Q3 2021 WEC Energy Group Inc Earnings Call
This call is being recorded for rebroadcast and all participants are in a listen only mode. At this time before.
Before the conference begins I remind you that all statements in the presentation.
Than historical facts are forward looking statements that involve risks and uncertainties that are subject to change at any time.
And that's are based on management's expectations at the time they are made.
In addition to the assumptions and other factors referred to in connection with the statements factors described and W. E. C energy group's latest Form 10-K, and subsequent reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those cars.
Template it.
During the discussions referenced earnings per share will be based on diluted earnings per share unless otherwise noted.
After the presentation the conference will be open to analysts for questions and answers in conjunction with this call a package of detailed financial information is posted at WEC Energy group Dot Com AR.
Replay will be made available approximately two actors after the conclusion of this call and now it is my pleasure to introduce Gale copper executive Chairman W. E C energy great.
From America's Heartland. Good afternoon, everyone. Thank you for joining us today as we review our results for the third quarter of 2021 first I'd like to introduce the members of our management team who are here with me today, we have Kevin Fletcher, our president and CEO, Scott Lauber, our Chief operating Officer, Sha Lu our Chief Financial Officer.
And Beth Straka, Senior Vice President of corporate Communications and Investor Relations.
I'm sure you saw the announcement last week that our board of directors has taken the next step in our long term succession planning.
Kevin has decided to devote more time with his grandchildren and water skiing barefoot on his favorite links you'll be retiring in 2022, we're delighted that Scott will assume the role of President and Chief Executive on February one and finally I've agreed to continue serving as executive chairman until our annual stockholders meeting.
In 2024 covenants.
Covenants got of course have been instrumental in shaping our progress over many years, we wish Kevin all the best and I look forward to working hand in hand with Scott as he takes on his new role.
Now as you saw from our news release. This morning, we reported third quarter 2021 earnings of 92 cents a share our results.
Were significantly better than expected driven by warmer than normal weather continued economic recovery in our region and our focus on operating efficiency our balance sheet. Our cash flows remained strong and as we've discussed this allows us to fund a highly executable capital plan without issuing equity.
And just a moment, we will update you on the details of our new five year ESG progress plan a plan that will cover our investments in reliability and de carbonization over the period 2022 through 2026.
As we've reported to you we're well on our way to achieving some of the most aggressive goals in our industry for reducing carbon emissions across our generation fleet, we're targeting a 60% reduction by 2025, and an 80% reduction by 2030, both from a 2005 baseline.
Importantly, we have a roadmap to reach these goals without any major advances in technology.
So today, we're announcing that our use of coal will continue to decline to a level that we expect will be immaterial by the end of 2030.
By the end of 'twenty 30, we expect our use of coal will account for less than 5% of the power we supply to customers now.
A number of you have also been asking when can we exit coal completely.
Here's the answer we believe we will be in a position to eliminate coal as an energy source by the year of 2035.
The next logical question is what does this mean for the modern coal fired units at our Oak Creek site.
As you recall these units were part of our power the future plan and were completed only about a decade ago.
While our modern units at Oak Creek will remain a key part of our fleet for many many years to come.
These power the future units rank as some of the most efficient in the country among the top 5% of all coal fired plants in the heat rate performance over the past decade, and they're strategically as we've discussed they are strategically located to support reliability of the Midwestern transmission grid.
Fortunately, we can plan for the future of the new units at Oak Creek with fuel flexibility in mind we.
We've tested co firing on natural gas at the site so subject to the receipt of an environmental permit we planned to make operating refinements over the next two years that will allow a fuel blend of up to 30% on natural gas.
And then over time, we will be able to transition completely away from coal by making incremental investments in plant equipment.
This would include for example, new burners and of course, we will need additional pipeline capacity.
Reaching into the site.
So we see a very bright and long future for the newer units at Oak Creek.
And now let's take a look at the capital plan that will continue to shape a decarbonising economy.
For the period 2022 through 2026, we expect to invest $17 $7 billion.
Our focus remains on efficiency sustainability and growth.
This ESG progress plan is the largest capital plan in our history, an increase of $1.6 billion or nearly 10% above our previous five year plan.
We expect this plan to support compound earnings growth of 6% to 7% a year over the next five years without any need to issue new equity.
We'll be increasing our investment in renewables for our regulated utilities from 1800 megawatts of capacity in our previous plan to nearly 2400 megawatts in this brand new plan.
These carbon free assets include solar wind and battery storage.
We're also dedicating more capital to hardening, our electric distribution networks. So that we can maintain a superior level of reliability for our customers.
And investments in our gas delivery systems, and the development of renewable natural gas will support our goals for the gas distribution business as well.
As a reminder, we're targeting net zero methane emissions by 2030.
So add it all up and we have what I really believe is a premium growth plan the.
The projects that are driving our growth are low risk and highly executable and they are accelerating the transition to a clean energy future.
With that I'll turn the call over to Scott for more details on our sales results for the quarter as well as an update on our infrastructure segment, Scott All yours. Thank you Gail we continue to see customer growth across our system at the end of September our utilities were serving approximately 8000 more electric customers and 15000 more NAV.
Gas customers compared to a year ago.
Retail electric and natural gas sales volumes are shown on a comparative basis, beginning on page 13 of the earnings packet.
Overall retail deliveries of electricity, excluding the iron ore mine were up two 4% from the third quarter of 2020 and on a weather normal basis, we're up 2.5%.
We continue to see economic rebound in our service territory for example, small commercial and industrial electric sales were up three 5% from last year's third quarter and on a weather normal basis. They were up four 2% mean.
Meanwhile, large commercial and industrial sales, excluding the iron ore mine were up three 8% from the third quarter of 2020 and on a weather normal basis were up 3.5%.
Natural gas deliveries in Wisconsin were up 1%. This excludes gas used for power generation and on a weather normal basis natural gas deliveries in Wisconsin grew by two 5%.
Overall, our growth continues to track ahead of our forecast as the economy continues to open up.
Turning now to our infrastructure segment, our new capital plan calls for the investment of $1.9 billion between 2022 and 2026, considering the three projects that are currently under development, we expect to invest an additional $1 $1 billion at that time frame.
As a quick reminder, we have eight wind projects all with long term off takers announced are in operation. Our infrastructure segment. This represents approximately $2 $3 billion of investments.
As previously discussed our Jayhawk wind farm is projected to go in service by early next year and our Thunderhead wind investment is projected to go in service in the first half of 2022. These timelines have been factored into our updated capital plan with that I'll turn it over to Kevin for an update on our utility operations.
Thank you Scott first I'll cover some developments here in Wisconsin.
I am pleased to report that our Badger Hollow one solar project is just weeks away from completion.
You'll recall that we own 100 megawatts of this project in southwest, Wisconsin.
For the next phase of the project Badger Hollow tube, we now are performing civil work and grading.
Our target for completing that project is the end of 2020 to.
That date will depend on module supply, which is uncertain as we await clarity on matters before the department of Commerce.
Now for a few regulatory updates we.
We expect a decision from the Wisconsin Commission shortly on our plans to build two liquefied natural gas storage facilities in the south eastern part of the state.
This proposed investment would greatly enhance customer savings and reliability during wisconsin's cold winters pending approval, we expect the facilities to enter service in late 2023.
They are projected to save our we energies customers approximately $200 million overtime.
We also have updates on the rate reviews at two of our smaller utilities.
The Illinois Commerce Commission unanimously approved the final order for our rate case at North shore gas.
The order authorizes a rate increase of 4.5%, including an ROE of 967% and an equity ratio of 51.58%.
New rates went into effect on September 15th.
And the Michigan Public Service Commission unanimously approved a settlement in our rate case for Michigan gas utilities.
The settlement authorizes a rate increase of 6.35%, including an ROE of 9.85% and an equity ratio of 51, 5%.
New rates will be effective January the first.
We have no other rate cases pending at this time.
And as we look forward to the winter heating season ahead I am pleased to report that we're ready.
We have our gas contracts in place and our gas inventories are at our targeted levels.
And with that I'll turn it over to Sean.
Thanks, Kevin we continue to deliver quality and consistent earnings.
Our 2021 third quarter earnings of 92 per share increased eight cents per share compared to the third quarter of 2020.
Our favorable results were largely driven by higher earnings from our utility operations.
Our regulated utility benefited from the strong economic recovery in Arlington continued execution of our capital plan and our focus on operating efficiency.
The earnings packet placed on our website. This morning includes a comparison of third quarter results on page 17, I'll walk through the significant drivers.
Starting with our utility operation, we grew our earnings by five points compared to the third quarter of 'twenty 'twenty.
First continued economic recovery from the pandemic and stronger weather normalized sales drove a three <unk> increase in earnings.
Also makes a leaf and additional capital investment added four cents compared to the third quarter of 2020.
And low Earth day to day O&M contributed four songs.
These favorable factors were partially offset by four cents of higher depreciation and amortization expense and to think of increased fuel costs related to higher natural gas prices.
It's worth noting that we estimate weather with five cent favorable compared to normal in the third quarter yourself, both 2021 and 2020.
Overall, we added five quarter over quarter from utility operations.
Moving on to our investment in American transmission company earnings increased 1% compared to the third quarter 2020, driven by continued capital investment.
Earnings at our energy infrastructure segment improved one penny in the third quarter of 2021 compared to the third quarter of 2020.
This was driven by production tax credits related to wind farm acquisitions.
Finally, we saw a one <unk> improvement in the corporate and other segment.
This increase was primarily driven by lower interest expense.
In summary, we improved on our third quarter 2020 performance by eight cents a share.
Now I'd like to update you on some other financial items.
For the full year, we expect our effective income tax rate to be between 13 and 14%.
Excluding the benefit of unprotected taxes flow flowing to customers. We project, our 2021 effective tax rate will be between 19 and 20%.
As in past years, we expect to be a modest taxpayer in 2021.
Our projections show that we will be able to efficiently utilize our tax position with our current capital plan.
Looking now at the cash flow statement on page six of the earnings packet net cash provided by operating activities increased 57 $9.
Our increase in cash earnings in the first nine months of 2021 more than offset the higher working capital requirements.
As expected with normal collection practices underway in all of our service territory, we made great strides in improving our working capital position in the third quarter.
Total capital expenditures and asset acquisition were one $7 billion for the first nine months of 2021, eight 129, now and dollar increase as compared with the first nine months of 2020.
This reflects our investment focus in our regulated utility and energy infrastructure business.
Looking forward as Gill outlined earlier, we're excited about our plans to invest $17 $7 billion over the next five years in key infrastructure.
His ESG progress plan supports 7% annual growth in our asset base.
Pages 18, and 19 of the earnings packet provide more details of the breakdown of the plan, which I will highlight here.
As we continue to make our energy Inc.
<unk> transition nearly 70% of our capital plan is dedicated to sustainability.
<unk> five $4 billion in renewable investments and $6 $8 billion in grid and fleet reliability.
Additionally, we dedicated $2 $8 billion to support our strong customer growth.
We also plan to invest $2 $7 billion in technology, and a modernization of our infrastructure to further generate long term operating efficiency.
With our strong economic development backdrop, and our continued focus on efficiency.
<unk> and growth, we see a long runway of investment ahead, even beyond the next five years.
In closing before I turn it back to Dale I'd like to provide our guidance.
We're raising our earnings guidance again for 2021 to a range of $4 five to $4 70 per share. We then expectation of reaching the top end of the range.
This assumes normal weather for the remainder of the year.
This is the second time, we are raising our guidance. If you recall our original guidance was $3 99 to $4 three per share.
With that I'll turn it back to Gale.
Thank you very much we're on track for a solid year again in light of our strong performance our guidance range now stands at $4.05 to $4.07. A share. We're also tightening our projection of long term earnings growth to a range of 6% to 7% a year and finally, a quick reminder, about our dividend.
As usual I expect our board will assess our dividend plans for next year at our scheduled meeting in early December we continue to target a payout ratio of 65% to 70% of earnings we're right in the middle of that range now so I expect our dividend growth will continue to be in line with the growth in our earnings per share overall, we're on track to focus on the <unk>.
Bring in providing value for our customers at our stockholders and operator, we're now ready to open it up for the Q&A portion of the call.
Thank you now we will take your questions.
The question and answer session session will be conducted electronically.
Your question. Please press the Star key followed by the one digit one on your phone you are using a speaker phone turn off your mute.
Function to allow your signal to reach our equipment will take as many questions as time permits once again press Star then the number one on your phone to ask a question.
Your first question comes from the line of sharper razor with Guggenheim partners.
Hey, guys Rock'n'roll Shar, how are you doing not too bad not too bad guys I appreciate it.
So just a couple of questions and galvanize unpack sort of your comments around the Oak Creek power the future units, because I think that's sort of somewhat pretty material.
Any estimate around capital cost to fully convert from coal to gas and what the heat rate of those units would be under the contracts Youre, obviously tech agnostic, but with shifting also baseload units to essentially higher heat rate, peaking.
Have any kind of ramifications under the terms of the contracts with the unit service capacity or do you expect to run them all the time.
Yeah, Great question, Shar, and I'm going to ask Scott to give you some details as well, but let me say one thing, though I would not expect as we as we move through the transition of the New Oak Creek units between now and 2035 I would not expect them to run simply as speakers, they're probably going to run much more like our port Washington.
That's which are highly efficient combined cycle units.
I wouldn't make the conclusion that they'll run as speakers that they are very much going to be needed for road for reliability no question about that.
In terms of capital.
I mentioned that would be incremental capital investments in the plant and the most have Scott give you. The details I can tell you though that.
After a lot of work and a lot of analysis, we still have more to do for the long run, but after a lot of work and a lot of analysis. We are convinced that this is an economic thing to do for customers Scott sure.
Sure Gail and where should we look at the plant and this first step here to get to that 30%. We're looking at a very modest investment approximately $30 million to get it to be able to run at that blend coal blending with some gas and a little coal and then as you look farther out than that.
2030 timeframe 2035 timeframe as we look at converting completely that would be approximately $150 million. But this is really early in that analysis and more to come as we continue to to flush that out.
Perfect. Thank you for that and then just go just to $1 6 billion increase in the capital plan is obviously you highlighted its really material.
It's driven by electric maybe at the expense of energy infrastructure and gas spend right. So because you're kind of looking down the roll forward.
Electric spend is up about 2 billion in the infrastructure and gas are down around $4 50.
Is this kind of a broader and more sustainable strategic shift and growth focus going forward or just kind of a timing factor, especially as we're thinking about.
Youre plans beyond 'twenty five.
Yeah again, a great question Shar, let me just say this we always start with need.
And our preference obviously is.
To invest in our regulated assets, where there is clearly a customer benefit or a customer need. So as we look at this plan and you're right the increases material, but as we look at this plan compared to the prior five year plan.
And again largest five year capital plan in our history at $17 7 billion.
The two things you mentioned are correct first of all we will be adding a significant amount of renewables.
To maintain reliability as we retire older less efficient coal fired plants in this timeframe. So the first is we have got to replace some of that capacity with carbon free energy.
So there is an increase in our renewable investment regulated renewable investment in the plan compared to the previous five year plan and then and this is something that we've all talked about internally and Kevin continues to point out and he's absolutely right, we have aging distribution infrastructure.
And that aging distribution infrastructure, which we've which we've invested in in the past, we're coming up to a period now where there is a much greater need to replace that aging distribution infrastructure. So those are the two drivers. If you will of kind of the incremental change in this five year capital plan versus the prior five year pet Capa.
Plant does that does that respond to your question. It does it does and that's super helpful.
And then just lastly is just on the infrastructure segment.
You know on that roll forward does the contracting spending profile is it indicating anything something about Princess project returns you're seeing are pressure from input cost or is it just really a function of limited capital falling.
And your regulated opportunities instead, so like are you seeing any of these pressures in the business that others are saying.
No.
And it is.
Again, we've been asked this question as you know before.
The last the last one we just announced a few months ago, a sapphire sky actually our projections show up having the best returns of any of the eight projects. So we are not seeing a dimunition at all in terms of potential returns or in terms of the robust nature of the pipeline and remember.
We've got two coming that have been announced but are not yet in service jayhawk.
In the upstream not upstream I'm, sorry at Thunder here Mike.
James Bond project Thunder.
And then in addition to that there is still more than a $1 billion.
To be invested in this five year capital plan. So we're still very very active in seeing the kind of positive returns that we would expect to see.
Fantastic. Thank you for that and congrats Scott and Kevin on Phase Island, and Gail don't go anywhere Youre still too young.
I appreciate it.
Thank you very much.
<unk>.
Your next question comes from the line of Steve Fleishman with Wolfe Research.
Greetings, Steve How're, you doing hey, good afternoon.
Hi, everyone.
So first of all just on the.
The new growth rates of 6% to 7% should we assume that that is based off of kind of the initial 2021 guidance.
Yes, yep, Okay, and I just wanted to double our yeah yeah.
No I'm glad you asked the short answer is yes, and then just to kind of put some numbers around it historically.
Historically, what we've done is looked at the midpoint of our original guidance and then gave you guidance in this case. The you know the six to seven off of that so the midpoint of our original guidance for 2021 is like $4.01 a share.
Okay, Great and then on the.
I know the spending to convert.
<unk>.
The newer Oak Creek units is relatively modest but with that spending be.
Kind of like recoverable under the.
The lease structure of that law.
Would it be done more normal rate base, how would that work.
Now that the short answer Steve is that we obviously have to get commission approval for any investment of that time, but it would be under the waiver under the way the lease works it would be under the.
The power of the future terms.
Okay.
And is that.
Is there any chance that that could get extended if you do things to extend.
The period are those those just have under the law set end date.
Well, there's a current 30 year end date from the date of operation of the New Oak Creek units for the lease. So the commission initially said a 30 year lease period, but in the terms of the agreement with the commission the.
The commission has the right to extend the lease so all of that will be Oh, my God all of that will be dealt with probably around 2039 to 2040.
And I know that you're still going to be doing you're doing you're not going to be chairman.
And youll still be chairman.
[laughter].
Last question and this is kind of a broad one.
Be curious.
Your take on the I.
I guess, it's the build back better infrastructure, bill and potential implications.
Implications opportunities for work from that.
And chances of passing.
Yeah, well you know.
It's such a sausage, making machine in Washington, as you know, but.
If I were a betting man I think something will pass.
And it appears as you've seen Steve that there is there is strong support.
For the renewable tax credit portion of that build back better plan, but that seems to have stuck in every single version of every single iteration of the plan.
So again, if I were a betting man I would say.
That extensions of renewable tax credits will happen.
And it looks like Theres, a strong possibility that what they call direct pay will occur.
If direct pay as a part of the renewable package. If you will in that plan then that clearly enhances our opportunities. It's good for customers. It's good for cash flows. It's good for our the growth of our regulated business. It's good for the growth of our infrastructure segment. So I think a keto.
Watch is.
Not only the 10 year extension that Theyre talking about a.
Production tax credits also the flexibility on tax credits for solar but also a big key would be the direct pay and that would be a strong positive and would also have a step back in and.
And look again at what is doable and what's needed here.
Great. Thanks, so much.
Youre welcome Steve Thank you.
Your next question comes from the line of Julien Dumoulin Smith with Bank of America.
Hey, good afternoon, Tim Thanks for the time.
Graduation on the road you on the road again Julien.
So <unk> tried to stay out of the road call. It it is.
I appreciate it.
And congratulations again to Kevin its Scott here.
If I, if I can pick it up well, where perhaps charlotte's it off on the on the coal side.
Just what are the worst didn't hear you you made the broader comment not just about pts, but about the wider nature of coal within your portfolio can you comment on that asset and I have a follow up.
Sure.
I won't give you an answer and then I'll, let Shang Hsiao and Scott give you a little bit more detail, but the western units, which for those of you who may not be familiar the western units are relatively new coal fired units.
That are an integral part of Wisconsin Public service generation fleet. The company that we acquired based in Green Bay.
Western is a real workhorse.
And again, we may have some flexibility there.
That that we're looking at now in terms of Optionality for the Western units Scott.
Yes scale at the Westin and particularly the newer unit less than four we have actually done some coal coal firing on that with some natural gas also so we'll be evaluating that as an option as we go through the next several years here. So.
But we do realize that it's a very critical part of the state that we want to make sure. We have the the reliability at that location. So we're going to continue to evaluate it.
And Julian to your question, which is a good one.
And everyone should know we have a path here to have a really significant change in our portfolio to support the carbonization and to get too aggressive environmental goals. We can do that and we can do that without sacrificing reliability, we will not sacrifice reliability, we don't have to do that as we.
Worked through our plan.
Excellent. Thank you for clarifying that.
If I can ask just on the infrastructure side, just just to elaborate on this but you said a moment ago. Your Sapphire project for instance, amongst the best returns you've had thus far in your efforts.
And obviously, you're kind of relatively scaling this down is this more about keeping the infrastructure segment within call. It a 10% bucket of total earnings and having effectively achieve that with this five year outlook and that's what's driving a little bit of a scaling back or or Conversely is this just about being conservative and arguably.
Whether it's direct pay or whether it's just simply finding opportunities that exceed that but that allocation that you could actually be you know again sort of exceeding these these budgets.
Well, let me just say this we are usually conservative.
And that wont surprise you.
And I would look at I would look at what we've just laid out here for that segment of our capital spending over the next five years is a really strong place holder, which we will then once we see what's in that build back better plan, we'll step back and see what opportunities that might give us.
So I think the short answer to your question in Charlotte Smiling and nodding her head I think the short answer to your question is we're being appropriately conservative today.
Excellent sorry, sorry, just clarifying the earlier comment until that kind of what's the episode of care improvement drove a.
If you if you can quantify that at all.
I'm sorry, you broke up Julian can you ask that.
The balance sheet.
Under the plan today, how much better would your credit metrics get if you have any sense on that obviously, there's a lot of assumptions.
Sure Yeah.
Julien we're looking now the details as you know that we know the language just came out. So we wanted to really study the specific implications, but I think in general we can look at between 50 to 100 basis point improvement.
At the.
The first grant of that language.
Perfect. Thank you guys.
Wow.
Yes.
Thank you.
Your next question comes from the line of darker dark Grace.
Rough with Evercore ISI.
Hello, There gosh how're you doing today, Hey, Gal, good afternoon, and congratulations to Kevin and Scott as well.
From my side too.
Two questions for me first.
You I think I'm jumping the gun here, but still okay to assume no equity in the plan through 2026 now.
Yes, yes, and yes.
Okay.
Just wanted to clarify that that's great and then maybe just.
Really quickly some of your peers have talked about.
Given it some sort of sensitivity on natural gas price increases and customer will impact so to the extent that you can help us.
With that.
But that would be greatly appreciate it.
Sure. Let me give you a dollar amount and Scott can fill in some additional details depending upon and you know we have natural gas where the natural gas provider in most of Wisconsin, Chicago, the northern suburbs of Chicago portions of Western Michigan and in places all over Minnesota.
Depending upon where you are in our service area.
It looks like the average bill increase for our residential customer given what we've been able to do to mitigate higher gas prices with our hedging and storage opportunities. So the typical residential customer will see about a 25 to a $40 monthly increase for each month of the heating season based on what we're seeing.
Today, and what we've got locked in and I can tell you that that we have been very aggressive as always.
With our hedging strategies with gas storage with option contracts.
And we're pleased with how we've been able to mitigate the very sizable increase in.
In the natural gas market for pricing Scott that's exactly correct. Yale So we've got about a third of our gas in storage that we filled throughout the year and as Kevin mentioned those storage levels are where we where we want them to be at this time.
And then we also have a lot of third of the hedging program. So that 25 to $40 looking at the current prices and we don't expect that to move too much with our hedging program at or storage inventory.
And that is as a percentage of total bill what's that like 25% to 30% and I think that's the right way.
Yeah, it's about 30, a 30% to 40% depending upon the area.
Thank you.
Thank you <unk>.
Your next question comes from the line of Jeremy Tonet with J P. Morgan.
Good afternoon, Jeremy Hi, good afternoon, Thanks for having me here.
A nice being ahead Jeremy.
Okay.
Just the last one on Oh Creek here, if I could.
Just wanted to see with regards to the timeline of 2035 how.
That date was established as the right timeline as opposed to something earlier or later.
It all.
It's a great question. It all comes back as we've talk this through with our operating people with our technicians with our.
With our outside experts it all comes back to the proper transition to continue aggressive C O two reduction but maintaining reliability.
And we're quite confident that by 2035.
At the latest that we can that we can adjust our fuel source at Oak Creek, such that coal will be a backup source I mentioned to you that that our view is that our use of coal for power supply for our customers will be almost immaterial in our planning by 2030 less than five.
Percent of our total power supply so we're going to we're going to work our way forward.
With continuing to increase the fuel blending.
At Oak Creek.
Making sure that we maintain that high standard of reliability, which we've got to have.
But it really is a thought about how quickly can we go and maintain reliability and step increments.
That's our current view.
So we'll see how it goes but we're very confident.
About the trajectory between now and 2030 and if the trajectory is even better than we will see where we go but.
But it's really it's really our best estimate of how to make continued progress on aggressive environmental goals and maintaining reliability.
Got it that's very helpful. Thanks, and just one last one for me on the <unk>.
The new 6% to 7% growth target, what's different now versus prior to this change.
Just giving you a directional guidance and since growth is already generally trended at the high end of the range just wondering what prompted I guess today's changing message.
Well, one simple thing of the refreshing of our five year capital plan.
I mean, we went from a $16.1 billion of five year capital plan that we unveiled to you last at the same time last year to a 10% increase in the capital needs to $17 7 billion and when you look at that and you say, okay no need for equity.
Run it through the model, what do we get and it gives us confidence in the 6% to 7% growth rate.
Got it makes sense I suppose work operational execution might feed into it a little bit as well appreciate the capex uplift there.
Well, let me just say this the XP operational execution doesn't hurt.
Yeah.
Thanks for taking my questions have a good one.
Jeremy Thank you.
Your next question comes from the line of Andrew Weisel with Scotiabank.
Afternoon, Andrew.
Hi, everybody.
First question on O&M I see the income statement is flattish on a year to date basis can you give us a figure on what you call the manageable or day to day, O&M and I know you've been targeting a 2% to 3% year over year reduction on that metric is that still a good number or should we expect some spending to be pulled from 2022, given the strong year to date.
Earnings results.
<unk> has the answer for you yeah. So we're looking at the projection for the year taking into consideration what has happened over the past three quarters and what we expect to see the 3% range is still a very good number the day to day reduction compared to the annual 2020.
Okay, great and.
Next question is on rate cases, congrats on having such a clear near term outlook can you talk about expectations for the next filings I think you've previously talked about May 2022 for Wisconsin.
Is that still a good placeholder, then which are the smaller subs might see activity over the coming months.
Well, yes for our Wisconsin utilities late spring 2022 are certainly by no later than May one of 2022, that's the plan for filing our next rate reviews for the Wisconsin utilities, and recall that where I believe the only state in the U S that has a two year forward looking test period for those rate reviews.
So we're looking forward to we're looking forward to having the rate reviews done next year and Wisconsin and.
And Kevin and Scott I don't know of any other plan I mean, we we just as Kevin described we just finished rate reviews for north shore gas in Illinois for Michigan gas utilities, and nothing else seems to be on the docket Gail just as I said in my remarks, we have no. Other plans at this particular time thanks for the question.
It's a great position to be in thank you Kim.
Thank you.
Your next question comes from the line of Michael <unk> with Goldman Sachs.
Hey, guys Michael.
Hey, guys. Thank you for taking my question just curious.
Our five year plan can you walk us through a little bit of the cadence of the change meaning is the change mostly in 'twenty, two and 'twenty 2023 or is it more in kind of the backend of the plant.
Scott do you want to take that one.
Sure sure Gail and when we look at the plan, it's actually throughout the plan yet.
In fact.
When you look at it compared to this year's plan.
The prior capital plan in years, four and five of kind of tapered off and in this particular year.
Especially as we laid out more and more as our energy transition in these projects get staged and over time, it's actually a flatter outlook as you look through it. So it really blended did well and when do you think about us putting in the generation and being very measured you've got to make sure you get the generation in and go to the next projects. So it's very deliberate in how we laid it out.
Anything you'd like to add.
I agree I think the two areas would be the renewable investments and the equation fleet's reliability investments, though we are adding are investing.
Investment on all five years in those category.
And Michael as we look even beyond the five year plan that we just rolled out this morning, the new five year plan one of the things that <unk>. Just mentioned is very clear to us the additional an upwardly trajectory investments in grid modernization and reliability.
Those kind of investment dollars are going to continue well beyond the need is going to be there well beyond this five year period.
Alright, Oh, no and we've got a massive opportunity in Wisconsin and elsewhere.
The system.
Just curious, though I want to make sure I follow up can you give any cadence for like wait years within just the Wisconsin regulated business what amount of potential new megawatts for <unk> is in this plan that hasn't already been announced.
That hasn't been announced yes, okay. Okay. Yeah. So we have a number of them already pending at the Wisconsin Commission.
But go ahead Scott. So there is approximately on the solar side that Hasnt been announced approximately 700.
Megawatts on the solar and then another about 500 in the batteries.
Scott as you know we have several of the largest wind farms are ready and nothing additional just that one that we've already.
Filed for in the wind and much of the batteries really can be deployed at existing sites.
Got it and so when you think about this that 700 megs of solar 500 megawatts of battery, that's kind of spread throughout the five years of the plan.
Correct Yep correct Yep.
It's going to you're going to see a consistent growth as we look at our renewables over the next five years.
Got it and then the one thing and it's smaller but I noticed that there was an uptick in expected capex at ATC and we haven't really seen an uptick in expected capex and a T. C. For awhile can you talk a little bit about what's driving that and whether this is a beginning of a cycle of kind of.
Continual increases in spend at ATC is just a little bit more of a one off.
No.
And Kevin of course is the.
The chairman at ATC I'm going to ask him to comment on this but one of the things that is notable here that I think Kevin will continue is to ATC has a lot of maintenance capital that is just really going to be required to maintain the reliability of the existing transmission network and I think that uptick in maintenance capital Kevin as a significant driver here Gabe.
It is just like it is on on a retail side, that's exactly right and also as you know theres a lot of renewable projects that are planned on onboard so that'll help drive some of that Capex investment over the next five years and even into the future from that perspective. So.
Maintenance as well as new needs from renewables is a drivers.
Got it. Thank you guys much appreciate it.
Youre welcome Michael hang in there.
And our last question comes from the line of Videla Marti.
With Hudson Bay capital.
Greetings Videla.
Gail how are you.
We're good how're you doing.
Okay.
How does your cloud your Oh, how is your friend Mad dog doing.
Mad dog.
Yep Yep.
Never mind.
Yeah.
So today.
It is a WFAN in New York Oh, Yes, that's my my Kid brother works there yes.
<unk>.
We're doing very well very well thank you.
Very good.
Wanted to ask about is you know electric.
Electric vehicles and associated infrastructure I mean, we saw the other day.
Extensive by hurts in terms of wanting to convert over their fleet choosing Tesla as their preferred provider et cetera can you give us a sense as to right now like how large fleet that you have that the addressable to be.
To electric.
Kind of how you're thinking about that over a period of time and kind.
Kind of.
Based on how the fleet runs.
Type of characteristics and features et cetera that you'll be.
Looking for Oh.
As you do the transition.
Bill are you are you thinking about our own fleet that youre asking about yes, yes, all right.
Alright, well, we've got we've got we've made a commitment actually I'm going to ask Kevin to give you. The details we've made a commitment to part of a national plan.
Two.
And a very reasonable timeframe to continue to add materially to our to our operating fleet and the on the ground to our bucket trucks to our to our other vehicles to continue to transition them to Evs and then I'll ask Kevin to give you. The details on that and then I'll come back and I want it to.
Very briefly about a pilot program that is beyond our own fleet, but a pilot program for our customers that we just got approved a couple of months ago Kevin.
Gail for our cars and Suvs, specifically for our fleet as Youre asking about we have a goal of 35%.
To be purchased of Evs between now and 2025 and then for the larger trucks for a class three trucks. So our goal is that 25% of those would be.
These by that point in time.
We also looking at some of the fleets are in store room looking at our Fort lifts and the equipment that we use for moving our products around looking.
Looking at those and have targets for those as well in.
And Kevin wanted to buy some new electric motorcycles from Harley, but we'll talk about that later.
[laughter].
I'll always pushing Gail.
And then vedula.
We just got approved a pilot program from the Wisconsin Commission.
We're in the very early stages will talk more about it as we as we rollout some of these options for our customers, but essentially the pilot program is to help.
The afforded with the affordability for particularly a large commercial customers hotels et cetera, the affordability of installing charging stations.
That program is again just now in the earliest stages and we will talk more about that as we get some customers to sign up but early early on as our key account folks talk to our large customers. There are some significant interest in moving forward with putting EV charging stations.
And offices hotels parking lots, etc, I hope that responds to your question Vedula.
Gil.
Real quick.
Our fleet is one but we're also working with large block of our large customers and the biggest opportunity is our large customers that are looking at their fleets not just our internal fleet, but that goes hand in hand, with what Gail shared with a pilot that we're working on.
Thank you for your question.
Thank you very much.
Terrific. Thank you vedula, well, ladies and gentlemen that concludes our conference call for today. Thanks, So much for participating and for all your good questions. Do you have any other questions feel free to contact Beth Straka. She can be reached at 4142 to 14639, thanks, everybody. So long.
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Yeah.
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