Q4 2021 Unitil Corp Earnings Call
Speaker 1: Thank you for speaking by. Welcome to the Fiscal Year 2021 Unitel Earnings Conference Call.
Welcome to the fiscal year 2021, Ernie Unitil earnings Conference call.
Speaker 1: At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star 0. I would like to hand the conference over to your speaker today, Todd Diggins, Director of Finance. Please go ahead.
At this time all participants are in a listen only mode. After the speaker presentation, there will be a question answer session.
Ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded and if you require any further assistance. Please press star zero I don't want like to hand, the conference over to your speaker today.
Diggins director of Finance. Please go ahead.
Good morning, and thank you for joining us to discuss Unitil Corporation's fiscal year 2021 financial results speaking on the call today will be Tom Meissner, Chairman, President and Chief Executive Officer, and Barb Hebert Senior Vice President and Chief Financial Officer and Treasurer.
Speaker 2: Good morning and thank you for joining us to discuss Unitell Corporation's fiscal year 2021 financial results. Speaking on the call today will be Tom Meisner, Chairman, President and Chief Executive Officer, and Barb Hebert, Senior Vice President, Chief Financial Officer and Treasurer.
Speaker 2: We will discuss financial and other information on this call. As we mentioned in the press release, announcing this call, we have posted information, including a presentation, to the investors section of our website at Unitil.com. We will refer to that information.
We will discuss financial and other information on this call as we mentioned in the press release announcing this call.
Allstate information, including a presentation to the investors section of our website at <unk> Dot com.
We will refer to that information during this call.
Speaker 2: Moving to slide two, the comments made today about future operating results, or events, are forward-looking statements under the safe harbor provisions of the Private Security's litigation reform act of 1995.
Moving to slide two the comments made today about future operating results or events are forward looking statements under the safe Harbor provisions of the private Securities Litigation Reform Act of $19 95.
Speaker 2: forward-looking statements inherently involve risks and uncertainties that can cause actual results to differ materially from those predicted.
Forward looking statements inherently involve risks and uncertainties that can cause actual results to differ materially from those predicted.
Speaker 2: Statements made on this call should be considered together with cautionary statements in other information contained in our most recent annual report on form 10K in other documents we have filed with or furnished to the Securities and Exchange Commission. Forward-looking statements speak only as of today and we assume no obligation to update them.
Statements made on this call should be considered together with cautionary statements and other information contained in our most recent annual report on Form 10-K , and other documents, we have filed with or furnished to the securities and Exchange Commission forward looking statements speak only as of today and we assume no obligation to update them.
Speaker 2: This presentation contains non-GAAP financial measures. The accompanying supplemental information more fully describes these non-GAAP financial measures and includes a reconciliation to the nearest GAAP financial measure.
This presentation contains non-GAAP financial measures the accompanying supplemental information more fully describe these non-GAAP financial measures and includes a reconciliation to the nearest GAAP financial measures.
Speaker 3: The company believes these non-GAF financial measures are useful in evaluating its performance. With that, I will now turn the call over to Chairman, President, and CEO Tom Micra. Thanks, Todd. And good morning, everyone. Thanks for joining us today.
The company believes these non-GAAP financial measures are useful in evaluating its performance with that I will now turn the call over to chairman President and CEO , Tom Meissner. Thanks.
Thanks Todd.
And good morning, everyone. Thanks for joining us today.
Speaker 3: I'm going to begin today's discussion on slide three, which provides a brief overview of the unit of business strategy.
I'm going to begin todays discussion on slide three which provides a brief overview of the <unk> business strategy.
Speaker 3: Unitil is a pure play distribution utility in New England, serving some of the most desirable areas along the New Hampshire and Maine Sea Coast.
Unitil is a pure play distribution utility in new England, serving some of the most desirable areas, along the new Hampshire, and Maine Seacoast.
Speaker 3: Being a dedicated distribution utility, we do not own generation assets, nor do we have any of the large environmental obligations that often accompany them.
Being a dedicated distribution utility, we do not own generation assets, nor do we have any of the large environmental obligations that often accompany them.
In addition, our earnings are not impacted by commodity cost fluctuations as a result of approved recovery mechanisms.
Speaker 3: In addition, our earnings are not impacted by commodity cost fluctuations as a result of approved recovery mechanism.
Speaker 3: We have a diverse mix of residential, commercial, and industrial customers across the states we serve, and have about 25% more electric customers than gas.
We have a diverse mix of residential commercial and industrial customers across the states, we serve and have about 25% more electric customers and gas.
Speaker 3: Through our regulatory strategies, we expect over 80% of our customers to be served under decoupled rate mechanisms by year end, which minimizes revenue fluctuations due to weather, energy efficiency, or business cycle.
Through our regulatory strategies, we expect over 80% of our customers to be served under decoupled rate mechanisms by year end, which minimizes revenue fluctuations due to weather energy efficiency or business cycles.
Speaker 3: Moving now to slide four, today we announced strong results for fiscal year 2021, with net income of $36.1 million in earnings of $2.35 per share.
Moving now to slide four.
We announced strong results for fiscal year 2021, with net income of $36 1 million and earnings of $2 35 per share.
Speaker 3: This represents an increase of 20 cents per share, or 9.3% over 2020, and reflects higher adjusted growth margins for both the electric and the gas division.
This represents an increase of <unk> 20 per share or nine 3% over 2020 and reflects higher adjusted gross margins for both the electric and the gas divisions.
Briefly looking ahead I'd like to reaffirm our long term guidance of 5% to 7% growth in earnings per share with earnings growth expected to be above the high end of that range over the next two years.
Speaker 3: Briefly looking ahead, I'd like to reaffirm our long-term guidance of 5-7% growth and earnings per share, with earnings growth expected to be above the high end of that range over the next two years.
Speaker 3: Touching on a few strategic updates, operationally we continue to exceed industry standards with a strong focus on continuous improvement.
Touching on a few strategic updates operationally, we continue to exceed industry standards with a strong focus on continuous improvement.
Speaker 3: Customer satisfaction remains at an all-time high, and we were once again recognized with an EEI Emergency Response Award, reaffirming our best-in-class storm preparedness in restoration practice.
Customer satisfaction remains at an all time high and we were once again recognized with an emergency response award reaffirming our best in class storm preparedness and restoration practices.
Speaker 3: Later on the call, Bob will provide a refresh of our investment plan. But I wanted to mention that we continue to have robust investment opportunities, and we forecast long-term rate-based growth of 6.5 to 8.5%.
Later on the call Bob will provide a refresh of our investment plan, but I wanted to mention that we continue to have robust investment opportunities and we forecast long term rate base growth of six five to eight 5%.
Speaker 3: Finally, as noted on previous calls, we continue to embed sustainability into all aspects of our business strategy.
Finally as noted on previous calls we continue to embed sustainability into all aspects of our business strategy.
Speaker 3: We see this as a key underpinning to our long-term success. Our 2021 Corporate Sustainability Report can be viewed on our company website.
We see this as a key underpinning to our long term success.
Our 2021 corporate sustainability report can be viewed on our company website.
Speaker 3: Now with that, I'll pass it over to Bob. We'll provide further detail on our 2021 results. Thank you, Tom.
Now with that I'll pass it over to Bob who will provide further detail on our 2021 results.
Thank you Tom and good morning, everyone.
Speaker 4: I will begin on slide five. As Tom mentioned, this morning we announced fiscal year 2021 net income of $36.1 million, and earnings per share of $2.35. Net income increased by $3.9 million, or 20 cents per share, compared to fiscal year 2020.
I will begin on slide five.
As Tom mentioned this morning, we announced fiscal year 2021, net income of $36 1 million.
And earnings per share of $2 35.
Net income increased by $3 9 million or <unk> 20 per share compared to fiscal year 2020.
Speaker 4: The increase in earnings reflects higher electric and natural gas-adjusted gross margins, partially offset by higher operating expenses.
The increase in earnings reflects higher electric and natural gas adjusted gross margins, partially offset by higher operating expenses.
Turning to slide six.
Speaker 4: For the 12-month-sended December 31, 2021, electric-adjusted gross margin was $97.4 million, an increase of $4.5 million, or 4.8%, compared to fiscal year 2020.
For the 12 months ended December 31, 2021 electric adjusted gross margin was $97 4 million, an increase of $4 5 million or four 8% compared to fiscal year 2020.
Speaker 4: The $4.5 million increase was driven by higher rates and customer growth.
The $4 $5 million increase was driven by higher rates and customer growth are.
Speaker 4: Our commercial and industrial unit sales increased by 3.5% reflecting improving economic conditions in our service territories.
Our commercial and industrial unit sales increased by three 5%, reflecting improving economic conditions in our service territories.
Speaker 4: Turning to slide seven. For the 12-month-send in December 31st, 2021, gas-adjusted gross margin was $133.1 million in increase of 10.5 million or 8.6% compared to fiscal year 2020.
Turning to slide seven for.
For the 12 months ended December 31, 2021 gas adjusted gross margin was $133 1 million, an increase of 10 5 million or eight 6% compared to fiscal year 2020.
Speaker 4: The increase in gas-adjusted gross margin reflects higher rates in customer growth of $9.4 million. And $1.1 million due to the favorable effect of colder winter weather.
The increase in gas adjusted gross margin reflects higher rates and customer growth of $9 4 million and $1 $1 million due to the favorable effect of colder winter weather.
Speaker 4: Despite the caller peak heating system for the year, 2021 was about 8% warmer than normal.
Despite the colder peak heating system for the year 2021 was about 8% warmer than normal.
Speaker 4: Moving on to slide 8, we provide an earnings bridge comparing 2021 results to 2020.
Moving on to slide eight we provide an earnings bridge comparing 2021 results to 2020.
As I noted 2021, adjusted gross margin increased by a combined $15 million, primarily as a result of higher distribution rates and customer growth in both our electric and gas operations.
Speaker 4: As I noted, 2021 adjusted gross margin increased by a combined $15 million, primarily as a result of higher distribution rates and customer growth in both our electric and gas operations.
Speaker 4: Operating and maintenance expenses increased by $3 million attributable to higher labor costs of $1.6 million and higher utility operating and maintenance costs of $1.4 million.
Operating and maintenance expenses increased by $3 million attributable to higher labor costs of $1 6 million and higher utility operating and maintenance costs of $1 4 million.
Depreciation and amortization increased by $5 million, reflecting higher levels of utility plant in service and higher amortization expense.
Taxes other than income taxes increased by $6 million, primarily due to higher local property taxes on higher utility plant and service and slightly higher payroll taxes.
Speaker 4: Interest expense increased by $1.8 million, reflecting interest on higher long-term debt balances.
Interest expense increased by $1 $8 million, reflecting interest on higher long term debt balances.
Partially offset by lower rates on lower levels of short term borrowings.
Speaker 4: other expense decreased by $0.6 million, largely due to lower retirement benefit and other costs.
Other expense decreased $5 $6 million.
Largely due to lower retirement benefit and other costs.
Speaker 4: Lastly, income tax is increased by $1.3 million as a result of higher pre-tax earnings.
Lastly income taxes increased by $1 3 million as a result of higher pre tax earnings.
Turning now to slide nine.
Speaker 4: Both the Unitil Energy and Northern New Hampshire rate cases are progressing well. As a reminder, both filings include full revenue decoupling proposals, multi-year rate plans, and temporary rate relief.
The Unitil energy and northern New Hampshire rate cases are progressing well as a reminder, both filings include full revenue decoupling proposals multiyear rate plans and temporary rate relief.
Speaker 4: I am pleased to announce that all parties in the Unitil Energy case have reached a comprehensive agreement in principle on final rates.
I am pleased to announce that all parties in the Unitil energy case have reached a comprehensive agreement in principle on final rates.
Speaker 4: Once the settlement agreement is filed, it will be subject to commission approval.
Once the settlement agreement as filed it will be subject to commission approval.
Speaker 4: We currently have hearings scheduled for February 14th and 15th, at which time we will present the settlement for the commission's consideration.
We currently have hearings scheduled for February 14th and 15th at which time, we will present the settlement for the Commission's consideration.
Speaker 4: On slide 10, as we have done in the past, we have updated our projected five-year investment plan.
On slide 10, as we have done in the past we have updated our projected five year investment plan.
Speaker 4: Our planned investments, which now total about $755 million, will ensure the safety and reliability of our existing distribution system, enable system growth, advance our grid modernization initiatives, and enhance customer experience.
Our planned investments, which now total about $755 million will ensure the safety and reliability of our existing distribution system.
Enable system growth advanced our grid modernization initiatives and enhanced customer experience in.
Speaker 4: In 2022, we expect to invest approximately $140 million in our utility infrastructure.
In 2022, we expect to invest approximately $140 million in our utility infrastructure.
Speaker 4: Looking forward, there remain potential upside revisions to our investment plan for electric vehicle infrastructure, additional grid modernization, and supply-side projects such as distributed energy resources and renewable natural gas projects.
Looking forward there remain potential upside revisions to our investment plan for electric vehicle infrastructure.
Additional grid modernization and supply side projects, such as distributed energy resources and renewable natural gas projects.
Speaker 4: We continue to anticipate long-run annual rate-based growth in the range of 6.5 to 8.5 percent, with our investment mix becoming increasingly balanced between gas and electric operations.
We continue to anticipate long run annual rate base growth in the range of six 5% to eight 5%.
With our investment mix, becoming increasingly balanced between gas and electric operations.
Speaker 4: Slide 11 provides the five-year financing plan supporting our capital investment portfolio.
Slide 11 provides the five year financing plan supporting our capital investment portfolio.
Speaker 4: We expect roughly two-thirds of our capital investments to be funded by cash flow from operations less dividends.
We expect roughly two thirds of our capital investments to be funded by cash flow from operations less dividends.
Speaker 4: The remainder will be funded through a combination of debt and equity.
The remainder will be funded through a combination of debt and equity.
Speaker 4: Our follow-on equity offering in the third quarter of 2021 demonstrated our commitment to maintaining a strong balance sheet and supporting our investment-grade credit met
Our follow on equity offering in the third quarter of 2021 demonstrated our commitment to maintaining a strong balance sheet and supporting our investment grade credit metrics.
Speaker 4: We continue to target a dividend payout ratio range of 55% to 65%, enabling us to reinvest earnings and reduce external financing requirements.
We continue to target a dividend payout ratio range of 55% to 65%, enabling us to reinvest earnings and reduce external financing requirements.
Turning to slide 12.
Speaker 4: We are pleased that the company's Board of Directors recently declared a quarterly dividend of $0.39 per share or $1.56 per share on an annualized basis.
We are pleased that the company's board of directors recently declared a quarterly dividend of <unk> 39 per share or $1 56 per share on an annualized basis.
Speaker 4: For several years, the company had increased the dividend by $0.02 per share on an annualized basis in an effort to move the payout ratio toward our target range.
For several years the company has increased the dividend by <unk> <unk> per share on an annualized basis in an effort to move the payout ratio toward our target range.
Speaker 4: This year's annualized increase of $0.04 per share reflects the company's confidence in our ability to execute on our strategic and financial plans.
This year's annualized increase of <unk> <unk> per share reflects the company's confidence in our ability to execute on our strategic and financial plans.
Speaker 3: we will evaluate further accelerating our dividend growth in future years as the payout ratio moves further into our target range. And with that, I will turn it back over to Tom. Great. Thanks, Bob. Turning now to slide 13. We've seen strong customer growth in recent years, and as I've mentioned before, we operate in service areas that have seen incredible economic development.
We will evaluate further accelerating our dividend growth in future years as the payout ratio moves further into our target range and with that I will turn it back over to Tom.
Thanks, Bob.
Turning now to slide 13.
We've seen strong customer growth in recent years and as I've mentioned before we operate in service areas that have seen incredible economic development.
Speaker 3: Further supporting this unique growth opportunity is the potential for customer conversions to natural gas, as the states we serve have the highest dependency on fuel oil for home heating in the nation.
Further supporting this unique growth opportunity is the potential for customer conversions to natural gas as the states. We serve have the highest dependency on fuel oil for home heating in the nation.
Speaker 3: By increasing the penetration of natural gas, we can both reduce emissions and save customers money.
By increasing the penetration of natural gas, we can both reduce reduce emissions and save customers money.
Sure.
Moving on now to slide 14.
Speaker 3: We procure a diverse and reliable supply of natural gas in order to meet the demands of our growing customer base.
We procure a diverse and reliable supply of natural gas in order to meet the demands of our growing customer base.
Speaker 3: Unitil maintains pipeline capacity and underground storage capacity originating from both the North and the South.
Unitil maintains pipeline capacity and underground storage capacity originating from both the north and the south.
Speaker 3: From the north, we have interconnections with Portland Natural Gas Transmission and the Maritime to Northeast Pipeline, as well as capacity on pipelines further upstream.
From the North we have interconnections with Portland, natural gas transmission, and Maritimes and northeast pipeline as well as capacity on pipelines further upstream.
Speaker 3: From our south, we have interconnections with Tennessee Gas Pipeline Company.
From ourselves, we have interconnections with Tennessee gas pipeline company.
Speaker 3: We supplement pipeline and storage capacity with delivered peaking supplies arranged in advance of the winter heating season to ensure we have adequate supply to meet our customers' needs, even on the coldest New England days.
We supplement pipeline and storage capacity with delivered peaking supplies arrange in advance of the winter heating season to ensure we have adequate supply to meet our customers' needs even on the coldest new England days.
Speaker 3: In fact, January will likely be a record month for gas sales due to our growing customer base as well as colder than normal weather. And we can confidently say we have adequate supplies to meet customer demand throughout our service areas for the winter period.
In fact January will likely be a record month for gas sales due to our growing customer base as well as colder than normal weather and we can confidently say, we have adequate supplies to meet customer demand throughout our service areas for the winter period.
Speaker 3: Turning to slide 15, as I touched on earlier, we continue to excel operationally and strive to continuously improve.
Turning to slide 15, as I touched on earlier, we continue to excel operationally and strive to continuously improve.
Speaker 3: Both our electric reliability and our gas emergency response widely surpass industry standards. And we were awarded the Edison Electric Institute's Emergency Response Award for the fourth time in five years.
Both our electric reliability and our gas emergency response widely surpassed industry standards and we were awarded the Edison Electric Institute Emergency response award for the fourth time in five years.
Speaker 3: Additionally, the American Gas Association has recognized us for our outstanding emergency response and accident prevention.
Additionally, the American gas Association has recognized us for our outstanding Emergency response and accident prevention.
Speaker 3: These awards were a reflection of our tireless dedication to system safety and reliability.
These awards are a reflection of our tireless dedication to system safety and reliability.
Speaker 3: This year, we also added a new mobile command center to our fleet in order to improve our emergency response and to provide flexibility during major storms or emergencies.
This year, we also added a new mobile command center to our fleet in order to improve our emergency response and to provide flexibility during major storms or emergencies.
Moving on to slide 16.
Speaker 3: Our dedication to safety and reliability goes hand in hand with our focus on customer service.
Our dedication to safety and reliability goes hand in hand, with our focus on customer service.
Speaker 3: Customer satisfaction stands at an all-time high as our customers continue to rate us among the top-performing utilities in the nation.
Customer satisfaction stands at an all time high as our customers continue to rate us among the top performing utilities in the nation.
Speaker 3: We are once again the top-ranked utility in the Northeast for the second year in a row.
We are once again the top ranked utility in the northeast for the second year in a row.
Ending now on slide 17.
Speaker 3: With fiscal year 2021 behind us, we are pleased with the progress the company has made in the opportunities ahead.
With fiscal year 2021 behind US we are pleased with the progress the company has made and the opportunities ahead.
Speaker 3: The company today is stronger, more resilient, in better position than ever before, and we believe our long-term strategic plan is solid and attainable. Our investment plan will allow us to execute on our growth strategies, pursue our sustainability goals, and maintain excellent service to our customers.
The company today is stronger more resilient and better positioned than ever before and we believe our long term strategic plan is solid and attainable.
Our investment plan will allow us to execute on our growth strategies pursue our sustainability goals and maintained excellent service to our customers.
Speaker 3: We're excited about the company's future and its growth prospects and believe we will continue to create long-term sustainable value for our shareholders.
We're excited about the company's future and its growth prospects and believe we will continue to create long term sustainable value for our shareholders.
Speaker 2: So with that, I'll turn it back to Todd. Great. Thanks, Tom. That wraps up the material on this call. Thank you for attending. I'll now turn the call over to the operator who will coordinate questions.
So with that I'll turn it back to Todd great. Thanks, Tom that wraps up the wraps up the material on this call. Thank you for attending I will now turn the call over to the operator, who will coordinate questions.
Speaker 1: Thank you. As a reminder to ask a question, you will need to press star one on your telephone to withdraw your question just press the pound key. Please, then, dive away, comply the K&A roster.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please.
Compile the Q&A roster.
Our first question will come from the line of Julien.
Speaker 1: Our first question will come from Julian Dumoulin from Bank of America. You may begin.
Through Marlin.
From Bank of America, you may begin.
Speaker 5: Hey, this is actually Cody Clark on for Julian. Good morning, Tom and Bob. Good morning, Cody.
Hey, this is actually Cody Clark on for Julian Good morning, Tom and Bob.
Hey, Cody.
Speaker 5: So first on the CapEx budget that you outlined, you state that there could be upside for strategic projects around the advanced energy system and clean energy solutions. Can you give some color on what those projects might look like, what the size might be, and if you have any sense on timing and when these projects could show up in the capital plan?
So first on the Capex budget that you outlined you state that there could be upside for strategic projects around the advanced energy system and clean energy solutions can you give some color on what those projects might look like what the size might be and if you have any sense on timing and when these projects could show up in the capital plan.
Speaker 3: Sure. Well, first of all, we're very focused on electrification opportunities relating to transportation in particular, so, you know, we have a focus on expanding EV infrastructure. That would be one area.
Sure.
Well first of all we are very focused on electrification opportunities relating to transportation in particular.
So we have a focus on expanding EV infrastructure that would be one area.
Speaker 3: We're also looking at solar to the extent that we're allowed under statute, and we're still trying to prove out the business case for that, but that's an area of potential upside in the years ahead that we've not reflected in our capital plan.
We're also looking at solar to the extent that we're allowed under statute.
We're still trying to prove out the business case for that but that's an area of potential upside in the years ahead that we have not reflected in our capital plan.
Speaker 3: And I think as we mentioned also, you know, we're continuing to pursue RNG as a supply opportunity and, you know, we don't have a concrete business case for that yet, but we are pursuing both the regulatory and legislative, you know, structure that would allow us to recover, you know, RNG supply to try to advance our supply portfolio in that area.
And I think as we mentioned also we're continuing to pursue RMG as the supply opportunity.
We don't have a concrete business case for that yet, but we are pursuing both the regulatory and legislative.
Structure that would allow us to recover.
RMG supply to try to advance our supply portfolio in that area.
Speaker 5: Okay, got it, understood. And then next on the UEF settlement, just curious where you all were able to come to an agreement. Was it principally around just the rate of return? And I guess asked a little differently, are the core programs and asks intact with the settlement agreement? Hey, could
Okay got it understood and then next on the UBS settlement, just curious where you all were able to come to an agreement with it principally around just the rate of return.
I guess asked a little differently are the core programs and asks intact with the settlement agreement.
Hey, Cody its Bob.
Speaker 4: I think, well, first off, we're in the middle right now, Cody, of finalizing the settlement agreement. And so, as I'm sure you can appreciate, we really cannot speak to the specifics of the agreement until it's filed.
I think well first off we're in the middle right now Coty of finalizing the settlement agreement and so as I'm sure. You can appreciate we really cannot speak to the specifics of the agreement until it is filed.
Speaker 4: But it's fair to say that the agreement we have is comprehensive and it's comprehensive in scope and it's comprehensive in terms of the parties to the agreement.
But it's fair to say that the agreement we have is comprehensive and its comprehensive in scope and its comprehensive in terms of the parties to the agreement.
Speaker 4: So it covers a host of issues that were included in the filing, but we really can't speak to it in particular beyond that.
So it covers a host of issues that were included in the filing, but we really can't speak to it in particular beyond that.
Speaker 5: Okay, understood. That's fair. And then just lastly, if I can, on customer growth, as you discussed, you know, the opportunity for natural gas conversion in New Hampshire and Maine, just wondering what you're assuming for electric and gas within that 5% to 7% EPS growth rate.
Okay understood. That's fair and then just lastly, if I can on customer growth as you discussed the opportunity for natural gas conversion in New Hampshire, and Maine, just wondering what youre, assuming for electric and gas within that 5% to 7% EPS growth rate.
Speaker 3: I'm not sure that we have specific assumptions recommended. Our 5 to 7 percent EPS growth rate I think is based more on assumptions around rate-based growth and investment that we anticipate in the next five years. What we are seeing...
Cody This is Tom I am not sure that we have.
Specific assumptions recommended.
Our 5% to 7% EPS growth rate I think is based more on assumptions around rate base growth and investment that we anticipate in the next five years.
What we are seeing.
Speaker 3: You know, in terms of conversions, I think we saw a little bit of a slowdown during the pandemic because people weren't undertaking activities like that, but we are seeing an uptick now. And we're also seeing a significant sort of increase in development projects coming through largely because of the housing shortage that we're seeing in the value of homes, you know, reflecting significant inflation in this area.
In terms of conversions I think we saw a little bit of a slowdown during the pandemic because people werent undertaking activities like that but we are seeing an uptick now.
And we're also seeing a significant sort of increase in development projects coming through.
Largely because of the the housing shortage that we're seeing.
And the value of homes.
<unk>.
Reflecting significant inflation in this area. So between the two I think organic growth and switching over to natural gas from fuel oil.
Speaker 3: So between the two, I think organic growth and switching over to natural gas from fuel oil, we're seeing, you know, pretty healthy opportunity in the years ahead.
We're seeing pretty healthy opportunity in the years ahead.
Okay. Thanks, so much for the time.
Thank you Cody.
Speaker 1: Once again, that's star one for any questions. Star one, one more for questions.
Once again Thats star one for any question Star one one more quick questions.
Okay.
Speaker 1: Our next question comes from Shelby Tucker from RBC Capital Markets. You may begin.
Our next question comes from the line of Shelby Tucker from RBC capital markets you may begin.
Shelby Your line is open.
Speaker 5: Sorry for that. Good morning everyone. Just to follow up on Cody's question about renewable natural gas, some parts of the country have a lot of resources like poultry farms. Could you maybe give us a sense of the type of resources that are available within your territories for renewable natural gas? Sure.
Sorry for that good morning, everyone.
Just to follow up on <unk>.
<unk> about renewable natural gas some parts of the country have a lot of resources like pumps you farms could.
Could you maybe give us a sense of the type of resources are available within your your territories for renewable natural gas.
Sure.
Shelby it's Bob.
Speaker 4: There are feedstocks locally that we can look to, certainly dairy is one, food waste is another.
There are feedstocks locally that we can look to.
Certainly dairy is one.
Food waste is another.
Speaker 4: there is the potential for biomass as well. So there, we do have actually a more diverse range of feedstock than you might initially consider.
There is the potential for biomass as well so there we do have actually a more diverse range of feedstock than than.
And you might initially considered.
Speaker 4: when we look to both local resources, as well as resources that can be brought in. So as we look at these opportunities, we're really focused on all of them and certainly focusing on the carbon intensity of each of them as we move forward. But we do see a diverse.
When we look to both local resources as well as lease or excuse me resources that can be brought in so as.
As we look at these opportunities, we're really focused on all of them and certainly focusing on the carbon intensity.
Each of them as we move forward, but.
We do see a diverse supply of <unk>.
Speaker 5: supply of feedstock for those projects. Got it. Thanks, Bob. And then maybe, Tom, as we look at the addressable market for natural gas over the home heating market, can you remind me how much of Maine and New Hampshire actually is, I guess, reachable through your pipes and how much more investment you would have to make to reach more of those goals?
Feedstock for those projects.
Got it thanks, Bob and then maybe Tom.
As we look at the addressable market for.
Natural gas over the home heating market.
Can you remind me how much of Maine, New Hampshire actually is.
I guess reachable.
Through your pipes and how much more.
That's been you would have to make to two to reach more of those those homes.
Speaker 3: Sure, to that point Shelby, I think clearly, especially in Maine, only a small portion of the state is really addressable with natural gas just due to the rural nature of the state.
Sure to that point, Shelby I think clearly, especially in may and only a small portion of the state is really addressable with natural gas just due to the rural nature of the state.
Speaker 3: We, you know, we tend to operate in the highest density areas of the state now, although there still is opportunities for smaller cities in that state that don't currently have natural gas.
We tend to operate in the highest density areas of the state now although they are still has opportunities for smaller cities in that state that don't currently have natural gas.
Speaker 3: I think our overall penetration at Northern is still somewhere around 60%, so we still have plenty of opportunity on our existing mains and our existing system just to convert customers over who already have natural gas available to them.
Our overall penetration that northern is still somewhere around 60%. So we still have plenty of opportunity on our existing mains in our existing system.
Just to convert customers over who already have natural gas available to them.
Speaker 6: Got it. And then the last question I have is if I recall correctly, a decent chunk of your capex is still going more to gas than to electric. I mean, should we see, but we've seen a greater slice of the capex going to electricity. Where do we see that trend over time?
Got it and then the last question I have is if I'm, if I recall correctly.
A decent chunk of your Capex is still going more to gas to electric I mean should we see but we've seen the.
Greeters.
Slice of the Capex going into electricity.
Where do we see do you see that trend over time.
Speaker 3: Well, part of the trend we're seeing is we're actually completing pipe replacement on the gas side. So we finished in New Hampshire a couple of years ago. In Maine, we'll be complete in 2024. So pipe replacement essentially will be limited to Fitchburg gas and electric thereafter until sometime in the 2030s.
Well part of the trend. We're seeing is we're actually completing pipe replacement on the gas side. So we finished in new Hampshire, a couple of years ago, and Maine will be complete in 2024, so pipe replacement essentially will be limited to Fitchburg gas and electric thereafter until sometime in the 2000 thirty's.
Speaker 3: So that's why the gas spend is tending to come down a little bit. On the electric side, we're seeing more opportunity to advance the grid, you know, invest in electrification and pursue some of the other strategic opportunities we talked about.
That's why the gas spend is tending to come down a little bit on the electric side, we're seeing more opportunity to advance the grid.
Invest in electrification and pursue some of the other strategic opportunities we talked about.
Speaker 6: Guys, so as your gas program comes off, we should see a similar type of capex program, but just money skewed more to the PC. Yes, that's where we anticipate.
Got it so as you as your gas program comes off we should see assumed a similar type of Capex program, but just money skewed more to the juicy.
Yes, that's what we anticipate.
Got it great. Thank you very much.
Thank you Shelby.
Speaker 1: And once again, that's the one for questions, the one for questions.
And once again Thats star one for questions for one one loan for questions.
And I'm not showing any further questions today.
Speaker 1: And I'm not showing you any further questions today. That end our Q&A segment as well as our conference for today. Thank you for participating everybody. You may now disconnect. Everyone have a great day.
And our Q&A segment as well as our conference for today. Thank you for participating everybody. You may now disconnect everyone have a great day.
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