Q4 2021 Public Service Enterprise Group Inc Earnings Call
And then just.
Thank you Carlotta.
Everyone.
Sadly the events of today do want.
Slight deviation from our normal beginning remarks and <unk>.
Let me just offer our thoughts and prayers from everyone at PSEG to those of you who.
We're more deeply and personally affected by the events in eastern Europe and of course, we pray for a rapid diplomatic resolution of matters.
Yeah.
Let me proceed however, with a review of our 2021 performance and our outlook for 2022 and beyond.
We are in fact pleased to report strong operating and financial results for 2021.
Which marked the 17th year in a row.
PSEG has delivered results within management's original or in some cases, our raised non-GAAP operating earnings guidance.
So pseg's GAAP results were <unk> 88 per share for the fourth quarter of 'twenty one.
Compared to 85 per share in the fourth quarter of 2020.
For the full year PSEG reported a 2021 net loss of $1 29 per share driven by charges related to the sale of PSEG fossil.
This compares to net income of $3 76 per share in 2020.
PSEG reported non-GAAP operating earnings for the fourth quarter of <unk> 69 per share compared to 65 per share in the fourth quarter of the prior year.
non-GAAP results for the full year 2021 rose to $3 65 per share.
Compared to $3 43 per share in 2020.
For 2021.
<unk> net income increased by 9% above 2020 results.
And contributed approximately 80% of Pseg's consolidated non-GAAP operating earnings.
Slides 15, and 17 detailed these results for the quarter and the full year.
So we're pleased to report that PSEG has completed the sale of the fossil portfolio.
We closed on the PJM assets on February 18th.
And the New York, and New England assets closed yesterday, having received all required regulatory approvals from the federal Energy regulatory Commission and regulators in Connecticut, and New York.
I extend my heartfelt thanks to the PSEG fossil employees for their professionalism throughout the sale process.
Which resulted in an impressive 2021 operating statistics that actually were among the best in our history.
Pseg's fossils commitment to operational excellence and continuous improvement.
We will continue to inspire all of us at PSEG going forward.
The closing of both fossil sales along with other key priorities achieved during 2021.
Will support our pursuit of a robust set of regulated and contracted opportunities.
PSEG has focused on clean energy and infrastructure investments to drive regulated utility growth.
With a vision toward powering our future where people use less energy.
And it's cleaner safer and delivered more reliably than ever.
Pseg's improved business mix further enhances an already compelling environmental social and governance profile.
And will help us achieve that powering progress division.
Let me take a minute to recap a few significant accomplishments from last year.
<unk> initiated investments and it's $2 billion clean energy future program.
That has expanded the traditional definition of rate base, while helping new jersey to achieve its clean energy goals, and importantly will provide customers with options to lower their bills.
<unk> also settled a potential challenge the return on equity and its FERC transmission formula rate last July .
<unk> and reduced rates for customers and eliminating our regulatory overhang.
In addition, our energy strong investments prove their value in the aftermath of a devastating tropical storm Ida last August .
Spite floodwaters approaching five feet in height and parts of New Jersey, all of the energy strong hardened substations remained operational and helped to minimize customer outages across our system.
PSEG power secured a second three year term of zero emission certificates, which will carry us through may of 2025 and helped to preserve the state's carbon free nuclear generating resource.
We detailed these in other accomplishments at last September's Investor day, which highlighted a company built around a 2022 business mix that is projected to be 90% regulated.
This more predictable and visible earnings platform has enabled PSEG to provide a multi year earnings growth rate of 5% to 7% from the 22 from the 2022 guidance mid point to 2025.
PSEG also announced at last year's Investor Day that we would pursue a $500 million share repurchase program and raised the 2022 annual dividend by nearly 6%.
$2 16 per share.
We have completed half of that repurchase program and we will be executing the remaining $250 million in the near future.
In addition, our board of Directors recently declared a <unk> 54 per share first quarter 2022 dividend at the indicative $2 16 per.
Per share annual rate.
Supporting our strong financial capabilities, and our commitment to operational excellence and continuous improvement.
Good to report that for 2021, <unk> achieved better than top decile rankings and Osha scores for safety and safety scores, which is an industry standard for reliability.
As shown on slide eight.
The utilities J D power customer satisfaction scores improved in both its electric and gas areas and in each of the residential and business customer segments.
These results were our highest cumulative scores to date, achieving a top quartile ranking in the eastern group in three of the four studies.
In addition for the 20th year in a row consulting recognized <unk> with its reliability One award as the most reliable electric utility in the mid Atlantic region.
After a sustained period of low natural gas prices, New Jersey, and the rest of the country is experiencing increases in energy prices.
This has resulted in PSC and <unk> implementing two 5% gas rate increases for this winter's heating season.
Yet following these adjustments our typical gas residential customer bills.
Still the lowest among our regional peers.
On the electric side monthly residential bills remained below our peer group average and.
Default supply rates will actually decline this coming June .
Based on the results of New Jersey's basic generation service auction earlier this month.
This will result in a decrease in the average <unk> electric bill of about two 8%.
Including the Bgs rate reduction in June and other request the changes the combined bill of a typical residential customer will be at least 20% lower compared to more than a decade ago.
35% to 40% lower when you take into account inflation.
Next month in March the statewide moratorium on shut offs for residential electric and gas service, which began in March of 2020 is set to be lifted.
<unk> in partnership with the New Jersey Board of public utilities, and several community groups is helping customers enroll in several payment assistance programs.
Now turning to our 2022 earnings guidance on slide nine we.
We have narrowed the range of full year guidance for non-GAAP operating earnings to $3 35.
The $3 55 per share.
From the $3 $33 60 per share initiated last September .
The subsidiary guidance ranges for 2022 are narrower also with a slightly higher midpoint Ips EMG that is 6% above 2021 results and reflects a more predictable earnings profile and improved business mix overall.
The narrowed range reflects the benefit of a full year impact of the conservation incentive program and.
And finalizing 2022 pension drivers updated for our December 31.
<unk> measurement date.
Last September we introduce Pseg's five year 2021 through 2025 capital investment program of.
A 15% to $17 billion.
With approximately 90% or 14% to $16 billion allocated to the utility.
This plan is expected to produce six 5% to 8% compound annual growth in rate base over that same five year period.
Recall that we added the infrastructure advancement program I'll refer to that as IAP.
Two our 21% to 25 capital plan.
With an investment to be made over four years to improve the reliability of the last mile where the lower voltage of our electric distribution system.
This will also address ageing substations in gas metering and regulating stations.
And allow us to invest in electric vehicle charging infrastructure at our facilities to support the electrification of the utilities vehicle fleet.
We remain in discussions with the <unk> with regard to our IAP proposal and.
And based on current status of the proceeding we anticipate btu action in the autumn of this year.
With respect to financing our capital spending program I will reiterate that we expect our strong cash flow.
Enhanced financial flexibility and solid investment grade ratings to enable funding this 15% to $17 billion program.
As well as our planned investment in Ocean wind one.
Without the need to issue new equity.
Now before moving to Dan's financial review I would like to touch upon some of the exciting new initiatives for future growth.
These range from the new clean energy future investments, which enable opportunities for rate base growth behind the meter.
To supporting electrification of transportation and a growing mix of renewables into the distribution system too.
Two expanding the aging infrastructure replacement programs that have been the hallmark of our growth this past decade.
During 2021, we advanced our regional offshore wind efforts.
By acquiring a 25% equity interest in Ocean wind one.
And submitting several onshore and offshore solutions into the New Jersey, PJM competitive transmission solicitation.
Is that a regional offshore wind partner as.
As well as two Standalone PFS EMG bids for onshore upgrades.
We submitted nine solutions into this state agreement approach proposal window.
Being pursued by the Btu with technical assistance from PJM.
Seven of those proposals were jointly made with that under our partnership which we've named coastal wind link.
These solutions are designed to deliver thousands of megawatts of offshore wind energy into New Jersey, drawing from PSEG has extensive transmission experience and expertise in offshore wind energy.
These projects range from single collectors at various landing points to a linked transmission network out in the ocean with total project cost ranging from 2% to $7 billion.
We continue to expect a third or fourth quarter 2022 decision from the <unk> on this matter.
We're also in discussions with <unk> regarding near term opportunities and options to expand our offshore wind investments and the mid Atlantic via <unk>.
By way of our joint ownership of the Garden State offshore energy side and <unk> Recent award of the Skipjack two project.
Turning to our climate advocacy efforts, we are continuing our active dialogue with federal and state regulators.
JM and other stakeholders to develop a regulatory and market mechanisms that appropriately recognize the value of carbon free nuclear generation over the long term.
As a top 10 producer of carbon free energy in the United States with a coal free fuel mix, where especially supportive of the nuclear production tax credits and clean energy incentives proposed and previous legislative efforts and are hopeful that the broad support for the clean energy measures will result in new legislative proposals in coming months.
<unk>.
Let us move through our updated environmental social and governance summary on slide 11, where you can see our comprehensive and growing list of action items as well as an equally impressive list of recognition and.
In 2021, we not only accelerated and expanded Pseg's climate vision by 20 years to net zero 2030, covering scopes, one and two for our entire operations we own.
Also made a significant commitment by signing on to the.
The United Nations backed race to zero campaign.
That will validate science based targets for all three scopes of our emission reduction goals. We're.
We're fully engaged in meeting this commitment and look forward to updating you on our progress.
PSEG was recently named to just Capital's 2020 to just 100 ranking of America's most just companies. That's a lot of adjustment there and we were added to the 2020 to Bloomberg gender equality index as well.
The many ESG accomplishments and recognition we obtained in 2021.
Ratified that our corporate strategy grounded in sustainability is one that is appealing to ESG investors more and more.
Finally.
I think the 13000 strong PSEG workforce contributing to our solid operating and financial results in 2021.
The board of Directors' recent dividend Declaration is the 18th annual increase in the last 19 years.
Our 2022 dividend marks 115 consecutive years.
PSEG has paid a common dividend to shareholders one.
One of only a very few companies that can make such a claim.
This year's <unk> 12 per share increase reflects our confidence in.
And the durability of our growth strategy as well as an ongoing commitment to returning capital to our shareholders.
In summary, with the fossil sale now behind US we look forward to executing on our robust set of opportunities to grow both the regulated and contracted areas of our business.
Solid alignment with the state of New Jersey's energy policy goals in a cost conscious focus on the customer Bill continue to underpin our approach to regulated growth investments that power progress in New Jersey, which has been our core mission for the last 119 years and counting.
I'll now turn the call over to Dan for more details on our operating results and will be available for your questions. After his remarks.
Thanks, Ralph Good morning, everybody as Ralph mentioned, the full year fourth quarter 2021, PSEG reported a net loss of $1 29 per share related to the fossil sale charges and mark to market impacts and net income of 88 per share respectively.
<unk> also reported full year and fourth quarter 2021, non-GAAP operating earnings of $3 65 per share and <unk> 69 per share respectively.
We've provided you with information on slides 15, and 17 regarding the contribution to non-GAAP operating earnings by business.
For the fourth quarter and for the full year of 2021 and.
In slide 16, and 18 contain waterfall charts that take you through the net changes quarter over quarter and year over year.
And non-GAAP operating earnings by major business.
And I'll now review each company in more detail.
For the full year <unk> net income increased by $119 million of approximately 9% compared to 2020 results.
This improvement reflects a 10% increase in rate base to $24 5 billion at year end 2021.
Driven by our investment programs focused on infrastructure replacement resiliency and beginning our clean energy future investments.
We also note on slide 32, approximately $1 $2 billion of construction work in progress are mostly transmission not included in that year end 2021 rate base numbers.
For the fourth quarter of 2021, <unk> net income was 53 per share.
<unk> to net income of 58 per share for the fourth quarter of 2020.
As shown on slide 20 transmission margin was a penny per share lower compared to the year earlier quarter, reflecting the formula rate settlement implement implemented earlier in 2021.
Partly offset by growth in rate base, and a benefit from O&M timing.
Gas margin was <unk> <unk> per share favorable, reflecting GSM <unk> and the implementation of our conservation incentive program or Sip compared to last year's fourth quarter and.
Electric margin was a penny per share higher compared to the fourth quarter of 2020 also reflecting ongoing investments in the adoption of the suite.
O&M expense was it paying unfavorable versus the year earlier quarter.
Higher distribution depreciation expense reduced results by a penny per share reflecting higher plant service.
Lower pension expense added <unk> <unk> per share versus the year ago quarter.
And as we signaled last quarter flow through taxes, and other or <unk> <unk> per share unfavorable reflecting the expected reversal of similar positive impacts in taxes in the second and third quarter 2021 net income.
The New Jersey economy continues to recover from Covid related restrictions throughout 'twenty one.
As more people return to work outside the home and commercial activity stabilized.
For the full year.
Weather normalized electric sales were flat versus 2020 and weather normalized gas sales were slightly higher up three tenths of a percent over 2020.
I should note with the Sip now in effect for electric and gas growth in the number of customers not sales will drive net income for the utility.
The number of electric and gas customer rose by approximately 1% each in 2021.
<unk> invested over $770 million during the fourth quarter of 2021.
And fully executed on its planned full year to $7 billion of electric and gas infrastructure capital spending program in 2021.
To upgrade transmission and distribution facilities enhance reliability and increase resiliency and launch its clean energy future programs.
We're on track to meet our higher $2 9 billion capital plan for 2022.
And while we're seeing pockets of delays affecting certain equipment procurement.
We are managing our work accordingly, and do not expect that conditions will affect the overall capital plan.
As detailed on slide 31.
Approximately $865 million of our 2022 capital plan is allocated to transmission.
$840 million to electric distribution, which includes over $200 million in energy strong II.
940 million of gas distribution, which includes over 400 million for <unk>.
And $275 million for award winning energy efficiency programs.
Of these amounts the vast majority about 90%.
<unk> contemporary things are near contemporaneous regulatory treatment.
Either through the FERC formula rate clause recovery mechanisms already recovered and base rates as replacement spend or new business.
As a reminder, the conservation incentive program is now in effect for both electric and gas sales.
With the implementation for the electric side of the business last June and for gas last October .
This mechanism removes the variations of weather economic activity efficiency and customer usage from our financial results resetting margins to a baseline level per customer.
The mechanism supports <unk> ability to promote maximum customer participation in energy efficiency programs.
Without the loss of margin from lower sales and retains earnings impacts based on the number of customers.
And as a reminder, <unk> suspended its gas weather normalization charge in October 2021, when the gas it began.
We continue to expect the remaining balance of <unk> clean energy future filings, which includes energy storage and the remaining EV programs will be addressed in future stakeholder proceedings.
Moving on to power for the full year 2021, PSEG power reported a net loss of $4 <unk> per share and non-GAAP operating earnings of 86 per share respectively.
For the fourth quarter of 2021 piece.
PSEG power had net income of <unk> 40 per share an increase of <unk> 10 per share compared to the fourth quarter of 2020.
Power also reported fourth quarter non-GAAP operating earnings of 21 per share an increase of 11 per share over the year earlier quarter.
In both instances the quarterly improvement mainly reflected the cessation of depreciation expense related to the fossil sale and lower interest expense. Following the redemption of PSEG Power's remaining long term debt in October of 2021.
non-GAAP adjusted EBITDA totaled $179 million for the quarter and $896 million for the full year of 2021.
This compares to non-GAAP , adjusted EBITDA of $182 million and $990 million for the fourth quarter and full year 2020, respectively.
non-GAAP adjusted EBITDA excludes the same items as our non-GAAP operating earnings measure as well as income tax intra.
Interest expense depreciation and amortization.
The earnings release, and Slide 25 provide you with a detailed analysis of the items, having an impact on P&G Power's non-GAAP operating earnings relative to net income quarter over quarter from changes in revenue and cost.
And we've also provided you with added detail on generation for the fourth quarter and the full year on slide 26.
Gross margin for both the fourth quarter and full year 2021 was $30 per megawatt hour.
A decline of $2 per megawatt hour over the fourth quarter and full year of 2020.
Mainly reflecting prior re contracting at lower prices.
As we turn to powers operations total generation output for the fourth quarter of $13 three terawatt hours was 9% higher than the fourth quarter of 2020.
The nuclear fleet operated at an average capacity of 88, 5% during the quarter producing seven six terawatt hours.
Which represented 57% of total generation.
The combined cycle fleet produced five seven terawatt hours of output and operated at a 49, 4% capacity factor.
For the full year 2021 generation totaled 54, terawatt hours up 2% over 2020.
And the nuclear fleet operated at an average capacity factor of 91, 9% for the full year.
And produced over 31, Terawatt hours of carbon free base load power, representing 58% of total generation.
Pseg's forecasting total base load nuclear generation of 31 Terawatt hours for the full year 2022 hedged, 95% to 100% at an average price of $29 per megawatt hour.
Representing an approximate $3 per megawatt hour decline from 'twenty one.
For 2023 nuclear generation is forecasted to be 31, terawatt hours and is 85% to 90% hedged at an average price of $28 per megawatt hour.
And for 2024.
Nuclear generation is forecasted to be 30, terawatt hours is hedged 45% to 50% at an average price of $31 per megawatt hour.
For 2020 to PJM capacity prices determined in previous auctions are.
We're expected to provide approximately $150 million of revenue for our nuclear units.
This is based on <unk> pricing of $166 per megawatt day for the first five months.
Followed by a scheduled declined to $98 per megawatt day for the last seven months of 2022.
The next PJM capacity auction.
For the 2023 to 2024 delivery year is expected to be held in June of 2022.
Now, let me briefly address results of enterprise and other where we reported a net loss increased by <unk> <unk> per share.
Impaired to the fourth quarter of 2020.
As a result of higher contributions to the PSEG Foundation <unk> interest expense, partly offset.
By lower taxes.
PSEG ended 2021 with approximately $2 9 billion of available liquidity, including cash on hand of $818 million and debt representing 57% of our consolidated capital.
During 2021.
<unk> issued $750 million of.
Of senior notes at 84 basis points due November 2023, and $750 million of 245% senior notes due 2031.
And we also retired $300 million of senior notes at maturity.
As Ralph mentioned earlier PSEG redeemed all remaining outstanding senior notes of PSEG power in connection with the sale of Power's fossil generating units.
The receipt of the fossil sale proceeds supports the share repurchase program and provides cash help repay funds borrowed from the parent for the power that.
Redemption.
We're providing 2022 non-GAAP operating earnings guidance for <unk>.
With an updated description for the remaining businesses for nuclear offshore wind gas operations long island, and other investments as well as power financing costs to be described as carbon free infrastructure and other.
For the full year of 2022.
<unk> net income is forecasted at $1 $510 million.
To $1 $560 million and.
And it reflects the benefit of contemporary mostly recovered investments and the full year benefit of the Sip.
non-GAAP operating earnings for carbon free infrastructure and other is forecasted at 170 million to $220 million.
Pseg's 2022 operating earnings will exclude results from the fossil assets.
Free cash flow previously generated from the fossil units translates into an adjustment in the purchase price.
<unk> also raised its common dividend by 12.
Per share to the indicative annual level of $2 16, a five 9% increase over 2021.
The 2022 indicative rate represents a 63% payout ratio of consolidated earnings at the midpoint of our 2022 guidance.
And utility earnings alone are expected to cover 140% of the dividend at the midpoint of 2022 guidance.
That concludes our formal remarks to summarize the non-GAAP results for the quarter was <unk> 69 per share for.
For the full year were $3 65 per share.
And for 2022, we've narrowed our guidance to $3 35 to $3 55 per share.
With regulated operations contributing about 90%.
The narrowing of our guidance reflects the setting of our 2020 to pension expense, which incorporate strong investment returns through year end 2021.
Offset by a more conservative portfolio composition, given a strong year end funded status.
As Ralph mentioned, our strong cash flow improved financial flexibility and solid investment grade profile will enable us to fund pseg's five year, 15% to $17 billion capital program as well as our plant Ocean wind one investment.
Without the need to issue new equity.
And with that Ralph and I are ready to take your questions.
Ladies and gentlemen.
We will now begin the question and answer session from members of the financial community.
If you have a question. Please press Star then the number one on your telephone keypad. If your question has already been answered or you wish to withdraw your question from the polling request you.
You may do so by pressing the pound key.
If you are on a speakerphone. Please pick up your handset before entering your request one moment. Please for the first question.
Your first question comes from the line.
Jeremy Tonet from Jpmorgan.
[laughter].
Just wanted to start with given the significant attention on offshore projects and cost increases here just wanted to get your latest thoughts on this part of the business and if there's any color you can provide on kind of return expectation.
Hi, Jeremy Yes, I think our message has been pretty consistent on this.
We look at the returns.
That could come from these projects and insist upon them being above our regulated opportunities.
Yes.
The nature of the relationship with the <unk>.
Right is that the commercial risk.
Is minimized by virtue of the fixed price with escalators, but this is clearly operational construction risk that would exceed.
We're normally accustomed to in the utility so we look at the earnings accretion potential and those returns and we havent given a specific number except to say that there has to be higher than the utility.
And we're pleased that we think it's a regional opportunity for us the state is committed to going forward.
I will say theres been a lot of discussion around this topic of late.
<unk>.
It just feels like some of the some of the enthusiasm and exuberance for this that we question early on.
Yes.
Ben.
Tempered down a bit.
But over that period of time, we've learned a lot more about the capabilities and skills of our partner and we've learned a lot more about the commitment of other states in the development of the supply chain.
The regulatory hurdles that have been eased by virtue of some state actions and some federal elections.
So our initial early caution.
It has actually been diminished.
So it feels like the lines are converging in terms of what the return expectations are for these projects.
But suffice to say that we.
We do have an internal set targeted and we'll be disciplined about making sure that we exceed them.
Got it.
Helpful. Thank you for that and then just wondering as you look at the deep into D. C. If there's any thoughts you could share with regards to maybe build back better itself, but the energy policy elements, there and if you see hope for that.
Path moving forward in some fashion.
I do.
I think we're all right now and a little bit of a holding pattern. Clearly there are there are current events that are superseding.
Build back better and.
Use around.
<unk> energy policy I do think however, the current events are going to motivate.
Additional conversation.
Energy policy and how comfortable are we as a nation with.
Sort of the increased globalization of gas prices vitamin gas market just to be very very regional very tightly priced in and clearly some of the dependencies that are our allies in Europe have on Russian gas.
Is it going to be a factor in the LNG exports, which is going to be a factor in.
Prices here in the U S. So.
We have a new dynamic that over the long term as a positive read through to our our.
Our nuclear fleet and to renewable energy of the near term is going to be a little bit tougher to predict.
But I think in general I'm optimistic that the.
Provisions that were first motivated by climate change and now I think can also be motivated by energy security or are both positive forces for us.
Great. Thank you for that.
Your next question comes from the line of Shar <unk> from Guggenheim Partners.
Okay.
Hi can you hear me.
Yeah.
Well if I just wanted to get your perspective on the value of nuclear to sort of PSEG and more broadly kind of in the market. I mean, obviously you envision some sort of a policy change at the federal level.
And then as a follow up just given the recent public mark for the asset.
How did the sort of factors play into the value proposition for long term ownership of the nuclear assets I guess.
Sum it all up do you see value to transitioning to a pure distribution business singles stayed pure distribution business.
So shar, it's good to hear from you.
Yes.
I have a little bit of patience with us as we focus on that question.
And the reality is we're going to let our investors determined.
Who is the logical owner of nuclear as in the future.
Our priority is right now is the continued outstanding operations that we've realized that Dan talked about the.
92% capacity factor was 91 nine I can't we round those numbers up.
And.
We just talked to Jeremy about the importance of nuclear from a climate change and energy security point of view I think.
Im confident we can resolve those issues if not at the federal level certainly at the New Jersey state level.
Within the calendar year and once that's done.
If P S EOG.
It doesn't get the kind of recognition that it deserves that I believe it deserves in the market.
Co located with nuclear then I think the market will really be signaling that.
That maybe we're not the natural owners of it, but but but but there's a couple of things that I want to get done before we jump to any conclusions because it is.
A well run operation that contributes to earnings and as a fairly steady earnings producer.
We're not hedging the spark spread here with us.
We're not following full requirement load contracts, where we're baseload generator that can be hedged pretty comfortably over a three year period in and be part of a fairly stable earnings stream, but as is often the case with us we pay very careful attention to what the what the market and our investors is telling us.
And I will give you a more definitive answer to that in the not too distant future, but right now we've got just a couple of tasks ahead of us on a result.
That's helpful and that's pretty consistent to what you've been saying so thank you for that.
And then just maybe just the Capex question here.
Current plan remains at around $17 billion top end.
What level of spending if any just remind is embedded for offshore wind the transmission proposals and any supporting infrastructure and do you have an update around ocean wind <unk>, sorry, sorry, if you highlighted that but I had to jump on late thank you.
Yes.
Maybe we're following accounting a little bit, but if you think about what's in that 15% to $17 billion you do not have the ocean wind one investment in there that's going to be accounted for as an equity interest in a joint venture. So it is separate and apart from that 15 to 17 chart.
And I would say the same with the ocean wind length. There. There is some modest dollars you could think about from the standpoint of the onshore infrastructure that would be.
Yeah.
That would be necessary that is going to support offshore wind more generally, but the ocean wind link.
But do you think about offshore wind is being outside of that <unk>.
Got it got it.
Any just ocean wind too is there any sort of updates there at all or nothing.
Nothing brand new there sure I think it's safe to say, though that we have a series of conversations underway that.
Related to ocean wind to skipjack.
Potential further upside in Ocean wind one in there.
All fall into this notion of what are the return expectations.
That can be derived from each.
Each of those.
Terrific. Thank you guys. So much appreciate it.
Sure.
Your next question comes from the line of Paul Peterson from Glen Rock Associates.
Good morning, how are you doing good Paul how are you.
Right.
No.
Sort of follow up one on offshore wind.
And you guys, you know with a history of being conservative.
Looking at risk adjusted rate of returns.
And mentioning that there is quite a bit of excitement.
L P M.
Parties.
Looking to get into the business.
Is there any potential of.
Obviously it depends on what you see out there, but I'm wondering have you been approached or.
Is there any potential for potentially monetizing it.
You know the you guys see more opportunity.
Adjusted.
Rate of return.
To other things and what people are offering.
It looks like.
If you can maybe monetize it.
Yes.
Is that opportunity right, Paul you never say never.
I just said never.
Yes.
Monetize the social.
The solar assets that we had 400 plus megawatts.
So that could be assumption that I think it's premature to monetize something that still has a pretty robust growth trajectory and is right.
In our regional wheelhouse.
Some enormous potential from a transmission point of view.
So.
But yes, I mean, we would always we would always be open to that core business is the regulated utility it's beyond courts. The dominant part of our business are at 90%.
But but but folks always nowhere, we're open to inquiries that can enhance shareholder value.
Okay, and then with respect to the you mentioned the PJM.
Btu collection for transmission.
Located with offshore wind in the Q3 and Q4.
Curious is that just going to be do you think there'd be any that'll be provided through in the interim or do you think it's going to be.
Sort of a selection of the winter so to speak with the winners.
When.
When it's finalized.
So the short answer to that is I don't know I mean, the BPA has always prided itself on transparency and visibility and public outreach. So that would lead me to say.
Yes, but I think so little will be known just coming out of PJM in terms of the other criteria.
You may want to apply that that would lead me to say no that it would be too premature.
So.
Most accurate answers, we just don't know we have some some vague dates that have been given to us we do know that the <unk> wants to get this done before the next solicitation.
Which goes out I think in the third quarter and so if you want people to bid offshore wind farm based upon.
Knowledge of what they might have by way of transmission assets.
Then that would argue for our Q3 results from the GPU, but theres a lot of flexibility built into the FAA approach that allows the <unk> to take advantage of the transmission proposals or not depending upon what the ultimate wind farm.
There is proposed.
Okay, Great and then just finally on.
Electrical efficiency.
You guys are big on making a big effort in that I'm, just sort of and I realize the way the investment works and what have you.
But I'm just wondering.
Given COVID-19 and everything it looks like essentially growth was sort of flat. This year over the next several years three to four years, what do you expect.
Sales growth to.
B.
Any reason given given COVID-19 and of course, the energy efficiency.
Since you guys are making a big effort on yes. So I mean, I think we have a less than 1% projected growth rate for electric sales.
We're going to do our best to turn that to a negative number.
Because again.
Our business is not predicated on electric sales thats predicated on electric value and with an aging infrastructure that cannot meet the challenges of todays weather patterns or today's customer expectations. We have a huge task ahead of us at replacing that aging infrastructure.
And.
And the customer side of the meter is a huge opportunity set for us from the point of view of.
Customer bills and climate change impact.
And again this isn't fufu dust.
The the way in which we continue to make money off these infrastructure investments is but.
Basically sharing the fuel cost savings with our customers.
But we're not the fuel business. So that's a real win win for us and our customers and Paul I'll just add.
Ralph is referencing is as we went into this upsize of the energy efficiency program in conjunction with the state I mean, it's about a 10 fold increase in our investment amount and so it was increasingly important at that point to ensure that.
Lost revenues from those sales.
Did not create a disincentive with respect to the program. So that's when this conservation incentive program went in place that essentially separated.
Sales volumes and the revenue that we see from the volume of the product that we sell and so that all made sense to get all of the incentives align but it also dampened.
The implications to us from the standpoint of what sales are.
More about numbers of customers than it is about actual sales and sales volumes.
It helps our customers too.
So much appreciate it.
Your next question comes from the line of Donald Jonathan Arnold from vertical research.
Okay.
Hi, Jonathan.
Yes.
One quick question you gave a stat on the bill impact from bps I think.
Two 8%.
Things like that.
The supply rate or is that the average bill and just maybe.
Quick.
Headline on home.
Yes.
That's the bill impact and the whole bill not just the supply.
Okay, and then based on the.
Okay, and then just happened effectively.
Yogurt and that was driven by you may recall because of the delays in PJM capacity auctions. There was assumed capacity price that was in prior P. Bgs auctions that.
Ended up being much higher than what the <unk>.
Capacity Crunch turned out great. Okay. That's great. Thank you and then.
I did.
Sorry, if I missed this.
Could you maybe just talk about where you are on.
Yeah.
The stage two.
Yes.
<unk>.
Nuclear.
Yep Yep Yep.
Yeah. So.
By the way, that's 8% Bill impact just by way of reminder.
Residential number it obviously varies by rate class.
I think we've now had three spirited conversations about the importance of nuclear in New Jersey, and the last four years.
We had the creation of the legislation for the <unk> and we had two rounds of Zacks.
And my sense from policy leaders.
Both elected officials regulators.
Key staff members as we need these plants to run at least until 2050, which is actually beyond their current licenses and asking ourselves that question every three years.
Tantamount to it just sort of.
Being masochist.
Nobody really has that in them. So there is very much a strong desire to expand the duration of the support.
Theres, an equally strong desire to see.
What happens at the federal level. However.
Before I ask on that.
Yes.
A simple thing to think about Jonathan I won't take long with US right now that New Jersey legislation says if this federal line for.
For the carbon attributes of nuclear that mistake.
Zach support goes down well if you were to take the proposed production tax credit as it was originally envisioned.
<unk>.
And to build back better what that would mean is that as power prices went up.
The state.
Dollar should go down.
We'd go up I'm, sorry, because the federal money goes down as power prices go up so power prices rise state increases exact contribution power prices go down state decreases its that contribution that's exactly the opposite of good public calls right.
Hopefully I didnt confuse the confusion with SAP.
Sure.
We can clarify that further if need be the point is that the state policies should be working in partnership with whatever the federal policies and that has not been established yet.
Okay.
Just in terms of.
Because if we if it takes us a while.
Federal issues that sort of pushed off to the right.
John if we could have action in the state.
This year or any thoughts about timing yes.
We've already started those conversations and we would.
Of course.
We would follow the lead of ours.
Legislators and our governor, but we would encourage action sometime this year to certainly begin in.
In anticipation of what.
It'll outcome might look like.
But hopefully we would be able to initiate that action based upon.
Federal resolution.
It's just tough to to.
Estimate what a federal calendar might look like in light of the.
Very complex set of issues.
Facing us in Washington, right now.
Tie things together, if I hear you right.
Inclined to make a strategic decision about nuclear until these things.
Going to work out, but you did say you would be planning to give us an update relatively soon.
Go ahead.
Statements.
That's exactly right look the reality is people have already expressed an interest in our nuclear plants and they are.
They are outstanding assets.
The issue is.
Do you.
Firm up the longer term economic treatment beyond the three year timeframe and I think we're the ones who are best positioned to do that whether we're the natural owner or somebody else's.
And that's what we're hard at work to resolve it.
And Jonathan.
Thing maybe to think a little bit about is that there has been.
Number one I think that the support for nuclear as we've gone through these various stages that Ralph talked about.
<unk> has grown over time and what support was there is some method and I think others have come out to be more supportive.
And it sounded its way through the <unk>.
Three process, but I think as.
Little bit torturous to work our way through it and everybody involved has commented on that frankly starts fairly early on within 23.
And so I think that.
Wanting to go through another one of those shorter term determinations and trying to go to a longer term solution.
Could inspire some action before that starts and that starts into.
At the end of the first quarter of 'twenty, three if not mistaken so.
There isn't an outside data out there with respect to trying to get something done before to avoid the next cycle of the three years X and moving onto a longer term solution.
Great. Thank you maybe just one housekeeping item you said you've done half of the $500 million how much of that was done before year end and then I guess, we'll get this in the K, but any chance of a year end share count.
But as we model it.
Not having that precise number in front of you I'll make you wait for that but you can think of it more as being a 'twenty two than a 'twenty one event.
Okay. Thank you got you got you.
Your next question comes from the line of Paul Zimbardo Zimbardo from Bank of America.
It's actually Julien on for Paul.
Good morning, everyone. Thanks for the time.
To come back to the nuclear yeah. Good morning.
Just quickly wanted to come back to the nuclear conversation and I apologize to do it.
With respect to credit metrics.
Obviously would you anticipate your credit metrics to be further relax to the extent to which you were to divest I just want to understand some of the incremental latitude because what you see that and then separately. How do you think about like the litmus test on earnings accretion or given that that would be involved could be value accretive to divest without earnings I'm, just sort of thinking conceptually without asking.
Timeline.
Yeah.
Yes.
Elliot I think on the we haven't given a precise number with respect to where things would go I think.
If you think about where the credit metrics moved from the standpoint of with and without fossil I think that theres, probably increment in that same direction with respect to nuclear and so I think.
There has not been a firm number that we put out but I think you would become.
Even more regulated and that would be positive from a credit perspective.
And I don't think Theres, a theres accretion dilution answer to give you necessarily I mean, we would take a look at the overall value.
The accretion dilution on the ground, but also the valuation of the company that Ralph was talking about before so we look at both of those aspects with respect to what we've been doing that in that situation.
Right, but the point is it doesn't necessarily need to be earnings accretive in order to move forward given as you all think about the risks there.
Value that matters, but I'll leave earnings multiple expansion.
Yep.
Got it excellent and then just a quick follow up here on the IEP.
Yeah, how conversations with stakeholders progressed, some remaining infrastructure program here I mean, do you see opportunity to achieve a constructive stipulation before the autumn timeline that you talked about a moment ago.
Okay.
Ooh.
We've had a pretty good track record of <unk>.
Resolving these issues through settlement process.
That would be my prediction here again.
Julien so.
But you can never.
Guarantee that but we're proposing to do things that are completely consistent with the state energy Master plan.
A huge social justice component associated with it in terms of job creation for underemployed members of our community. So I really think it's a perfect fit for things that the state has said it wants to do.
So.
I would be very surprised if we couldnt settle something eventually but I can't guarantee it.
Got it so look for something in the summer or something like that I think so the early autumn.
Got it excellent we'll leave it there. Thank you. Thanks, Thanks Julien.
Your next question comes from the line of David Arcaro from Morgan Stanley .
Hi, good morning, Thanks for taking my questions.
Yeah, let's see it's been a thorough call, but maybe just one question I had was on the thoughts on customer growth going forward after posting 1% growth in both electric and gas this past year wondering.
If that's it.
In the ballpark that you would expect going forward.
Yes, I think thats, a reasonable number to use on a go forward basis. It's if we look back over time and forward youre kind of in that ballpark.
A reasonable assumption.
Okay great.
And then maybe just any thoughts on the on the timing of the remaining $250 million of buybacks.
We haven't put a firm date out there, but I think our language that we said was in the near future and so I would think about it fairly near term.
Okay, great. Thanks, that's all I had thanks, Dave.
We'll take one more question. Your next question comes from the line of Sophie Karp from Keybanc.
Hi.
Morning, Thank you for squeezing me in here.
Paul.
Yes.
Question, if I may could.
Could you comment on that.
The recent spike in energy prices and the impact.
Youre correct in the bills and I appreciate your comments that youre not in the energy business right, but your customers are nonetheless.
Mike.
Uh huh.
Is that right now.
These increases.
And how important that's in the future.
Btu or elsewhere.
Yes Sophie.
I think that the mechanisms that new Jersey uses leaves us in pretty good stead with respect to what Youre seeing here and it works both ways. So we've seen commodity prices come down over time and the mechanisms that a slower kick in of some of those reductions which they have seen.
And when you see spikes in time.
The impact similarly, youre going to be slower to find their way to the bill and frankly that the duration of those spikes might be such that they don't find their way on the bill and what I mean by that one is if you think about the bgs auction that we referenced earlier that just happened that was a.
A re up of one third of the obligation to customers for three years with the other.
Two thirds being based upon the last two year auctions and so those auctions happen once a year in February starting in June so the depending upon what you see from a pricing impact and how long it lasts you'll either see one third of the supply side move through over time and increase or to the extent that you have shorter term proto patients that don't get bid into that February auction you won't.
At all so we talked about an overall reduction from the most recent auction and again that was driven by the the update to the capacity prices going from using a prior price to using what the actual prices actually were and that true up.
It was a big driver in bringing that build out on the gas side.
We can implement 5% increases to the bill and we have done that as we step through time.
But in the overall scheme of things those are limited in how they get move through so I think you don't see spikes on customer bills, you tend to see things get moderated by virtue of the mechanisms that have been put in place, which I think are are very helpful from that perspective.
If you do see longer term changes in prices thats, when youre going to start to see things.
Move its way through the bill.
Terrific. Thank you very helpful color I appreciate it thanks Sophie.
That is all the time that we have for questions.
Please continue with your presentation or closing remarks.
Okay, well, thanks, everyone for joining us.
Hopefully you've gotten the information you need, but I know from Carlotta and Dan that will be on the road a couple of major conferences coming up in the next few days and we'd be more than happy to meet with folks and provide greater clarity, but at the end of the day I just can't help but overemphasize, we are well on track to deliver on what we promised we would.
Ever last September .
The dividend increase is in place.
The share repurchase program is well underway the growth rate is intact.
And we are 90% regulated utility and that of the 10% is basically a contract on long island strong nuclear operations.
<unk>.
And ongoing gas supply.
Contribution so.
We're excited about the opportunities and prospects going forward in terms of the utility cap.
Capital program being the underlying.
Driver of our growth.
But the additional augmented opportunities that may come from regional offshore wind all under a very very strong balance sheet.
And as far as the eye can see not in need of additional equity. So we can provide more color. When we see you in person and we look forward to.
That opportunity. Thank you all have a safe.
Good day.
Ladies and gentlemen that concludes your conference call for today, you may now disconnect and thank you for participating.
Okay.