico, again, and a recognized at Wayne presented at a government hearing recently.

And there's been a suggestions about the contract being amended including investment.

Sensitive criteria you you alluded to earlier could you help us.

I understand how your mouth frame your earnings expectation versus when the agreement was signed on one hand, it's likely that it's harder to achieve the incentives.

But on the other hand, if you do move into the supplemental agreement a reckon the the fees, possibly it could be higher than what was good for needed for year one.

Yeah, Yeah, I don't know if it's tougher to achieve those incentives are not because of the bar hasn't been set.

As I discussed with Mark out of the out of out of the chute, we'll see what the prep a.

Kind of a proves for going in.

A standards in order that we would need to achieve or exceed in order to.

Earn those incentives.

A.

Under the under the supplemental agreements there is no.

Incentive potential because a it's still a bankruptcy we don't have the a.

All of the means to improve performance.

Performance so.

In lieu of not being able to achieve to earn incentives.

Under the supplemental agreement the fixed feed is higher.

I think all the all of the contract details are out there and they're on a double double check with miles.

As to the amounts that potential is there.

But in terms of the overall.

The status of the contracting a it's probably fair to say that it's been a harder than we thought to go through the front end transition the.

I think Mr. Stansby has done a phenomenal job.

With the hearings and with the the.

The the people in Puerto Rico, we are committed and stay committed to improving the service for a for.

For all of Puerto Ricans and that is the primary focus the governor has come out and and supported the agreement.

And we are continuing on the path with the expectation that we will exit front end transition in June.

While it's been harder the.

The end result is somewhat the same that a in terms of our kind of the.

The returns that we would expect from that investment.

Great. Thank you very much.

Thanks Bruce.

Our next question is from Patrick Kenny with National Bank Financial. Please go ahead.

Yeah, Good morning, guys.

Just a quick question here on the given the strong power price environment, we've seen year to date.

If you're experiencing any tailwind on your retail business I know, it's still a small contribution but just in light of the rate freeze a do you see your retail business as a potentially.

Offsetting some of your cash flow drag over the next couple of years.

Oh.

Oh hi.

Hi, Pat on the good morning. Thank you for the thank you for the question.

We are seeing a.

Certainly some some tailwind.

In our retail business.

We no longer have the the the benefit of having a a natural hedge on the generation side.

On to the extent that a our retail business of the.

Locked in some fixed price contracts than the a the.

The increase to the power prices doesn't really a.

Help the margins the teams have been doing a a great job in managing that risk.

You're you're here in Calgary, you know how cold it got in February here when it was minus I'll say 15000 degrees.

And and we weathered that a that.

Net.

February quite well because of the the great work that the teams have done in a.

And matching up the the cost of the electricity with the with the sales.

That being said you know the the energy retail energy business is continuing to to chip away at market share that a it was published.

Every every quarter I think there the market share on the on the.

Non Reg side is over 10% now a number three on the province in a continuing to look to grow that business increased earnings and a in retail energy or included in the our corporate segment for Canadian utilities. So it is a it is definitely.

We are a bright spot on another bright spot in the in our first quarter results.

Okay, great. Thanks for that and yeah. Thanks for keeping the lights and the heat on true in February I appreciate that.

Just a and it stayed on because it wasn't me so.

But for the field people and a.

On our ops guys. They did a phenomenal job for.

For sure.

And then maybe just a to tie a bow on the the net cash flow drag if you will but if it does that change any of the funding plan going forward and maybe you can just update us on a.

What we can expect on the debt issuance front the.

The back half of 2021.

Yeah, the impact from that rate freezes between a $110 million to $120 million and rate increases that we would forgo in 2021 looking to recover them in 2023 over a tie.

Time period, yet to be determined we would look to finance that with a a short term debt and covered off that way on our five our five year cost of hovering around I think 1.1516%.

Give or take the.

The interest that we would earn from the commission we'd be looking at around a 2% Mark So we'll call that cost of the financing a would.

It would be covered.

By customers on a.

On a very low rate.

That's our proposal.

We expect a decision here imminently yesterday I heard it could be within a week. So we'll get clarity on that but we wouldn't look to impact the wings long term financing as a result of this.

Of this short term relief for our customers.

Okay. That's great. Thanks, Dennis I'll leave it there.

Scott.

This concludes the question and answer session I would like to turn the conference back over to Mr. Myles Dougan for any closing remarks.

Thank you Claudia and thank you all for participating on the call. This morning, we appreciate your interest in Canadian utilities and we.

We look forward to speaking with you again soon.

Okay.

This concludes today's conference call you may disconnect your lines. Thank you.

For participating and have a pleasant day.

Okay.

Okay.

Yes.

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