Q4 2021 NiSource Inc Earnings Call
Lloyd Donald and Sean a quick reminder, some of the statements made during this presentation will be forward. Looking these statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements.
Information concerning such risks and uncertainties is included in the MD&A section and risk factors sections of our periodic SEC filings.
Additionally, some of the statements made on this call relate to non-GAAP measures for additional information on the most directly comparable GAAP measure and a reconciliation of these measures. Please refer to the supplemental slides and segment information, including our full financial schedules also available at <unk> Dot com.
With all of that out of the way I'd like to turn the call over to Lloyd.
Thanks, Chris Good morning, everyone and thank you for joining us.
Before we get started I'd like to take a few moments to thank Joe Hamrock, My predecessor, as President and CEO .
For his outstanding service deny source.
Joe retired last week as part of the long planned transition.
Im grateful for Joes leadership, and his decade of service to this company.
He left nice lifts in a strong position poised for years of growth and success.
We send our best wishes as he begins the next chapter of his life.
I expect to build on the significant progress <unk> has made in the past year.
Including our strategic initiatives.
<unk> next.
The management system and your energy your future our transition to the future of energy.
I want to take a step back and remind everyone of our mission.
That is a nice source being a great place to work, where we're all relentlessly focused on safety.
Excellent.
Customer experience and delivering on our commitments to shareholders as we did in 2021.
Our strategic initiatives are what will enable us to achieve our mission of being relentless champions of safety.
And service for our customers.
And it will help set us up for long term success.
In short these initiatives are all about people.
Our plans for investment driven long term sustainable growth remain on track.
We continue to expect these plans to drive industry, leading compound growth of seven 9% and diluted net operating earnings per share through 2024.
My experience in the past few years on the board of directors has given the unique insights for executing and extending <unk> growth plan.
I plan to conduct a review of the business with the goal of ensuring that we are best positioned to drive long term value for all stakeholders.
And I look forward to further discussing our strategic initiatives with our employees and with shareholders in the coming months.
Now.
Let's start our discussion.
Hopefully you've all had a chance to read our fourth quarter earnings release.
Which we issued earlier today.
As we look at <unk> results in 2021, we see strong financial and operational performance across key areas of the business.
Advancing execution on our portfolio of renewable generation investments is matched by significant progress on our regulatory initiatives across all our states.
We are enhancing safety, providing customers with new ways to do business with us.
And moving forward on our plan to reduce scope, one greenhouse gas emissions, 90% by 2030 versus 2005 levels.
Let's now turn to slide three and take a closer look at our key takeaways.
I mentioned earlier, our CEO succession.
In addition to Joe's retirement fund.
Sondra Barbour and Cassandra Lee joined <unk> Board of directors.
The addition of Sandra and Cassandra further strengthen our leadership experience diversity and talent from the Nisource Board.
Shifting to full year 2021 results, we exceeded both our original and updated guidance ranges we.
We reported earnings of $1 37, non-GAAP diluted net operating earnings per share.
Or and EPS.
We are reaffirming our 2022 guidance of $1 42 to $1 48 diluted EPS non-GAAP and.
And we are reaffirming our forecast for 79% compound annual growth rate from 2021 through 2024, including near term annual growth of 5% to 7% through 2023.
In 2022, we expect two four to $2 $7 billion in capital expenditures as we continue to execute our core infrastructure programs and our renewable generation plants.
The preferred plan from NIPSCO as 2021 integrated resource plan or ERP advances our intention to retire all coal fired generation between 2026 and 2028.
Opportunities for additional generation investments will be better understood and we continue to analyze the results of the proposals received in the IRB process.
We received final orders and gas rate cases in Pennsylvania.
<unk> in Maryland, which.
Which provide balanced outcomes for all stakeholders.
Ohio case continues to advance towards a third quarter implementation.
And NIPSCO gas cases is in constructive settlement discussions.
Another key regulatory outcomes NIPSCO electric T. This order representing $1 6 billion of investments in safety reliability and improve customer service.
Before we get into our specific nitrous utility highlights.
I'd like to take a moment to call out our safety progress in 2021.
Nashville has reached important safety milestones.
They include substantially completing the installation of automated shutoff valves on our low pressure gas systems.
We also expanded deployment it vaccaro advanced leak detection technology.
We successfully completed the stage one of our certification of our safety management system by Lloyd's Register.
And we bought an additional resources to strengthen our quality management system capabilities across all of our companies.
I'm excited to say, we expect to issue our very first annual safety report at about the same time as our annual report.
I would encourage you to read more about our progress.
Now.
Let's take a look at the Nisource gas distribution highlights for the fourth quarter starting on slide nine.
The Columbia gas of Ohio rate case continues to progress on schedule.
Following request, an annual revenue increase of $221 million net.
Net of the trackers being rolled into base rates, which support continued investments in safety and reliability.
We received an order approving a settlement in the Columbia gas of Kentucky rate case.
The settlement supports continued investments in safety and infrastructure replacement and.
And includes an overall increase in revenues of approximately $18 million.
In Maryland, we received the final order from the public Service Commission.
The order includes a revenue increase of approximately $2 4 million.
The Pennsylvania Public utility Commission approved our rate case settlement is filed.
It provides a revenue increase of $58 $5 million and new rates went into effect in late December .
The settlement continues our program of infrastructure modernization supporting safety and reliability.
We are engaged in constructive settlement discussions and NIPSCO gas rate case.
The cases focused on infrastructure modernization and providing safe reliable service, while remaining in compliance with state and federal requirements.
If approved.
New rates would take effect between September of this year and March of 2023.
Let's turn now to our electric operations on slide 10.
As noted earlier NIPSCO electric tedious plan received final approval in December from the Indiana utility regulatory commission or <unk>.
This is a five year $1 $6 billion program.
Which includes newly identified projects aimed at enhancing service and reliability for customers as well as some previously identified projects.
The other items on this slide relate to our renewable generation strategy and I'll turn it over to Shawn Anderson to give more detail.
Thank you Lloyd.
The preferred plan from NIPSCO as 2021, ERP confirmed the retirement of the last coal fired generation unit in Michigan City as well as two vintage gas, peaking units at the Shaffer generating station site and advance the window for these retirements to occur between 2026 and 2028.
To support reliable generation when these units retire enhancements to our portfolio will require replacement capacity from technology, including solar Standalone battery storage and natural gas, peaking resources.
We estimate that the new investments of up to $750 million will be required to support the retirement of our last coal fired units.
As we evaluate the actual projects required to support these portfolio additions we are evaluating all forms of technology bid through the RFP process launched in May we continue to analyze these proposals and complete due diligence on these projects available, which align with the preferred plan identified back in November .
We expect to be able to share the results of our analysis during the first half of 2022.
Meanwhile, we are making steady progress on the execution and construction of renewable generation projects, resulting from NIPSCO as 2018 ERP.
We continue to expect to invest $2 billion.
In renewable generation by the end of 2023 to replace the retiring capacity at Schaefer.
Our most recent project to come online and begin operations is Indiana Crossroads, one or 302 megawatt wind facility, which entered service in December .
This project joins the Rosewater and Jordan Creek wind farms already operational and contributing to NIPSCO power generation fleet across 2021. Meanwhile, we expect four additional projects to be in service by the end of this year. They are dun's bridge solar one.
Indiana Crossroads solar.
Brickyard solar.
And Greensborough solar.
These projects will represent our first solar facilities, while the Greensboro project is our first project, which also includes storage.
We expect the final seven renewable generation projects needed to replace the retiring capacity of Shaffer to come online in 2023.
Our project and commercial teams continue to work tirelessly alongside our project partners to advance these projects as initially intended.
And this work continues we remain in close contact with some of the strongest developers in the renewable energy space regarding the progress of these projects and are actively monitoring any potential delays associated with the construction process, including the dynamic nature of the global supply chain.
<unk> also continues to engage with producers and developers focused on renewable natural gas hydrogen and emerging storage technologies.
We continue to support the advancement of these technologies and fuels to support accelerated and deeper decarbonization solutions leveraging existing assets such as the natural gas system.
We seek a risk informed understanding of the options and technologies, which may emerge as pathways toward further de carbonization and are encouraged on how our communities and service territory. Good benefit from the development of these technologies.
Now I'd like to turn the call over to Donald who will discuss our 2021 financial performance in more detail.
Thanks, Sean and good morning, everyone before we dive in I want to update everyone about our Investor day. It will take place in May and we will get a specific date and location details to you as soon as they are finalized.
Plan to provide an extension to our capital investment and growth plan, a detailed update on our generation transition and ESG profile as well as give you an opportunity to hear from the leaders of our businesses.
Hope you will be able to attend and I look forward to speaking with you.
As Lloyd mentioned, a few minutes ago, our 2021 earnings exceeded the top end of our guidance range of $1 32 to $1 36.
We have also reaffirmed 2022 guidance of $1 42 to $1 48, and our long term dilutive.
EPS growth rates.
Looking at our full year 2021 results on slide four we had non-GAAP net operating earnings of about $571 million.
Or $1 37 per diluted share compared to non-GAAP net operating earnings of about $507 million or $1 32 per diluted share in 2020.
The 2021 results reflect our ongoing execution of infrastructure investments and efficiencies, resulting from our <unk> initiatives offset somewhat by the sale of Columbia gas of Massachusetts, which closed in October of 2020.
Taking a closer look at our segment non-GAAP results on slide five gas.
<unk> distribution operating earnings were about $674 million for 2021, representing an increase of approximately $6 million versus last year.
Operating revenues net of the cost of energy and tracked expenses were lower by approximately $94 million due to the sales CMA.
Other operating expenses were lower by approximately $100 million due to the sale of CMA and are nice source next initiatives.
In our electric segment.
non-GAAP operating earnings for 2021 were about $387 million.
Which was about $25 million higher than in 2020.
Okay.
Operating revenues net of the cost of energy and track expenses increased by approximately $24 million due primarily to infrastructure investment programs and increased customer demand.
Other operating expenses were essentially flat to 2020 levels.
Now turning to slide six I'd like to briefly touch on our debt and credit profile.
Our debt level as of December 31 was about $9 8 billion.
Of which about $9 2 billion of long term debt.
The weighted average maturity on our long term debt was approximately 14 years and the weighted average interest rate was approximately three 7%.
At the end of the fourth quarter, we maintained net available liquidity of about $1 6 billion.
<unk> of cash and available capacity under our credit facility and our accounts receivable securitization programs.
Last Friday, we successfully extended our revolving credit facility for another five year term.
The new facility capacity remains at $1 85 billion.
Essentially the same borrowing terms.
We also continue our commitment to retaining our investment grade credit ratings in all three major rating agencies reaffirmed their ratings with stable outlooks in 2021.
Taken together this represents a solid financial foundation that will continue to support our long term safety and infrastructure investments.
As you can see on slide seven we are reiterating our 2022 capital forecast of two four to $2 7 billion.
Yeah.
Taking a quick look at slide eight which highlights our financing plan. There are no changes to our plan since April equity unit issuance.
I would highlight that this balanced financing plan continues to be consistent with all of our earnings growth in credit commitments.
Thank you all for participating today and for your ongoing interest in and support of Nisource, We're now ready to take your questions.
At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad.
Your first question comes from the line of Julien Dumoulin Smith with Bank of America. Your line is open.
Hey, good morning, Jim.
Gratulation deployed again.
On the latest.
Opportunity here for you.
Can you, perhaps give us some initial flavor by chance on what the strategy update might entail here I know you made some comments already in the prepared remarks, but I know cost containment and reduction admittedly has been top of mind for you Lloyd but I'm wondering if you have any further thoughts you'd like to share at least at this point in terms of the process there and I'm also cognizant that you.
As stated in the prepared remarks that you still have this may timeframe for an analyst day, but how are you thinking about this opportunity today, and especially considering the inflation backdrop that we've been talking with a lot of companies about.
Sure. Thanks. Thanks for your question Julien, Let me start by saying when you look at the current plan I have a lot of confidence in the current plan. The current plan talks about 7% to 9% compound annual growth rate and I think that's really good our strategic review is really wanted to take a hard look at how do we extend that plan.
Past 2024, it was that mean that means we want to look at everything we're going to look hard at the portfolio of the current portfolio we have.
And when we look at the performance of that portfolio or is that portfolio.
Executing in a way that's provided is maximizing shareholder value, we're going to look at the content of that portfolio should we keep all of the LDC is all of the businesses. We have should we buy some should we sell other other businesses versus I think thats.
That's part of the view, we're going to look hard at our cost structure.
The efficiency productivity and some of our operational metrics. So we're just getting started on that.
I think that.
We have team the board will be involved.
And Thats moving forward, but a comprehensive look at the business.
Just to add a little bit to that I think as a new CEO in an on on an ongoing basis.
Plan is to constantly evaluate the nice horse portfolio and make sure we're maximizing shareholder value.
Excellent. Thank you and just if you can clarify that last comment.
What are the criteria here, how are you thinking about the merits or what kind of thresholds to see in order to especially sell or divest other assets year end or frankly by since you introduced that as well here.
But if you don't mind.
Don't have the criteria established shed a little bit too early for that.
We are looking at the data points out there we've seen the Dominion transaction, we've seen some of the other transactions there'll be data point that feed into our process, but I can't sit here and tell you I have the criteria criteria established right now.
This is what my.
Six day on the job. So I don't have all those things done yet, but we're working really hard on it.
Yes.
Perhaps you can give us there and then just last little detail if I can just.
Solar projects here I know that they are moving around a little bit because of the the ongoing of euro policy backdrop, but no shift really in terms of meaningful earnings impact that you know quite yet or more importantly, probably rate case timing right.
So not right now, but I'm going to turn it over to Shawn Anderson, maybe a little more detail on that thanks Lloyd Thanks for the question Julien.
You said it it's premature to speculate how any potential how any potential delay.
Might might change the regulatory strategy here and I know just as it did in my prepared remarks that we have not seen a delay yet that it's extended beyond the timeline. We initially planned for so there's a lot that's going to play out here. There is a couple a couple of other considerations just to note, Indiana as you as you probably already know allows for a forward test year, we view.
Why is that historically for both our electric and gas cases in the past. So it has some precedent there I'd also add some precedent for rate step implementations.
It's really important to remember that all of these projects have already received an approved CPC and so while the timing might have some potential to flex. We believe the need for these rate base additions is just really clear in terms of how they'll add value for our community. So.
As you would expect we will continue to be active and will evaluate monitor this and much more to come here in may or at the midpoint of 2022.
Excellent Thanks, guys I'll pass it off.
Your next question is from the line of Turkish Chopra with Evercore ISI. Your line is open.
Hey, good morning team. Thank you for taking my question.
Just.
Congratulations on your appointment.
Thank you.
Sure just.
Can you clarify for us on the analyst day in May is that going to be extended through.
2008, or do you have sort of a terminal year in mind that we're going to see your plans through.
Yeah.
Yes, let me set expectations for analyst day, I can't promise you on analyst day that our strategic review will be complete I think that we'll have more clarity on where we are and what the plan looks like but.
I wanted to dive in and understand the organization in the business a little better we're talking about analyst day around the may timetable.
And.
I just don't believe we'll have the whole strategic review done by it and I think thats really fast.
<unk>.
But I do think we will have an idea what the strategic review looks like and the timetable for when we will complete the strategic review by Analyst day.
Got it that's very helpful. So I won't be complete, but youll give us sort of the bookends of.
What the process might look like and.
When that process might come to a conclusion.
Correct.
But just in terms of like the extension of the Capex plans and EPS growth.
What should we be expecting too.
To see this plan get extended due.
Let me turn it over Donald a little more detail analyst day, yes.
Yes.
Thanks for the question, we are planning to extend the financial plan. If you think about that next ERP that 'twenty one ERP, we just filed.
Last quarter.
With the.
Future retirement of Michigan City, we do want to take the plan out.
Two at least the.
The period of retiring that plant. So it would certainly be to 2027 or 2028, depending on what the outcome is there.
And then certainly we would provide an update on long term strategy in ESG profile as Lloyd is provided.
Alright, thanks, so much for that color guys I will get back into queue. Thank you.
Your next question is from the line of sharp.
With Guggenheim Partners. Your line is open.
Hi, guys.
Jim's award on for Shar.
Hi.
We were wondering if just to piggyback on the last couple of questions about.
The analyst day, and then one on the Indiana RFP.
So we've got the 2028 year there.
When you think about the way that you currently guide and provide disclosures.
We're curious if we might expect to see some changes there or if we should be expecting to see the same type of disclosures, but simply moved forward.
Oh to future years.
Use this as an opportunity to change the way you guys.
That's something that we're exploring.
Certainly want to look at the plan.
How the plan comes out.
We want to be able to communicate that in the most effective way.
For our shareholders.
But still.
Still a step back and you think about what drives our annual earnings.
Our annual Capex programs and it's those trackers that provides the predictability.
<unk> of our earnings growth and our cash flow growth and.
And so that's always going to be the strong foundation of our long term plan, but certainly want to make sure that as we look at the next phase of our plan.
We're communicating that in a way that provides the most <unk>.
Impact for shareholders to understand the long term value of Nisource.
Got it thank you.
And then on the Indiana, ERP and the current RFP analysis do.
Do you expect that you would have include any amount of the $750 million.
Of potential incremental capex, there by at the analyst day or would that be something that you'd be updating.
Post analyst day.
Yes that is our intention that that.
That next tranche of potential investment would be included in that financial plan.
At that time.
I think Bob current last analyst day, we provided a range.
Of the potential investment and I'd expect we'd be in that same place.
Hey.
Got it. Thank you very much I'll jump back in the queue.
Your next question comes from the line of Travis Miller with Morningstar. Your line is open.
Good morning, everyone and thank you.
I was wondering on the Indiana electric rate case is there anything specific that has to happen either in your eyes or just administratively before you can file that later this year.
Pablo do you want to handle that one.
Yes. Thanks.
Thanks for the question no I mean, I think we're set up in terms of the timing of when we're looking at right now is making sure that.
All of the planned investments around the renewables that are going to be getting developed over the course of this year and next year on the timing issues. We've talked about related to that are all going to line up with the expected.
Service dates that we need in order to support that rate case, all of the core approvals the certificates of public convenience and necessity. The <unk> those are all of them.
Approved in advance and so the prudence of these investments that we're going to do are essentially have been supported so now it's just making sure that the timing of the projects aligns with the timing of the rate case and the windows for that rate case and that will be the driver, but everything is lined up for that for the second half of this year.
Okay, and then just real quick on that.
It would be more of the capital side of it then.
Anything that happened with operating expenses.
Idea that that would be the biggest.
Factor in terms of.
Great.
Or whatever correct, okay, yes, thats right it would be it would be the capex associated with the renewable projects and when that will go in service and be considered used and useful for the purpose of the rate case.
Perfect Okay great.
And then.
Obviously I mentioned the portfolio review.
If you were to make any kind of changes, particularly so what would be the use of capital for the thinking.
<unk> potential equity to fund either the electric side or some other.
Initiative.
Take me through your thought process in terms of how you view that any kind of <unk>.
Capital incremental capital.
I think there are couple of ways to think about that one is if.
If you were to sell off some pieces of the portfolio that would eliminate the need for equity in the future. So that's a possibility. There is also a possibility that if you sell a piece of the portfolio you can find some other attractive investments to make.
Whether it's in capital programs for <unk>.
Your energy your future on the ESG side or whether there are some are some attractive properties are.
That we may want to purchase so I think I don't want to speculate on that.
But I think what we're trying to do is make the best use if we if we sell something.
The best use of efficient use of that capital to add shareholder value.
Okay great.
Thanks, so much Richard.
Yes.
Your next question is from Richard Sunderland with Jpmorgan. Your line is open.
Hi, good morning, Thanks for the time today, maybe just starting with the Ohio any sense on the near term pace. The preceding just really curious if youre seeing anything on the ground here.
So.
Yes.
Let pablo handle the detail I think Ohio is moving along.
At a what I'll call a reasonable pace, we don't have any concerns with Ohio.
It's just taken time Pablo you want to give a little more detail.
Yeah happy to thanks, Thanks, Richard.
There's a lot on the docket at the PUC or right now there is a D. P&L case that is going to hearing you've got a Duke electric case that is out there.
Still in the discovery phase.
And it's been awhile since.
Columbia gas of Ohio has filed a rate case, I will say that about half or a little more than half of our total cost of it have already flowed through extensive reviews and our tracker programs that we have over the last decade or so.
And so we would.
I'm not expecting any issues or problems the rate cases going fine. The next step is going to be to get the staff report, we expect to see that hopefully sometime in the next several weeks to a couple of months and we're still projecting an overall rate case timing of concluding sometime in the middle of the year.
Moving forward as Lloyd said as we would expect and no concerns on our part there.
Okay.
Understood. Thank you for the color there maybe just one other one what are the regulatory requirements with delivering the 2018 IOP projects I'm curious, how you see kind of supply chain risks within that context.
Sean.
I'm, sorry could you just repeat that the phone cut out right. When you asked that question.
Apologies just the regulatory.
The requirements with delivery into 2018, <unk> projects and how you see supply chain risks specifically in that context.
So the 2018 projects have all been approved from a <unk> standpoint. So that's the first step in the process, whether it's a number of steps to process is the first real regulatory step that you've got a cross through that demonstrates the prudence in terms of the projects themselves and then they need to be executed its a process of course through the supply chain process to get.
The materials on site and then to construct the facilities that can take six to six months to 12 months, depending upon the size of the facility and where it's being constructed.
That's where the remaining projects are outside the three that are operational or in the construction phase or to be constructed phase and the project team is currently working with the developers to then done stand those projects up.
Right now the schedule the schedule for the projects remains with four more projects to be.
Or operational this year and then the remainder of the projects in 2023 that would all take you through construction and then as we've already sort of highlighted here on our rate case standpoint, you will file a rate case and do a forward look test year that moves through that in service date to then pick up those investments as part of <unk>.
Your regulatory requirement Youre capex additions.
Got it so just to be clear.
Really around timing of the rate cases, we discussed earlier and interim required delivery dates or other obligations coming out of the CPUC and process not not so much to watch here is that fair.
Yes, that's exactly right and Youll, we'll step through each project individually, there's multiple steps through that in terms of getting those constructed bringing bringing materials onsite et cetera. So we'll step through each of those projects and then sweep all those investments into the rate case and proceed accordingly.
Great that was very helpful. Thank you for your time today.
Slowly.
Your next question is from the line of Ryan Levine with Citi. Your line is open.
Good morning.
A question for Lloyd what are your priorities in the first hundred days as CEO and more specifically what work processes streams are underway to evaluate the business operations as part of this broader business group Yep.
So I mean, a couple of things that we're going to continue on one is nice source next week.
We've taken some cost out of the business over the last couple of years with operational efficiency. So we wanted to kind of wrap up the next phase of nice sort of snacks.
I think as part of the strategic review process, we have an initiative called your energy your future.
When you look at that Thats, the retirement of coal plants by 2028, what's the next phase, especially focused on the gas distribution system.
I think decarbonize in the gas distribution system.
Good for the customers and I think it will present, an opportunity for the company to make investments. So we're looking hard at that and then as I mentioned earlier continue to look hard at the portfolio. So those are probably the three focus areas.
Thanks, and then as you do this business reviews should we look for some higher near term costs.
To help evaluate the different options.
Is the company doing.
This business review completely internally or is there more is there more reliance on third party consultants.
Yeah, I think the cost efficiencies that we know about today are in the current guidance. So when you look at our targets for next year and then the following year.
The 79% we have cost efficiencies built into those look harder to try and drive a little more but right now I mean, those are the guidance numbers, we have and I have a lot of confidence in hitting those numbers.
Okay and then last question for me is more specific on the quarter.
What's the driver of some of the O&M cost declines in the electric business and what drove some of the higher cost around O&M in the gas.
Yes, when you look at the electric business.
The cost decrease is related to shutdown of coal plants two of our street for units retired in 2021.
And then on the gas business, it's continued spend and investment in our safety and SMS program. So.
We will continue to see that over the next couple of years.
But.
The objective of Nisource next is to help mitigate <unk>.
Inflation that we see every year, so that we can afford to continue to invest in safety and reliability.
Appreciate the color. Thank you.
Your next question is from the line of <unk>, Kim with Goldman Sachs. Your line is open.
Yeah. Thank you my question then.
More on the O&M side, but to pick it back up your guys just comments on higher gasoline M related to SMS. My question was going to be kind of have you hit a pretty good run rate in terms of the spending on the SMS side for safety and reliability purposes or.
Are we seeing that continue to trend up over the years.
You've.
You talked about cost management as one of your key priorities as well so other than this type of time span, which is definitely very important I think.
For the company what are some other general areas of cost efficiencies that we should be looking out for.
So let me start with SMS, because I do want that I didn't mentioned that Sarah we are committed to continue with SMS I think in this business I think about that SMS I think about operational excellence I think that's table Stakes in this business, we have to operate well and we have to continue to invest in those programs.
On the other hand, we're going to control cost in those programs and we want to make sure that we invest effectively and as a resolve those programs I think over time, you should get cost efficiencies out of them. So the cost ramps up a little bit.
As the people who operate get used to the new ways of doing business, you should gain efficiencies out of that.
And again.
Other issues not issues that in our guidance. We will continue to look at corporate services just like most companies we're looking at productivity.
And any other costs or any other cost that we spend in the business, making sure that those costs are aligned with other high performing organizations.
Understood.
My only other question is I think this is the second quarter.
Reiterate it that seven to nine but off typically a higher base and at this time off of the actual 2021 results. So as we go forward I guess in future years is that something that we should.
Think about as a something that you will do going forward kind of guiding off of.
Movements on an annual basis on an actual basis.
I'd say, it's too early for me to provide guidance.
On next year's results and so give us some time.
I'll go back to the.
Core drivers of our earnings.
Annual Capex programs and Thats really whats provides that clarity and consistency of earnings and allows us to guide off of last year's earnings and update after that but I won't I.
I won't guide for 2023, yet.
But certainly expect that we will.
We've got confidence that we'll be in that seven to nine range off of 30 after 2021.
Sure.
Got it thank you so much.
Yeah.
Your next question is from the line of Nicholas Campanella with Credit Suisse. Your line is open.
Hey, good morning, Thanks for taking my question.
Just in terms of the strategic review comments and thinking about portfolio rotation I recall when you sold the Massachusetts assets you did have some dis synergies due to.
Cost allocation model from the parent down to the op codes and I'm, just curious if that hurdle exist kind of across the entire portfolio and how we should kind of be thinking about that if you are considering potentially.
Rotating capital here. Thanks.
So I think that hurdle is going to exist across the portfolio. When you rotate something out and you got to deal with the dis synergies I think that we know.
We are here and we need to manage those.
Decided to rotate something off the portfolio, we have to consider that in the math, but we also have to consider the fact that you can dis synergies can be managed and that'll be a part of rice and that'll be part of our strategic review process as we think about that but we believe they can be managed.
Got it thanks, a lot for that.
And then just one for Donald on the on the seven to nine CAGR, just like the relevant puts and takes.
You guys issued the equity units last spring and share count in the outer years can kind of move around depending on where those are re marketed.
Does your does your updated 79 CAGR kind of take into account the increase in share price that we've seen.
It does we're always paying attention to.
And updating our models for share price and share count.
That is in our guidance right now, but again.
We want to make sure that we've got some cushion as share price moves around.
We're not moving outside of our guidance. So we're confident where we are.
Certainly recognize the appreciation in the stock price over the last year and a half.
Okay.
Great. Thanks, a lot.
Your next question is from the line of Steve Fleishman with Wolfe Research. Your line is open.
Okay.
Yes, good morning.
So.
Lloyd just.
High level curious on the.
You've been around both now.
Nice work on the board and electric utilities overtime and curious if you have a view on kind of the mix between electric and gas and is that an important aspect as part of.
Your strategic review.
I think it is Steve I think as we look at the strategic review.
Some of the companies that are.
Receiving higher multiples have.
A higher mix of electric and gas and I think we have to consider that as part of our strategic evaluation and it does that makes sense and is there are there opportunities to shift to more electric versus gas I don't think we need to be out of gas I think in the states that we operate in.
Gases.
Very valuable it may not be popular but it's valuable so I think as we look at this portfolio we have to consider all those options, but also consider where we operate.
Great that's helpful.
And then.
I just wanted to follow up on the renewables projects because.
I just wanted to clarify maybe I guess as Sean just are these projects are all on schedule.
As of now.
And just.
Yeah.
It sounds it sounds like.
Our on schedule, but then youre, having to monitor everything so I guess I just want to clarify just.
Where things stand.
My recollection is you had.
Pretty strong contract terms in the event that anything was delayed so just.
Could you remind us how you are protected there.
At all.
Yep. Thanks, Steve I. Appreciate the question. So all projects are currently scheduled to be in service by the end of 2023, that's the critical window. So we have the benefit of the remainder of the calendar for 2022 and 2023 for each project, which is at a different stage in its lifecycle to work through what's necessary to get it into service by.
The end of 2023, but that does require some active monitoring in terms of the partnership agreement the developers themselves. They're all sophisticated top tier developers. This is this is there a critical core competency. When you think of names like Nextera, EPR and better G. So theres diversity and that was intentional across the <unk>.
<unk> themselves, so as not to have concentration risk around one developer.
We're working very closely with those developers as they continue to move through the process, but everything remains with a projected 2023 and that's the critical date for us to watch and then in terms of contractual protections each agreements a little bit unique but to your point there are provisions to provide NIPSCO capacity is.
It relates to the agreements there is different levels of indemnity protection and flexibility in terms of even component suppliers. When you start to get into the weeds of the agreements. Each one is unique but the important point for customers is that the energy is contracted at that price that protects our customers thats an important part of this.
That's what we're seeking for with all 14 of these projects.
Thank you.
Your next question is from the line of James <unk> with BMO capital markets. Your line is open.
Okay.
Thanks, guys. Thanks for the time.
Just I guess circling back to your comments on the strategic review I know Youre, just beginning the process, but it sounds like you're casting a fairly wide net both in looking at both buying and selling assets so going back to Steve's question.
Is this kind of the initial.
Scope as to kind of cast a wide and see what kind of falls out of that process or is.
As part of the strategic review also looking at maybe.
Maybe even a more in depth sort of view, how does sort of change the business profile to your point on the differences between public market valuations on gas versus electric.
Okay.
Thanks for the question and I think Youre right. The goal here is to cast casting that wide.
Broad and then kind of kind of zoom back in.
We're going to look at everything.
And we're going to look at everything so we're gonna start wide cast back and we're going to take a hard look at everything.
I've said, it or I don't want to repeat myself, but we'll look at the portfolio operational efficiencies rotation mix of electric versus gas, but everything's on the table is the point.
Great and then I guess the other question and it's also I think Julian asked the question too, but I know again I realize you're six days on the job and we are starting this process but.
When you when you kind of look at monetization or even acquisitions.
I'm, assuming that there is probably some guideposts, whether it be you know.
Credit accretion or.
Maintenance of credit are EPS accretive.
Do you do you see from your previous vantage point, a lot of opportunity it's too.
Maybe go on the offensive and shift that mix through accretive acquisitions.
Because in general it seems like.
Theres not a lot of that.
Really good.
Values out there in the utility, especially when you when you go into a sort of a private market auction or even then.
<unk> auction bid.
Well.
We're going to be <unk>.
We buy we're going to look for value.
Say that one of our job is to create shareholder value and we're going to look for accretive acquisitions. If we purchase if we fail we want to try to get as much as we can for any asset that we have and I think so.
And that's the challenge and the strategic evaluation and everybody wants to.
No.
Accomplish the same objective right.
Hello, Sir Hi, So we'll if we're in that game.
I think how you how you look at those things and how you do that in your strategic criteria.
There's going to be really important but everything we do.
Is to gain shareholder value, which means that we're going to try to get as many accretive accretive.
Everything accretive, but we also want to protect credit quality.
You got to pay attention to the balance sheet. So we get all of those things.
Sure.
We're going to get after it.
Great.
Thank you so much for that appreciate it and best of luck.
There are no further questions at this time I will now turn the call back over to the CEO Mr. Lloyd Yates.
So first of all thank you for thank you for your questions and I want to close by just reiterating a few key takeaways.
Our 2021 earnings of $1 37.
For share exceeded the top end of our guidance range.
Number two we are reaffirming our guidance for 2020 to $1 42 to $1 48 per share and our long term growth commitments are reaffirmed as well.
Number three we continue to evaluate <unk> portion of the investment needed to replace the retiring coal fired generation outlined in our preferred plan.
2021 ERP.
Okay.
Or are strong regulatory execution continues no further illustrated.
Some late breaking news last night that.
That NIPSCO reached a settlement in principle in the gas rate case for <unk>.
Details to follow there so our regulatory team is really executing strong and as Donald mentioned, we look forward to presenting the next phase of our strategy and financial plan at our Investor Day.
In May we will kind of get.
Give an update on where we're moving with our broad strategic review. So thank you for your comments.
And we appreciate you joining us this morning, and please stay safe. Thank you.
Ladies and gentlemen, thank you for your participation. This concludes today's conference call you may now.