Q4 2021 Xcel Energy Inc Earnings Call
Please standby were about to begin.
Good day, everyone and welcome to <unk> Energy's year end 2021 earnings Conference call Today's conference is being recorded.
<unk> will only be taken from institutional investors reporters can contact media relations with inquiries and individual investors can and others can reach out to Investor relations.
And now at this time I'd like to turn the call over to Mr. Paul Johnson, Vice President Treasurer, and Investor Relations. Please go ahead Sir.
Good morning, and welcome to XL Energy's 2021 year end conference call. Joining me today are Bob Frenzel, Chairman, President and Chief Executive Officer, Brian Van Abel Executive Vice President and Chief Financial Officer. In addition, we have others from our management team here to help answer.
For any questions you might have.
This morning, we will review, our 2021 results and share our recent business and regulatory developments.
Slides that accompany today's call are available on our website.
That's where my mind are some of the comments made during today's call may contain forward looking information significant factors that could cause results to differ from those anticipated are described in our earnings release and our.
The SEC filings.
Today, we will discuss certain metrics that are non-GAAP measures information on the comparable GAAP measures and reconciliations are included in our earnings release and with that I'll turn it over to Bob.
Thank you Paul and good morning, everyone.
Before we walk through year end results I want to reflect on the devastating wildfires that tore through Boulder County, Colorado, just before the new year.
It's been a long four weeks since the historic tragedy ravaged our communities and resulted in two people, losing their lives and over 1200 homes and buildings being destroyed or damaged.
Our hearts and thoughts are with all members of these communities lost their homes suffered damage or were displaced including 17 of our own employees and their families.
I'm truly grateful for our hundreds of employees contractors and partners.
Exercise incredible diligence in keeping each other and our customers safe, while working around the clock to get the lights and the heat back on.
Specially over a holiday weekend with below zero temperatures and in more than a foot a fresh snow in some areas.
More than 100000 electric customers experienced a sustained outages services largely restored within 48 hours.
Our wildfire protocols required that we turn off natural gas service to over 13000 customers as a safety precaution.
And once it was safe our employees with mutual aid assistance with door to door to manually relight pilot lights, restoring service within just three days.
In addition to our crews I want to extend my heartfelt thanks to our many employees and community members, who volunteered alongside emergency responders handy.
Handing out space heaters in water bottles and collecting clothing donations.
I'm, so proud of how our team and partners led with compassion and deliver for our customers and communities in this extreme time of need.
Officials continue to investigate the cause of the fire. They confirm there were no down power lines in the ignition area.
Our systems remain resilient, even as 100 mile per hour winds propelled the fires.
Due to our previously approved wildfire mitigation plan and our continued focus on operational excellence.
As we always do our team rallied to the call guided by our four values connected committed costs.
Worthy and safe.
Moving onto our 2021 results we had another very successful year continuing to execute on our strategy, while delivering strong financial and operational performance.
First and foremost throughout the pandemic, we continue to provide safe reliable service to our customers and support to our employees and our communities.
Financially, we delivered EPS of $2.96, representing 17th consecutive year of meeting or exceeding our earnings guidance.
Raised our annual dividend for the 18th straight year, increasing it by 11 cents per share.
We reached constructive rate case settlements in Colorado, Texas, New Mexico, Wisconsin, North Dakota and Michigan.
We also reached constructive settlements in several additional regulatory proceedings in Colorado, including Yuri storm cost recovery.
Our resource plan and the pathway transmission project and.
And we anticipate commission decisions on these settlements by the end of the first quarter.
Our nuclear fleet remains the top performing fleet in the country achieved a capacity factor of over 92% last year.
We also installed over 300000 smart meters as part of our advanced grid program and plan to install more than 1 million in 2022.
Can you to lead the country in carbon reduction in 2021 our estimated carbon emissions were approximately 50% below 2005 levels and we remain on track to achieve 80% carbon reduction by 2030.
As planned we completed four wind farms with 800 megawatts of capacity, which provides significant environmental benefits and cost savings for our customers.
We also accelerated our timeline for transitioning out of coal and now expect to be coal free by the end of 'twenty 34.
2021 we extended our clean energy leadership to our natural gas business committing to reduce greenhouse gas emissions by 25% by 2030 and deliver net zero natural gas service by 2050 for scope, one two and three emissions.
We continue to execute on our electric vehicle vision implementing 12, new programs for our customers receiving approval for our new Mexico plan and preparing for increased levels of electric vehicle adoption across our eight states.
We were also recognized for our continued ESG leadership named among the world's most ethical companies the best veteran employers and for disability inclusion in the workplace.
And finally, we introduced the compensation base diversity metric and earned a perfect score on the corporate equality index for the sixth consecutive year.
I'm proud to lead a team that can deliver on financial operational environmental customer and diversity goals simultaneously.
Looking ahead, we're well positioned for sustainable organic growth over the next decade, including affordable renewable additions and our proposed Minnesota and Colorado resource plans.
Transmission needed to enable those carbon free resources.
And responsible transitions as we retire our coal plants.
Together, our resource plans will add nearly 10000 megawatts of renewables to our system and achieve an 85% carbon reduction by 2030.
In December we reached a settlement in our Colorado resorts plan that will accelerate the retirement of our Comanche three coal units to 2034 and advance our Pawnee plant conversion to natural gas to 2026, while maintaining plants at approximately 4000 megawatts of renewables and reduce carbon 87 per.
Set by 2030.
We also reached a settlement in our $1 $7 billion pathway transmission project in Colorado.
The pathway will provide 560 miles of double circuit $3 45 kv lines to enable 5500 megawatts of new renewables in the state.
The settlement includes a certificate of need rider recovery and a potential for a 90 mile line extension with an additional investment of $250 million to enable access to some of the richest wind resources in the region.
We expect decisions on both the Minnesota, and the Colorado resource plans and the pathway transmission project in the first quarter of the year.
As we previously as we've previously discussed our capital investment plan is not dependent on changes in federal policy. However, the energy provisions that were included in the build back better legislation would provide substantial customer benefits and help enable the clean energy transition.
Well that legislation has stalled there is some discussed there is some discussion that a more modest version could potentially move forward this year.
This could include new and extended tax credits for wind solar hydrogen.
Storage nuclear and transmission along with a direct pay option for the tax credits.
Continue to advocate for these provisions, which would be beneficial for our customers.
And as President by and has suggested there may be congressional support for energy and climate Bill with a more modest price tag than the original build back better Bill.
With that I'll turn it over to Brian .
Thanks, Bob and good morning, everyone.
We had another strong year booking $2 96 per share for 'twenty or 'twenty, one compared with $2 79 per share in 2020 .
The most significant earnings drivers for the year include the following.
Higher electric and natural gas margins and increased earnings by 41 cents per share.
Merrily, driven by riders and regulatory outcomes to recover our capital investments.
In addition, our lower effective tax rate increased earnings by <unk> 17 cents per share production.
Production tax credits lower the E. T. R. However, 56 are flowed back to customers through lower electric margin and are largely earnings neutral.
Offsetting these positive drivers were increased depreciation expense, which reduced earnings by 24 cents per share, reflecting our capital investment program.
Laurie P. D C decreased earnings by <unk> 10 cents per share largely due to placing several large wind farms into service last year.
Higher other taxes, primarily property taxes decreased earnings by <unk> <unk> per share.
And other items combined to reduce earnings by four cents per share.
Turning to sales weather adjusted electric sales increased by 1.7% in 2020 , one as the economy recovered during the pandemic.
We anticipate weather adjusted sales growth of approximately 1% in 2022.
Shifting to expenses.
Our O&M spend was flat in 'twenty 'twenty 2021 .
This continues an existing trend as we've kept our O&M flat since 2014, while adding significant renewables and capital investment.
We expect O&M will increase 1% to 2% and 2042 driven by wind farm additions increased spending on electric vehicle programs and other customer initiatives.
Turning to regulatory.
We reached an unopposed settlement in our Colorado Electric case, which will provide a net rate increase of $177 million based on an ROE of nine 3%.
Equity ratio of 55, 7% in the 'twenty to 'twenty, one test year.
Every settlement as baseline compromises and we feel this is a constructive outcome for all parties.
Hearings were completed last week, and we expect a commission decision in March.
We also reached a black box settlement in principle in our Texas Electric case, which provides a rate increase of approximately $89 million.
The agreement also accelerated depreciation life of the Coke coal plants at 434.
A commission decision is anticipated later this year.
Moving to Minnesota.
The commission approved interim rates of $247 million for electric customers and $25 million for natural gas customers.
The commission granted interim rates as requested for our natural gas operations, but lowered our electrical requests by $41 million due to the lingering impacts of the pandemic on residential customers. They.
They made similar adjustments for Centerpoint and Minnesota power.
Yes.
Reschedule schedules for both cases are included in the earnings release, and we expect commission decisions in mid 'twenty two 'twenty three.
Earlier this week, we filed a natural gas case in Colorado seeking a net rate increase of $107 million in 40 to 42 with incremental step increases of $40 million and 43% and $41 million in 2024.
The request was driven by significant capital investment for customer growth safety reliability and resiliency.
On a 10, 5% Roe.
And equity ratio of 55, 6% in the 'twenty to 'twenty two current tests here.
Our average, Colorado residential customers natural gas Bill was 24% below the national average and 40 40, among the lowest in the country.
We anticipate a commission decision later this year and final rates to be implemented in November 2022.
Shifting to earnings we have updated our 2022 guidance assumptions largely through reflect 'twenty or 'twenty. One actual results details are included in our earnings release.
In addition, we are reaffirming our 2022 earnings guidance range of $3.10 to $3 20 per share, which is consistent with our long term, 5% to 7% EPS growth objective.
With that I'll wrap up with a quick summary.
We delivered <unk> 2020 , one earnings guidance within our guidance range, the 17th consecutive year and increase our dividend for the 18th consecutive year.
We continued to execute on our steel for fuel strategy by adding 800 megawatts of wind to our system.
We remain on track to achieve 80% carbon reduction by 2030 and plan to be coal free by 2034.
We reached constructive rate case settlements in Colorado, Texas, New Mexico, Wisconsin, North Dakota in Michigan.
We also reached constructive settlements with several additional regulatory proceedings in Colorado living storm urea cost recovery, our resource plan and the pathway transmission project.
We've kept our O&M expenses flat since 2014.
We reaffirmed our 2022 earnings guidance.
We remain confident we can deliver long term earnings and dividend growth was in the upper half of our 5% to 7% objective range, we continue leading the clean energy transition and keeping bills low for our customers.
This concludes our prepared remarks, operator, we will now take questions.
Thank you, Sir if you'd like to ask a question at this time. Please signal by pressing star one on your telephone keypad. Please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again that is star one if you'd like to ask a question.
We'll take our first question from the line of ensue, Kim with Goldman Sachs.
Yeah. Thank you hope everyone's well just first question.
Maybe for Brian touching on your O&M growth forecast comment now, 1% to 2% versus 1% that you had given in the third quarter earnings could you.
Elaborate a little bit more what's driving this whether it's more demand driven or are we seeing some impact of cost inflation, that's getting impacted.
Package here and also how confident you think salaries other offsets.
Included are the drivers.
To get you to to keep you on pace.
Hey, good morning, ensue, Yeah, and if we look at our I'll start just with the updates on the the guidance changes as most are just updating.
<unk> to actuals.
When we look at 2020 year end versus the guidance. We gave in Q3 for 2020 two and that's exactly what it is for O&M, our O&M number in 2022 didn't change, but what happened is our O&M for the end of the year ended up lower than it was so what youre seeing is just an update to actuals now we have lower.
Its costs in Q4 of 2021 and also manage through some of the weather impacts that we saw in 2020 . One so we're comfortable with our our O&M guidance in 'twenty two 2022 in that 1% to 2% like I said, it's just a function of where 21 landed.
Yes, I did see that and I think the 21 levels are still below the 2019 levels. So that makes sense okay.
The second question.
The it seems like in the fourth quarter, you did a pretty healthy amount of ATM equity $350 million or so.
How does that fit into your five year plan of.
Up to $800 million that you laid out.
And just thoughts on the Frontloading it seems a lot of equity upfront chairs, especially given we.
We don't know what will happen with spill back better or any of the energy related provisions, but you have said in the past that direct pay provision could meaningfully reduce your equity needs.
Yes, no good question into it and I look at our 'twenty to 'twenty two to 'twenty 'twenty six.
Capital plans and financing plans is just that the five year and.
And so but you know we've been transparent in terms of of the incremental capital is generally financed no. We call. It 50 50, and if you think about where we were last year, meaning our our last five year plan 21 through 25.
Rolling forward, we added about $2 $5 billion of capital.
And so the way I think about is yeah, we were opportunistic in issuing some equity in Q4 and add that to $800 million of equity in our plan today, because drip was in the same in both and it was about 1.15 billion. So if you look at the tune of $1 billion of capital. We added so it's right on kind of right in line with.
How we talk about financing incremental capital. So hopefully that makes sense I know it was kind of looking plan over plan.
But you're absolutely right as we think about the potential for clean energy legislation and the opportunity that gives us that absolutely still rings true in terms of being able to significantly reduce our equity needs going forward.
If that does pass.
Or vice versa. We could you know really pronounce your accelerated investment without the need for incremental equity. So I think it gives us a lot of flexibility going forward if it does happen.
Got it thank you so much.
Next we'll go to Julien Dumoulin Smith with Bank of America.
Hey, good morning team. Thank you for the time again and.
Congrats on continued progress here, especially in Colorado I, just wanted to bring up this pathway project.
Hum panning a deal there I'm just curious if you could elaborate here on how that fits into the potential upside that you guys have articulated earlier the the half 1 billion to one that's the potential incremental for 22 to 26 and also if you could clarify the settlement. It seems like its 1.7. It is what you asked for but you also alluded.
This potential further.
Network upgrades is that something else that we should be looking for to come out of this settlement or what have you.
Hey, Julien, it's Bob Great to hear you. This morning I appreciate the interest in the Colorado pathway project. It's obviously very strategic for US as we look to transition that state to an 87% carbon reduction and greater than 80% renewables by the end of the decade.
I think if you went back and looked at the filings what we asked for was a base plan of about $1 $7 billion of capital to enable.
That almost 600 mile project.
At 1.7 also had in the filings in the original filings as we call it the an extension.
That would enable access to the best wind resources in the state I think it was it's conditional approval based on whether or not we have projects that show up in our RFP in that region, and whether we'll build it or not.
I think about the incremental capital that we laid out there's a couple of pieces in the pathway program that would take that $1 $7 billion somewhere higher. The first one is this $250 million extension and then as we've said since the outset of the pathway project.
We have to at some point ultimately interconnect all of the assets that get proposed to us in the RFP and those interconnections come with additional.
Upgrades on the transmission system to enable voltage support and stability and those may depending on the ultimate locations of the projects that are picked those could happen.
Out in the eastern Plains of Colorado, they could be more in the metroplex, we don't know exactly where that's going to happen until the final projects are pick and that's we know that will cost. Some money. We just don't know what it is and where it exactly it'll happen. So that's where the incremental capital comes from but we expect it to be needed.
Yeah, and if you can clarify that.
Well I would say and just in terms of of timing and visibility into the incremental spend like Bob said, we know what needs to happen. We just don't know the timing and type of it yet, but once we get through the RFP process. Later this year and have identified the actual resources and where they're gonna relocated whether it's wind or solar.
And then we'll have a really good visibility into what the transmission upgrades will be needed and when they'll be needed probably latter half of this five year plan early in kind of a second second five.
But maybe to clarify that further you talk about this $1 billion a half billion 1 billion transmission upside and in the current five year plan. It sounds like Youre edging towards the higher end of that incremental piece and then ultimately if I. If I can push you a little bit on this you've alluded to this in the in the remarks, I mean, whether it's Colorado or the Minnesota.
Colorado Rfps when do we get a more fully baked view on on your Capex I know you said that that's coming in the first quarter here, but it sounds like.
Considering the rfps et cetera that that may be more of an EI or even next year. This time kind of update to get them more fully flushed ya.
Yeah, I think let me answer your first question around all of that that are call. It.
In this the transmission settlement the conditional approval of that extension of $250 million. That's certainly is helpful. When we look at that half a billion two 1 billion and that's a really I mean as Bob said in his opening remarks that's.
Really goes to a very resource rich wind region, that'd be beneficial beneficial for our customers and really the party just wanted to make sure that we get projects, appearing there and that's why it's conditional approval. So if you assume that's already part of the 501 billion you could see how there is you know it will be incremental opportunities I'll push that number closer.
To the the midpoint or higher.
On your second question around really timing, so what's going to happen will get decisions in both Minnesota and Colorado on the resource plans from the commission in Q1, and then we'll move into the RFP fees, which is likely going to be.
234 months beyond those decisions and then we have to work through that process, So Colorado could move a bit quicker in terms of getting clarity around Q4.
From Colorado is do we think about that process.
Minnesota might be a little bit later than that but there'll be opportunities as we work through it and get through the RFP fees and make filings with the commission, where there'll be more visibility.
Kind of throughout the process.
Got it alright look for some crumbs I got it. Thank you guys very much I appreciate it.
That's really.
Good luck.
Alright next question will come from the line of Jeremy Tonet with J P. Morgan.
Hi, good morning.
Hey, good morning.
Just wanted to kind of start off with with MISO <unk> process here and just seeing if you could share any other thoughts on the timeline and what is the potential for the process to bear fruit.
For the current plan or where could that come in in the future.
Speaker 1: that come in in the.
Speaker 2: Hey, Jeremy, it's Bob. Thanks for the question. You know, similar to Colorado, we're really excited about the opportunity for transmission expansion in all of our regions, as it will enable additional renewable penetration that we can deliver to our customers. In particular, in MISO, you know, we've been very active with the MISO Steering Committee and the MISO Transmission Owners
Hey, Jeremy it's Bob Thanks for the question you know similar to Colorado are really excited about the opportunity for transmission expansion and all of our regions as it will enable additional renewable penetration that we can deliver to our customers in particular in MISO.
You know we've been very active with the MISO steering committee in the MISO transmission owners.
Speaker 2: Recently, we've agreed to cost allocation mechanisms across MISO and new proposed tariffs, which we expect to deliver next month, which puts us on a schedule.
Recently, we've agreed to.
Cost allocation mechanisms across MISO, and new proposed tariffs, which we expect to deliver.
Deliver next month, which puts us on a schedule for MISO to release, what they would say is <unk> 2021 by I'll call it mid year.
Speaker 2: for MISO to release what they would say is MTEP 2021 by, I'll call it mid-year.
Our expectation for <unk> 'twenty, one is a subset of the projects that are included in micros future. One. So if you go back to the original source document MISO released three futures the world we've been largely talking about future one in future three future one was about a $30 billion transmission expansion in the upper Midwest.
Our throughout MISO region.
And then future three was really the other goalpost was about $100 billion investment needed to enable a significant carbon reduction across all of MISO footprint, our expectation for future. One is that as a company, we're probably likely to get about 20% of the transmission opportunities that are <unk>.
In future one we expect <unk> 21 to be a subset of future ones. So a smaller subset in the $30 billion worth of projects.
And Jeremy it's probably important to point out too that we don't have any material MISO transmission in our first five year forecast.
Okay.
Okay.
Got it that's a very helpful. Thank you for that and then.
Maybe just pivoting over to Minnesota, and the already proceeding there I was wondering if you might be able to provide any comments or thoughts there and does it does this provide any indications or takeaways related to the Minnesota rate case.
Yeah, It's Bob I am not certain I would I would put a lot of linkage between those two proceedings you know as I think about Uri and the Minnesota case I think about.
The unprecedented event that happened last February .
And it's not unexpected to have parties.
Question the investments that we made to enable our system reliability at the time and in Minnesota in particular working through that regulatory proceeding we filed what I would say is extensive testimony in just last week, we filed rebuttal testimony, we obviously disagree with the positions of the O E. G in the in the depart.
<unk> on the disallowances, they proposed and look we'll continue to work with the commission through the proceeding, but I wouldn't put a lot of linkage between a uri proceeding and the Minnesota electric or gas cases.
Got it understood just a last one from me here, if you might be I'll provide more color on the process for converting to natural gas by 2026.
What the potential cost for conversions could be and over what timeframe should we expect this to occur.
Yeah, I expect that conversion cost to be relatively small and that's really one of the reasons why we proposed to convert Pawnee versus Comanche.
Just because you yet the conversion costs are that and write in 2020 six six so I expect the conversion is really to me that in the back half of this five year forecast. So that's really you know assuming we get approval forward. We think it is certainly the right path to ensure that we have system reliability with converting the pawnee to gas and having that.
And in terms of conversion it is not not significant.
Got it that's helpful I'll leave it there thanks.
Once again, everyone star one if you'd like to ask a question. We'll next go to Doug <unk> Chopra with Evercore ISI.
Hey, good morning team. Thanks for taking my question Bob.
Bob maybe just to kick things off I have two questions just on the macro or appreciate the commentary on build back better sorry, if I missed it but you didn't touch.
Such an E M T.
Just wondering if it's you know I know industry sort of leaders in the you know in the last few weeks last few months, it's sort of lobbied against it is that something that you think.
Perhaps it comes out.
You know in the process of negotiations or what are you.
Latest thoughts there.
Hey, Josh good morning.
<unk>.
Thanks for the question you know, let's see I think it really depends is what is the size assuming something can get done and there is seems to be pretty good support for the clean energy provisions, but the question is then what is the pay for and what's the size of the clean energy provisions right you you've heard around this this number of a five.
Plus billion dollar climate provision package.
Being put forth a theres also seems to be pretty good support for the Medicare slash prescription drug.
A change which is a revenue raiser of about $300 billion. So I really think you know I haven't.
Certainly from what we have heard is a M. T is not off the table I think it all depends on what size of the package that they can get support from I mean for US certainly if the climate provisions.
We're past and and bought like Bob said in his opening remarks, we strongly support those clean energy provisions. They are great for our customers in terms of driving this clean energy transition, meaning they'll do it more affordably.
But if a M. T wasn't included in that that is just better for us as you know we talk about the overall impacts of the clean energy provisions plus a M T.
But if we actually just didn't have a empty that improves our cash flow metrics, probably by about 15 basis points. So relatively minor, but I think to your question is more to come as we think about how this could play out and really how they look paying for the overall smaller package.
Greg I'd just add one more thing to what Brian said is one I think we've concluded that the a M. P in and of itself isn't all that impactful for XL energy as it allows the use of existing renewable credits to fund. It I think the other thing that we would look to though as an industry and mitigating the A&P.
Is is really the fact that on one hand, the federal government is giving you a lot of tax credits to incentivize development of renewable assets.
And then on the other hand, if you have an E M. T funding requirements, you're almost nullifying some of the incentives that come with those tax credits. So we're I think the the discussion would go with lawmakers is is can we use tax credits are funded in the clean energy provisions to offset the A&P provisions.
And ultimately if you think about a M T in our industry.
Paid for by our customers and so it's just a it's an increase in tax to our existing customers and I think that would be an area that we would negotiate with with lawmakers as well so.
It's still included in what we see as provisions in the Bill back better plan, but all subject to negotiation.
Got it. Thank you for that color and then just one quick clarification, if I may on the MISO <unk> process.
You know you you mentioned mid 2022, I think you know we've seen some bits around me.
Did that move or are we still expecting some sort of capex announcements project announcements in may.
Well I think may is probably the target I might've been hedging a bit by saying it could slip into June but you know I think if we're talking about maybe a month tops and I'm not saying, it's gonna slip I just I was hedging my own comments.
Thanks, So much guys I appreciate the time today.
Alright next question will come from Stephen Byrd with Morgan Stanley .
Okay.
Hi, its Dave Arcaro on for Steven Thanks, So much for taking my question.
Hey, I was wondering you know in Colorado have you.
Abuse of fire risk changed in light of the catastrophic tires, we saw and wondering if there are adjustments that you might make or consider to your wildfire mitigation plans in the state.
Hey, Steve Thanks for the question.
Obviously, a tragedy in Colorado in the martial fire and with everything that we learned from it we've been focused as a company on climate driven resiliency for a long time, and we followed in Colorado, Our wildfire mitigation program back in 2019, and we're executing under that program I'm sure there's always ways that we.
We can learn from these tragedies and improve the risk for the customers for sure.
The Commission open a proceeding and we're going to actively participate with them on exploring your exact question on things that are in the approved wildfire plan and things we might want to consider in the future.
But that we're early stages in that.
Understood Thanks for that color.
And then was curious on on sales growth in the quarter saw weather normal Ritchie sales down a decent amount and I was just wondering if you might be able to comment around that and just a comfort level with the 2022 sales growth outlook, where you sit today.
Yeah, I think I got to look at it over the balance of the year of 2021 .
If you recall going into the year, we thought sales growth was going to be about 1%.
We ended up ended at 1.7% on a weather normalized basis.
And really our CNI forecast was pretty close what was higher than expected was on the residential side and what we saw is that residential stickiness through most of 'twenty 'twenty. One. So I think you saw some of that give back in Q4, a little bit that weakness when you look over the Q over Q numbers. So.
As I think about 2022 that was our expectation even going into 2020 . Two continued C&I strength now are our economies are our service territories have stronger forecasted GSP than the national GDP. We are forecasting strong job growth. So I feel good on the C&I side than we do.
Those residential numbers to decline a little bit as you go to return to a more a little bit more call. It returned to normal. So we do feel comfortable with where we're sitting for 2022 on the overall basis with stronger C&I sales offsetting some of the residential decline.
They're pointing to make up to is that we did have some pretty extreme weather in the fourth quarter and while we feel comfortable with our weather normalization process when the weather.
Extremes get kind of a.
More extreme it makes it a little bit more difficult to determine the weather versus the sales impacts so there could be a little bit of noise there.
Got it okay I appreciate that thanks, so much.
All right next we'll go to Paul Fremont with Mizuho.
Great.
<unk>.
I just wanted to sort of look at the additional equity issuance and is it fair to sort of infer that with that additional equity issuance that you would at least be somewhat into the incremental capex spend that you guys have identified.
On a go forward basis.
Hey, Paul Good morning, I think if youre talking about the ATM that we did in Q4 are the way I think about it is is the plan and the 22 to 26 plan that we have in front of US is is the equity needed for that plan and really the equity.
Last year was related to that last five year plan and I'll explain it a little bit.
Is no when we roll rolled forward five year plans, we added two and a half a billion dollars of capital and for us credit quality and balance sheet strength is important and we've always talked about funding incremental capital with about 50% equity and if you kind of look at what we did at the end of Q4 plus eight.
100 million gets you just under 50%.
Equity funding when we look at kind of the the two plants together. So I think we're comfortable there for US now correct like I said credit quality and credit strength is important at XL and our operating companies. It is important to have access to capital.
And so when you look at our current five year plan going forward right that the then equity financings hold true and you know certainly like I said, if something happens on the clean energy provisions federally we will revisit those as that gives us a lot more flexibility in terms of financing it Paul it's important to recognize what we did in 2021.
It was always part of our 'twenty one plan. So it's not any change to what we had envisioned going forward.
Okay.
And then.
In the past I guess, you guys have talked about contract buyouts.
Seems to be sort of less focus on that but can you give us any update on contract buyout opportunities or do you see any with it within that.
'twenty two to 'twenty six period.
Yeah, I don't think I wouldn't characterize it characterize it as any less focus.
Our corporate development team reports directly to me.
And we're in constant discussions with developers.
I think a little bit is what you see is we're in too you know and resource plans in our two major jurisdictions.
Working through those proceedings, and then we have rfps coming up and that could be an avenue for developers to bid in potential opportunities within those rfps and I think you know it.
It would be I think our commissions given that we have those rfps coming up that that that's the preference. They had if you know sitting here today, if we had any project springboard they'd prefer to see them in those rfps, but we always focus on it I've talked and I've always talked about it as being opportunistic.
And it'll be opportunistic because it has to work for our customers, we won't bring forward an opportunity to our commissions if it doesn't save our customers money.
You know Paul we've been successful in this strategy I think we've deployed more than a half a billion dollars in capital in this strategy and.
Well you know I think theres another half a billion two 1 billion more opportunities for us, but they are as Brian said very opportunistic.
Likely to see some of that as we go through the resource planning processes and men in Colorado over the next year or so.
Great and then my last question when you talk about sales growth of 1%. This year on a normalized basis beyond this year would you what would be sort of.
Uh huh.
An expectation of a more normalized expectation.
For the outer years.
I think longer term it's.
Beyond this year as we continue to recover our sales are still below where we were pre COVID-19 levels I think longer term, it's relatively flattish with the exception as EV adoption as that starts to increase in pick up we'll start to see some sales growth we see our EV goal.
20% of ease in our service territory by 2030, adding about seven tenths of a percent over a decade. So I think it's relatively flat until we start to see some more EV penetration.
In larger numbers over the longer term.
Great. That's it thank you very much.
Alright. Your next question will be from Travis Miller with Morningstar.
Good morning, everyone. Thank you.
Travis Good morning, Josh.
Good morning, you answered my question on the Colorado wildfires, but just one quick follow up to that.
Have you heard or been involved in discussions that.
Kind of give more momentum from the whole clean energy.
<unk> and climate change and in such following the wildfires has that accelerated or enhanced some other clean energy discussion.
Hey, Travis it's Bob look I think our stakeholders in Colorado, including the company itself has been very aggressively pushing our clean energy transition in fact, our goals in Colorado have us reducing our carbon footprint by 87% by the end of the decade on the electric side.
And just in November we committed on the natural gas side to reduce emissions on the natural gas business by the end of the decade, and then be net zero by mid century in the gas business. So I think the conversations in Colorado continue on that front with that as the backdrop.
I've seen the articles in the paper that talk about climate change and things like that but I think our the path. We're on is absolutely aligned with the policyholders in stakeholders in Colorado. So.
There may be increased discussion, but I think the the trajectory that we're on is the right one.
Sure Okay, Great and then second question staying in Colorado there.
Earned Roe for.
For the year were in the low 8% range once you get that electric rate case in there.
In the first quarter early second quarter does that jump up does that get you to a.
A 9%.
Type range closer to the allowed or is there something in Colorado the rate structures et cetera, We're just very very difficult for you to get to the nine plus percent.
Hey, Travis It you know I don't see significant improvement into 2022, one is no rates won't be effective until April on the electric side, you did see us file a gas case here very very recently.
And we're still you reduce face regulatory lag there.
With the test year on on the electric side really being kind of a mid year 'twenty. One so we'll continue to work with our stakeholders and the commissions on.
On that side, but I don't see that the ROE improving significantly at least in 2022.
Okay.
Is it the historical test year that just makes a big difference 100 basis points or so.
I mean, I haven't done that math, but you know the historical test year, particularly when you are investing significant amount of capital into the system, helping drive this clean energy transition.
And yet in that that historical test year does does put some pressure on your earned ROE is.
Sure Okay makes sense.
Thanks, So much that's all I had.
Yeah.
Alright, it looks like there are no further questions at this time, so I'd like to turn it back over to Mr. Brian <unk> for any additional or closing remarks.
Yes. Thank you all for participating in our earnings call. This morning, please contact our Investor relations team with any follow up questions.
And that does conclude today's conference we thank everyone again for their participation.
Okay.
Okay.
Yeah.
Okay.
Yeah.
Yeah.
Yeah.
[music].
Yes.
Okay.
Okay.
Yes.
Yeah.
Yes.
Yeah.
Yeah.
Yeah.
Hum.
[music].
Yeah.
Okay.
[music].
Yeah.
Yeah.
Okay.
[music].
Yeah.
Yeah.
Yeah.
[music].
Okay.
Yeah.
Yeah.
Okay.
Okay.
Yes.
Okay.
[music].
Yeah.
Yeah.
Yeah.
Okay.
Yeah.
Yes.
[music].
Yeah.
Yeah.
Yeah.
Yeah.
Yes.
Yeah.
Yeah.
[music].
Hmm.
[music].
Yeah.
[music].
Yeah.
[music].
Yeah.
Okay.
[music].
Yeah.
Yeah.
Yeah.
[music].
Okay.
Yeah.
Yeah.
Okay.
Okay.
Yeah.
Yes.
Okay.
[music].
Yeah.
Yeah.
Okay.
Yeah.
Yeah.
Yes.
[music].
Yes.
[music].
Okay.
Yes.
Yeah.