Q1 2022 Emera Inc Earnings Call
Yeah.
Good day and thank you for standing by welcome to the Emera Q1, 2022 Analyst Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press Star One on New York Dallas Allen.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to had a conference over to your speaker today, Dave Johnson, Vice President of Investor Relations. Please go ahead.
Thank you Jerome and thank you all for joining US. This morning at Amira as first quarter 2022 conference call and live webcast mirrors first quarter earnings release was distributed this morning by newswire and the financial statements management's discussion and analysis and the presentation being referenced on this call are available on our web site at a mirror.
Dot com.
Joining me for this morning's call are Scott Balfour and parents, President and Chief Executive Officer, Greg Blunden mirrors, Chief Financial Officer, and other members of <unk> management team.
Before we begin I will take a moment to advise you that this morning's discussion will include forward looking information, which is subject to the cautionary statement contained in the supporting slide.
Today's discussion and presentation will also include references to non-GAAP financial measures you should refer to the appendix for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure and now I will turn things over to Scott.
Thank you, Dave and good morning, everyone.
EMEA reported solid first quarter results. This morning, with 92 of adjusted earnings per share and a 42% increase in operating cash flow compared to the first quarter of 2021.
The four penny reduction in year over year adjusted earnings per share. This year. This quarter was largely driven by decreased contributions from Amir energy, which in 2021 performed particularly well as a result of market conditions created by winter storm here in 2021.
Our regulated utilities delivered an 8% increase in adjusted earnings per share this quarter, highlighting the strength of our regulated portfolio and the consistent reliable earnings growth that we can expect from these businesses.
As an example of that growth our team in Florida recently achieved another significant milestone in our solar program as the first tranche of solar wave two 235 megawatts of new solar generation was placed into service.
I am proud to say, our total solar investment to date of over 800 megawatts positions Tampa electric with the highest proportion of solar generation per customer of any utility in the state.
These investments have obviously reduce the carbon intensity of the generation fleet, the Tampa electric but they've also driven value for our customers through fuel cost savings something that is particularly beneficial for customers in the current market conditions.
And while not the only factor rising fuel costs are a significant contributor to the current high inflation that we're experiencing and working hard to manage on behalf of our customers.
The fuel the asset strategy, we've been executing on for many years, where we've been investing to reduce the carbon intensity of the energy we deliver to our customers has also helped to reduce fuel and operating cost profile of the business.
These are helpful contributors to reducing albeit from eliminating the inflationary impacts to the business and thus for our customers.
We continued to execute well on our capital program with 9% higher capital investment in the first quarter compared to last year.
We're on track to invest close to $3 billion in 2022, and we continue to expect to invest between eight four and $9 4 billion through the end of 2024 with over 60% of that capital plan focused on cleaner and more reliable energy.
Beyond 2024, we believe that the ongoing need for cleaner generation infrastructure renewal and grid modernization will continue to provide robust investment opportunity and growth for the business.
In that context, we've talked a lot about our capital plans focus on Decarbonising, our generation fleet, but we're also transforming and modernizing our grid.
Investments in distributed generation smart meters cyber security and data analytics platforms are a vital part of the energy transition.
They support the underlying framework that enables the buildout of increased renewable generation and they make the grid more reliable and more responsive to evolving customer demands.
The energy transition underway is complex and costly.
And the current environment, where costs are rising in virtually all areas is adding to the challenge.
We continue to monitor supply chains, and the impact of inflation to proactively mitigate any risks around our capital plan and our business more broadly.
At this time, we do not have any material changes to our capital plan in response to these challenges, but we continue to watch this closely.
As we continue to execute on our capital plan that has a clear focus on reducing emissions in our reliance on coal we're proud of our track record and the very substantial progress we've made.
However, it's important to recognize that the path to further reducing and eliminating carbon from the electric energy sector is getting even more challenging notwithstanding the abundance of opportunity for continued deployment of renewables like wind and solar and the exciting developments in battery storage and other technologies.
The task ahead is made more difficult by increasing energy demand more severe weather patterns that are challenging system reliability, increasing levels of intermittent renewable sources that require backup generation or storage solutions, which are themselves increasingly challenging and expensive to secure.
And of course, very ambitious government energy and climate policies.
I believe that our strategy is continuing to serve all of our stakeholders well we remain committed to an energy transition that takes the balanced approach, making real progress while ensuring the reliability is not compromised and that costs remained as manageable as possible for customers.
And our approach positions us well to continue to deliver value and growth for customers and our shareholders.
Since 2005, we've reduced the use of coal by 65%.
And we currently have more than.
1400 megawatts of installed renewable generation capacity across the business.
That's in addition to the renewable energy that can now be imported into Nova Scotia with benefit of the maritime link.
Last year, we announced our climate commitment, which includes clear de carbonization goals and our vision to achieve net zero cotwo by 2050.
We continue to be transparent in our characterization of a net zero carbon future as a vision and not be concrete goal because the path to get there is not clear certainly not in a way that does not sacrifice reliability or place an extraordinary cost burden on customers.
Our major projects like the Maritime link Big Bend modernization, the solar program in Florida, and the Eastern Clean Energy initiative at Nova Scotia power are critical pieces of our de carbonization strategy.
To meet the challenges ahead, we'll need to do more.
And we know that innovation and emerging technologies will play an important role in shaping a viable path to achieving ambitious climate targets in both the U S and Canada, a critical factor to achieving net zero will be accelerating timelines and ensuring that today's emerging technologies can be commercially viable and ready to support the transition.
And help to not only provided cleaner energy, but also the reliability and energy availability the customers need.
While we speak often of our big project initiatives I want to take a moment to talk about some of the smaller projects. Our teams are working on across the business that highlight our innovative thinking and the attention we are paying to emerging technologies early.
Earlier this year the team in Tampa completed construction of a floating solar array.
It's the largest floating rate in Florida, and the first of its kind in the Tampa Bay area.
Half of the solar panels used in the project are double sided which can produce as much as 30% more energy than traditional painters panels.
Exploring this type of alternative solution helps us expand the solar potential for Tampa electric where land availability and cost is a meaningful factor in that region.
We continue to believe that our gas utilities are an important part of the transition to a greener energy future.
One example, the team at peoples gas in partnership with local dairy is building a renewable natural gas facility.
Construction is underway and once the facility is in service RMG will be injected into Florida pipeline systems and used as a reliable and cost effective energy source.
Another example, at new Mexico gas the team launched a pilot project this year to test the blending of hydrogen with natural gas that can then be used in typical household appliances. The.
The project is in early stages, but as part of our commitment and strategy to reduce the carbon emission intensity of the energy we deliver to our customers.
The team is also exploring the value of our gas storage project to help manage the risk of supply constraints as well as the risk of a volatile gas prices and expects to file an application for this project with the regulator later this year.
While grid scale renewable natural gas and hydrogen blending projects might not be commercially and economically feasible. Today. It is essential that we continue to explore and support emerging technologies like this by making small investments now so we can be ready to make the best assessment for our customers. When these technologies become commercially viable.
Our block Energy initiative is another clear example of our commitment to innovation and our work to capitalize on customer trends.
Recognizing that it would have a meaningful impact on our sector. We established a mirror technologies over five years ago to explore the emerging trend of distributed generation.
By 2019, a full scale demonstration project was developed and put into service at the Kirkland Air Force base.
With resounding success, we followed this with our first residential project for 37 homes and a new subdivision in the Tampa Bay area, which importantly, the Florida Public Service Commission approved as a rate base investment for Tampa Electric.
Utilities are expert operators, which makes block energy a win win for customers and utilities alike.
Customers benefit from more renewables renewable energy with a step change in reliability, but without the upfront costs are ongoing maintenance of making the investments themselves and rooftop solar battery storage for backup generation.
And that technology allows utilities to do what they do best invest in rate base with economies of scale and optimizing the flow and sharing of energy sources to reduce the overall cost for all customers.
We know emerging technologies like these and many others will play an important role in achieving a net zero carbon future and were committed to continuing to explore and invest in these ideas to drive value for our customers and growth for our shareholders.
More examples along with progress on our safety journey climate transition plan and other ESG commitments will be included in our upcoming sustainability report that will be released next month.
Before I pass the call over to Greg I wanted to provide a quick update on our regulatory calendar <unk>.
Our rate cases in Nova Scotia, New Mexico in Barbados are ongoing and we expect that resolution on all three by the end of the year.
And while we don't have substantial update on the Atlantic Loop project, we continue to be encouraged by the ongoing conversations and hope to provide more clarity on the project later this year.
Okay.
Thank you Scott and thank you all for joining US. This morning. This morning, we reported first quarter adjusted earnings of $242 million and adjusted earnings per share of 92.
Compared to $243 million and 96 in 2021.
As Scott highlighted our regulated portfolio delivered strong first quarter results.
Contributions from our regulated Ernie utilities increased $30 million over last year or 11 <unk> of adjusted EPS.
This was offset by lower contributions from Emera energy, who is 2021 results benefit from event driven market volatility following winter storm Yuri.
Meera Energy's earnings will vary both quarter to quarter and year to year, depending on market conditions.
Which causes variability on our consolidated results while their financial results are not as predictable as those from a regulated portfolio.
They're low risk operations provide us with potential earnings and cash flow upside and are always positive on an annual basis.
Operating cash flow before changes in working capital increased by $142 million or 42% over Q1 of 2021.
The increase was primarily due to the 2021 gas cost of Birla in new Mexico gas from Winter Storm, Europe , partially offset by higher fuel under recoveries at Tampa Electric as a result of higher gas prices.
Although fuel under recoveries can cause temporary cash flow differences, we have regulatory mechanisms across our portfolio to recover prudently incurred fuel costs from customers on a timely basis.
Earlier this year, we filed a 169 million U S. Dollar mid mid year course, fueled correction at Tampa Electric which was approved during the quarter recovery of these costs began on April one and will be recovered over the balance of the year.
This strong cash flow was expected and underpins our confidence that we are on track to achieve sustainable credit metrics that support our investment grade credit ratings.
Now I'd like to turn our attention to the details of the quarterly results.
Tampa Electric delivered strong results with growth of $29 million in earnings or <unk>, 35% over Q1, 2021 first quarter results reflect the impact of new rates that went into effect on January one of this year, which also includes the capital cost recovery for early retired assets through our innovative clean energy transition mechanism.
<unk> results also benefit from more favorable weather and the strong economic conditions in Florida that continues to drive meaningful customer growth of over 2%.
Contributions from our Canadian utilities increased $10 million compared to Q1 2021.
You recall, we experienced an incredibly mild winter here in Nova Scotia in the first quarter of last year and this year our results benefited from colder weather, which drove higher sales volume. However, we also saw higher <unk> due to storm costs as Nova Scotia experienced an unusually high number of winter storms during the quarter.
Mirror energy delivered a solid first quarter with 20, <unk> and $27 million of adjusted earnings driven largely by the marketing and trading business.
This represents a decrease of $16 million compared to Q1 2021, our prior year results benefited from winter storm jewelry, which created the event driven volatility of the business was able to capitalize on.
Our corporate costs increased $15 million this quarter, primarily driven by the timing of share based compensation expense and related hedges.
The quarter over quarter increase was partially due to a hedge gain recognized in Q1 of last year volatility in our share based compensation costs and the related hedges are driven by changes in our 50 day average share price leading into the quarter relative to our share price at quarter end.
Contributions from our Caribbean utilities decreased by $6 million, primarily due to the business interruption insurance proceeds that were recognized in Q1 2021 at Grand Bahama Power company.
Earnings from our gas infrastructure segment decreased by $3 million in the first quarter of 2022 higher <unk> driven largely by increased labor costs at new Mexico gas offset higher base revenues from strong customer growth and the recognition of a 5 million U S. Dollar advertise ACO reversal at peoples gas.
And finally higher share count decrease adjusted earnings per share by <unk> <unk> in the quarter.
Over 95% of our annual adjusted earnings come from our portfolio of regulated utilities. Since 2017, the first full year with teco and our portfolio of regulated utilities have consistently delivered high quality predictable earnings and cash flow growth.
Between 2017 and 2021, our adjusted earnings per share has grown by over 3% and that's before considering the impact of our asset sale program that deleverage our business and strengthen our balance sheet.
When you remove the contributions from these assets that we sold we delivered a six 1% annual annualized growth in adjusted earnings per share.
We have a clear record of delivering competitive earnings per share growth, which supports consistent reliable dividend increases and over the last five years. This means we've delivered a 10, 8% annualized total return for shareholders higher than both our Canadian peer group in the broader market.
As we continue to execute our strategy investing in rate base to decarbonize and strengthen the grid, while working constructively with our regulators and customer groups to ensure the energy we deliver is as affordable as possible. We have a clear line of sight to the continued growth of our business earnings cash flows and dividends.
Thank you Greg. This concludes the presentation, we'd now like to open the call for questions from analysts.
Thank you, ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one on your telephone keypad, if he would like to withdraw your question press the pound key.
Your first question comes from the line of Linda <unk> with TD Securities. Your line is open.
Yeah.
I'm wondering if you could just help us understand the shifting long term outlook of the importance of energy security in North America, and the Caribbean Center approach to operating our assets and capital allocation.
Might there be.
I can't break decelerating in energy transition in any of your jurisdictions.
Might there be for potentially prioritizing whatever remaining fuel requirements you have.
Those contracts that are more hedged long term and is this influencing the nature of your conversations with Atlantic loop potentially.
Linda it's Scott so thanks for the question.
It's a complex and important question in and look largely.
The pace of.
Change of the energy transition is going to be driven by economics and by government policy and government.
Government policy will set timelines that utilities like.
Nova Scotia power, and Tampa electric and others will will need to meet and and follow and that can certainly drive.
Drive timelines and otherwise it will be driven by economics to ensure that we're creating a path is most economic for customers, making sure that we're delivering the cheapest electron for customers or gas molecule for customers, while still being compliant with regulations.
Legislation that gets set bye bye.
By customers, so certainly as.
And inflationary impacts and fuel impacts.
To the extent that chain.
Changing price of fuel is a is a long term thing and obviously that's a that's an open question and we can all have a view the economics can shift around between.
The the cheapest way to generate those electrons for our customers, while still being in meeting the regulatory and legislative policies that are SaaS. So all to say this is a ever changing environment. The pace of change I think is actually quite quite quick already.
Our responsibility is to make sure that we continue to do that in a way that is most cost effective for customers, while maintaining reliability and availability of energy that obviously all of us and all of our customers depend on.
Thank you and as it relates to the Atlantic loop.
What sort of.
Things need to happen before you can provide an update later on this year in terms of milestones are.
Decisions or policy.
Thing.
Yeah.
As we said before Linda this is.
<unk>.
In concept. Obviously this is a simple and important project, where we are.
Looking to optimize the energy needs and energy sources in and Atlantic, Canada, amongst the provinces of Quebec, Newfoundland Labrador, Nova Scotia, and New Brunswick, but it's complicated because there's a lot of parties involved.
And.
The federal government's engagement and this is is important.
We're encouraged to continue to be encouraged by the engagement by all of those stakeholders in this in this process, but an important component of it is is the participation levels and the funding participation by by those parties, particularly including the federal government, where we've been clear.
Clear about the fact that.
For Nova Scotia <unk>.
Need support from the federal government in order to make this transition and this project affordable and so it's really just sorting out all of those dynamics, we continue to be encouraged.
By by the progress and continue to.
To work towards a timeline of more clarity by year end because of course, we need that in order to be able to.
Have a hope to meet the 2030 timeline to be able to have a project like that in service and delivering clean energy to Nova Scotia to be able to retire coal plants on that timeline.
Thank you and just as another follow up in terms of capital allocation and energy transition from energy security.
Recognizing that there's been challenges on a number of fronts getting east coast.
LNG.
Jack export project.
Off the ground.
On a number of fronts, including complexity.
Under what circumstances, if any when <unk> be interested in getting involved in any sort of project like that.
Yeah, we're certainly not looking at LNG.
LNG export capacity, Linda we certainly think about it as I mentioned earlier.
Gas storage and LNG is is obviously.
Our focal point within that and Thats.
That's certainly a focus for US right now in both of our gas utilities thinking about gas storage also important consideration for for Tampa Electric.
But at this point, we're not looking at it.
The market of thinking about LNG for export purposes.
We're looking at trying to create value for our customers.
Thank you.
Yeah.
And your next question comes from the line of Rob Hope with Scotiabank. Your line is open.
Good morning, everyone. A follow up question on the Atlantic lately just.
I want to know has the engagement of the federal government.
And your eyes changed over the last couple of months. It was interesting to see the Atlantic League specifically called out in the last budget.
Or updates there.
Yeah. Thanks, Thanks, Robin and look.
Yes, I guess in a way I think you are right.
Seeing the Atlantic loop project being referenced.
In many in many places, but frankly, that's not new.
We've seen that from the federal government.
For a number of.
Quarters now so.
I think we continue to.
As I say encouraged by their engagement and.
And interest in and I think they agree with US that this is an important project for for the region I think they agree it's an important project for Canada, but.
But theres still a lot of details to work out.
And and they and we and others are working our way through all of that complexity to find a way to help to make this happen.
Alright Thats helpful. Thank you and then just switching gears a little bit more a.
Relating to the numbers.
We've seen fuel prices increase however, you have.
Got some recent wins on fuel cost recoveries, how are you thinking about where fuel prices are currently versus recoveries as well as kind of a target of $2 billion of cash flow for 2022.
Yes, Rob it's Greg.
From where we sit right now everything that we've experienced from any kind of under recovery either from the tail end of last year Winter storm youree or even the early part of this year, we're expecting to recover in the current year.
And that's largely because of the settlement in new Mexico, obviously theres some of that.
<unk> costs in new Mexico would get recovered in 'twenty three but also the mid year course correction at Tampa Electric.
If we see gas costs remained elevated at.
At the levels. They are over the balance of the year, we will have to make a determination of whether we file for a second mid year course correction at Tampa Electric we haven't concluded on that yet again, because that would be based on our forecast as we see today and so that would be the one area that might have some potential variability.
Between this year and next year, but outside of that and I should mention as well less of an issue at Nova Scotia power because they do a lot of hedging on their fuel costs. So really it's gas costs at Tampa electric and we do have a regulatory mechanism to recover.
Over the balance of the year, but it would not surprise me if it stayed at these levels at some of that might leak into next year.
Alright, I appreciate the color. Thank you.
Youre welcome.
Yeah.
And your next question comes from the line of Maurice Choy with RBC capital markets. Your line's open.
Thank you and good morning. My first question is on the capital plan and thanks for confirming the plan and that there is no material change in relation to inflation and supply chain matters, but.
But you've made it clear that this is obviously an assessment for now so is it the case that a more wholesome assessment will be made in the next iteration of the plan.
Is it a case that you know 2025 and beyond projects more impact and less so for the next three years.
Yes, I think that's right Laurie so when we roll out our capital program.
Obviously put a lot of thought into that in the fall in.
In particular, the projects under development and other things we're seeing.
Probably it would be a little bit different this year as the projects not so much for 2023, obviously, but for 2024 and 2025, if we as we do more scope into those projects and cost estimates to.
To the extent that inflation weighs in on some of that will.
We will incorporate that in November nothing discussed point nothing has changed in terms of our plans our execution around it but we are seeing cost pressures on some of the projects a couple of years out.
Alright. Your next question comes from the line of Mark Jarvi CIBC.
CIBC Your line is open.
Thanks, Good morning, everyone.
Obviously, you've acknowledged the rising caseloads raising prices are you seeing that impact at all customer behavior and usage.
Yeah.
No maybe a little bit mark on.
<unk>.
Our gas utility in new Mexico.
It seems to be that the usage per customer seems to be off slightly whether thats tied to the price of gas or not I'm not so sure. We certainly have not seen it at peoples gas at all although we have seen.
Little bit software usage from our commercial customers just because restaurants are operating at full capacity because of staffing issues hotels aren't.
Necessarily Washington sheets, and towels at the same frequency that they were before.
I'd say the opposite is actually has been at the electric utilities, which is probably more meaningful.
You know right now electricity relative to other sources of energy is probably the most cost competitive out there and so whether it's electric vehicles heat pumps here people working from home, we're actually seeing a little bit of positive growth from our load per customer perspective. So all in all probably balance maybe slightly favorable because of the electric utility exposure.
Thanks.
And then what will be done in terms of early refinancing I think there's some notes maturing next year, just with the rising rates sort of updated thoughts on managing maturities.
Yes, it's a good question Mark I mean, obviously, we like I think most if not all of our peers have.
It had been taken advantage of the yield curve over the last number of years and going maybe a little bit further on a tender basis than we traditionally have over 85% of our debt is fixed debt with maturities beyond 2026.
We don't have a whole lot of necessary required financings over the next couple of years, it's pretty modest. So at this point in time, we're not planning to do anything outside of the normal course of business.
Okay and then last question for me just with the leader of that sort of net metering already bill in Florida, We're sort of initial thoughts on that any implications for the for Tampa Electric or also just for block hour if at all.
Yes, I mean, I think look.
Our view of net metering really hasn't changed and it's about trying to get rate design in it.
So it's fair to all customers or our view on that Hasnt changed obviously, we respect.
The decisions that have been made in Florida and in Nova Scotia, both but.
We will continue to.
Work within the the tariff design that exists currently I think fundamentally these are issues that.
We will surface again, but in the meantime.
We continue to deliver energy to our customers and support the needs of customers, whether they have solar panels on the roof.
And you don't foresee any issue in the near term.
Charged for recovery of some of the infrastructure cost recovery.
If we can see an uptick in residential solar.
No no.
Okay. Thanks.
And your next question comes from the line of David Peters with Wolfe Research. Your line is open.
Yeah, Hey, good morning, everybody.
I was just curious as it relates to this department of Commerce investigation here in the U S and my understanding is that solar wave two shouldn't be impacted at all just because of who you're getting your panels from but I was wondering for wave three have you contracted panels, yet for those projects and do you see any potential impact I guess too.
<unk> three as a result of the investigation.
So so no we won't we don't we don't expect any impact to the completion of wave, two which which includes the.
On the solar generation, we expect to put in service through the balance of this year and next.
Yes, as it relates to them.
The expectation that.
At the end of solar we have two that won't be the last solar generation that makes sense to put into service in Florida, its quite reasonable to expect that there will be price and supply chain constraints. As a result of of what's been going on I suspect first solar has become a very popular.
Supplier as a result of of.
What's gone on we've been fortunate to have them as a key supplier partners since the beginning of our solar.
Initiative and Thats, obviously served as well, but no we are not contracted for a panel supply beyond the completion of our solar wave two which is still.
300, <unk> and <unk>.
<unk> 50 ish megawatts of solar beyond that we've already got in service.
Okay, and then just one other one maybe a question for Greg I know you guys have used a fair amount of preferred equity in the past as part of your financing plan. So.
First just hoping you could maybe give us a sense of what youre seeing in that market today in terms of pricing and just overall openness over the market and then if you could just remind us where you stand.
With respect to financing needs. This year and next just with with respect to equity or a hybrid instruments.
Yeah David.
The preferred market.
You know, we've always said, there's a window opportunity sometimes the markets opened some times it's not.
It feels like it's close right now doesn't mean you couldn't do a transaction. If you wanted to but I think the terms would be much more favorable to the investor as opposed to the issuer. So.
So we're not planning to do anything in the short term, but we're certainly capable and ready to do something if we find that market demand and pricing is attractive.
In the second half of the year.
From from a common equity perspective, its really normal course business for us, we're really happy with the execution of our aftermarket equity program and you know raising roughly around probably 60 million Canadian dollars a quarter and we'll continue to do so and similarly happy with.
Our drip with you know raises around $50 million to $60 million a quarter as well. So we will just continue on that path.
We're not making any changes to that at all and from a debt perspective.
Really we don't have anything that needs to be done we will likely be go into the market later this year at Tampa electric.
Just regular course business with a bond issuance to support the rate base growth there, but nothing from a holding company perspective.
Okay. That's.
That's great and then last one just on the Nova Scotia rate case.
Can you just maybe give an update of where things stand there and expectations in the case specifically on.
The ROE sharing and stepping up the equity thickness that you guys requested and then just.
How the fuel request sort of squares with what you're seeing today in terms of pricing.
David It's Peter Gregg from ESP.
Out of that so we're on track.
What's the plan for our general reallocation filings that we've just completed a round of information requests.
Wanted to intervenors information request.
And we're on track for the hearing to start in early September .
And were just.
Preparations for that are underway.
Sorry can you repeat the second part of your question.
I was just wondering you know I know there was a few items you guys requested and Theyre, just the higher ROE sharing stepping up with equity thickness.
And just I know the fuel component kind of how that squares with what you're seeing today in the market given how things have changed so fast.
We continue to proceed with the.
Request and that will be subject to adhering.
Let's say certainly you know everyone has been seeing increase in fuel prices over the last several months for obvious reasons.
And so you know.
We're taking a look a hard look at that in terms of what might be required.
Jerry.
Yeah.
Okay. Thank you guys.
Thanks, David.
Your next question comes from the line of Matthew <unk> with <unk> capital.
Capital markets. Your line is open.
Good morning, my questions have actually all been answered at this point so I'll just turn it back thank you.
Thanks Matthew.
Alright, once again, if he would like to ask a question. Please press star one on your telephone Keypad. Your next question comes from the line of David <unk> with Raymond James Your line is open.
Hey, good morning, everyone. Thanks, just a quick one for me.
I'm just curious as it relates to the longer term generation mix.
Tampa Electric I'm curious, what you think the ultimate penetration of solar could be there and under the assumption that you'd move forward with additional waves of solar what kind of complementary investments might be needed to facilitate that.
Aren't you want it.
Address that sure I can take that good morning, David Good morning, everyone.
So David I think that.
Couple of years ago, when we first embarked on this.
De carbonization journey and in earnest way with an initial 600 megawatt investment in solar.
We have commissioned a study at that time for the size of our system to do kind of perform an assessment of how far could we go.
Before we might start to have some issues that we were able to determine that we could get up around 200, 4500 megawatts of solar which represents about <unk>.
21% of our capacity.
And not have any issues to get beyond that.
Requires some investment in.
Battery storage or storage or some form which is why in our current three year three year capital plan. We've got 280 megawatts of storage in there and so as we invest in more solar that paves the way to our sorry, as we invested more storage that paves the way to continue to invest in.
In more renewable energy so we.
We certainly have designs ongoing beyond that 21%.
<unk> that were currently forecasting to be at by the end of 'twenty three.
Excellent. Thanks appreciate that color and maybe maybe just a quick follow up to that.
And as it relates to affordability and the high fuel cost environment today does that high fuel cost environment.
Make it perhaps more palatable from regulators perspective to try to move forward with additional solar investments or does that you know in our <unk>.
Wei.
<unk>.
Hurt affordability and make it harder to.
Make a case for a large capital items.
So yes.
I think I understand your question David So.
So really what the teams do whatever source of of.
New generation.
Or transition of generation is really look at the at the math and and determine what's in the best interest of customers from a financial perspective, as well as making sure of course that the energy availability and capacity requirements are are there and so yes. The math the math is a little different now but.
Yes, we are seeing.
The cost of everything.
Go up including obviously the cost as we chatted about before of solar panels are planned of materials of construction costs.
So two of the car.
Cost of.
Fuel as to whether that's fundamentally shifted the lens between looking at early retirements of thermal generation and accelerated investments in renewables frankly, it's a little it's a little too soon to tell but in the meantime, obviously using Tampa electric as an example.
There have been significant investments in renewable generation like solar.
On the basis that it hasnt been cost effective for customers. Similarly, the year.
Early retirement.
One unit of Big Bend, and the conversion of another to high efficiency natural gas through Big Bend modernization and really the same exercise.
It goes on it at Nova Scotia power is at.
The team there looks to how to best.
<unk> the.
Legislated.
Requirements of.
Of 2030 and in terms of.
Renewable.
Generation and finding the most economic path for customers to be able to do that and Thats. One of the reasons why we see the Atlantic loop project as being important but also some of the initiatives that the team at Nova Scotia power is taking in relation to battery storage and additional wind resources and transmission upgrades all of them with a view.
On the economics relative to the alternatives and making sure that we're always choosing the path. It is most economic for customers.
Excellent appreciate the color. Thanks.
Your next question comes from the line of Patrick Kenny with National Bank. Your line is open.
Hey, good morning, everybody just wanted to delve into the gas storage strategy, a little bit more.
And I guess, given the portfolio is over 95% regulated today.
But the appetite for incorporating unregulated gas storage assets might be.
Especially given.
The backwardation in the gas market.
It would appear there could be some assets shaking loose over the coming months. So just maybe your thoughts on looking at storage assets that may not be physically connected to your your utilities, but.
Might still be able to help you manage fuel costs for our customers.
Yes. Thanks for the question Patrick So at this point I'd say across across the business storage of.
Of whatever kind right now frankly, but certainly.
Gas gas LNG, we're looking exclusively within within regulation in support of the needs of our customers and that's that's joined Mexico gas peoples gas.
And two in Tampa Electric all of those at this point in time, not looking at gas storage in Nova Scotia, but more focused on on a path to to.
Renewables and Hydro report.
Got it.
And then maybe just on the renewable natural gas front.
In light of inflationary pressures are you seeing any change in the pace of development of <unk>.
Central projects that could be blended into the system over time.
No.
Don't think so Helen will correct me if she's.
She's got a different view I don't think its changing a few around the pace at this point, but it's still this is a this is a young industry.
And.
And we're excited to have a couple of projects on the go in.
Florida, and excited about advancing them and bring them into service, but but I am not myself aware that it's.
Accelerating or or or the opposite impact as it relates to any other potential developments in this in the state Helen anything you'd say different.
No that's exactly right Scott I'd say, all we're experiencing is what everybody is across the supply chain.
No issues here and there with parts and supplies and that sort of thing, but nothing that's having a material impact.
Okay, that's great I'll leave it there thank you.
And our next question comes from the line of Richard Sunderland with Jpmorgan. Your line is open.
Hi, good morning.
Wanted to briefly follow up on the gas storage question can you provide more details around the new Mexico evaluation thinking really the timing and magnitude of the capital opportunity.
Yeah, Brian would you would you address that.
Yes, I'm happy to address that Scott.
I think as everybody knows we.
We last year, when we had approval of our gas costs from Winter Storm Yuri The commission asked us to take kind of a deep dive into various.
First gas storage options.
New Mexico gas company to own and control here that would.
Work to reduce the impact of.
Gas bikes are just are just supply in general so we actually filed.
That information filing with the commission.
And just recently in the last 30 days and so that's that's on file it's more of an information filing but isn't that filing we did say that.
We think the best option for us as LNG. So we will be we will be filing later this year.
Certificate of convenience and necessity and requesting that.
The commission here approve that.
In terms of cash.
Capital spending we're still working through the pre feed study and all of that but we would anticipate that it would be in excess of $100 million of capital that would be spent on the LNG facility, but again, we're still working through the details and we will have a much more firm number later this year when we file for that.
So I hope that answers your question.
That's helpful. Thanks, that's all for me today.
Once again, if you would like to ask a question. Please press star one on your telephone keypad.
We don't have any further questions at this time I'll hand, the call back to Dave at Bennington.
Thank you. Thank you very much and thank you for your interest in Amira that now concludes our call have a great day.
Thank you and that concludes today's conference. Thank you all for joining you may now disconnect.
Okay.
Sure.
[music].
<unk>.
[music].
Sure.
Okay.
Okay.
Sure.
Yes.
Okay.
[music].
Yes.