Q1 2022 NiSource Inc Earnings Call
Certainty hanging over the solar panel market as a result of the Commerce Department investigation.
As a result of the projected delays, we now expect to retire the remaining two coal units that shape for generating station by the end of 2025.
Despite those delays we are confident in reaffirming our 2022 guidance of $1 42 to $1 48 diluted non-GAAP EPS.
And we are reaffirming our forecast for 7% to 9% compound annual growth rate from 2021 through 2024, including near term annual growth of 5% to 7% through 2023.
We will exercise flexibility in our business plan by pulling forward modernization projects in our gas and electric business and employee O&M expense agility to support our plan.
<unk> will host an investor day in the fall, where we expect to have more clarity on our business review and solar project completions.
We intend to provide you with a definitive long term plan beyond 2024.
We continue to make strong progress in our regulatory agenda with a settlement NIPSCO gas rate case in new cases filed in Pennsylvania and Virginia.
And Nisource posted non-GAAP diluted net operating earnings per share or EPS of <unk> 75 in the first quarter versus 77 last year.
We have a lot to discuss this morning, but I would like to take a few moments to share. Some observations from my first few months here at <unk>.
I've had the opportunity to meet with employees leaders.
Customers.
Regulators policymakers and many others.
I see some real strengths now also see opportunities for improvement.
Here are some areas, we will be focusing on.
First and foremost we will continue to focus on enhancing safely.
This allows us to provide the best possible service to our customers.
We are intent on maintaining our regulatory excellence.
We have completed several rate cases in the past year, we have a number of cases pending.
Together, they will provide additional visibility.
Underpinning our rate case, our rate base growth forecast.
We will relentlessly pursue operational excellence across the businesses to ensure safety reliability.
An enhanced customer experience and organizational productivity and efficiency.
Our focus on these areas will help us build on the core strengths of our business our investment driven driven growth plan.
And the opportunities we see in the Nisource footprint.
Now we want to update you on how the government solar panel investigation.
<unk>, our renewable generation plan.
Like to turn it over to Shawn Anderson Sean.
Thank you Lloyd and good morning, everyone.
As most of you are aware the investigation by the U S Commerce department related to the import of solar components from certain countries has brought uncertainty and delays to the solar panel market.
We along with others in the industry continued to advocate for an expeditious resolution to this investigation.
Uncertainty that this investigation is introduced underscores the need for continued development of the domestic clean energy supply chain, which nice sources very much supportive of.
The Nisource team has been in constant contact with our diverse renewable generation developers, we've worked hard to gain a better understanding the potential project delays might have on our plans and our generating portfolio.
Our renewable generation plans include 10 solar projects, which are intended to replace the retiring capacity and schafer generating station.
Including two projects currently under construction.
Indiana Crossroads solar and Dones bridge one.
Broke wrong ground in fourth quarter 2021, we.
We are shifting the anticipated in service date from the end of 2022 to reflect a mid 2023 targeted date reflective of an anticipated delay associated with the department's investigation.
These projects and most of our other solar projects at various stages of the development process.
Expected to be delayed by approximately six to 18 months from the originally targeted completion across 2022 and 2023.
It is important to note that this is a broad timeframe given the uncertainty, but ultimately each project will be impacted differently.
We are working with our developer partners to refine our assessments on the expected impact.
Yeah.
Given these delays we now expect to retire shapers remaining two coal units by the end of 2025.
However, we continue to expect Michigan city generating station to retire on schedule between 2026 and 2028.
These retirements project Nisource to eliminate all coal fired generation by 2028 and continue to track towards our targeted 90% reduction in greenhouse gas emissions by 2030.
It is important to underscore the potential unintended consequences for our customers.
As we demonstrated in our 2018 and 2021 AARP. The renewable resources, we are adding to the portfolio drive significant cost savings to our customers and help insulate them against high commodity and energy prices.
Our focus has been to accelerate savings for our customers to benefit from the renewable transition and delays, resulting from this investigation may ultimately delayed the timing of when our customers can begin receiving these benefits, especially in the current energy cost inflationary environment.
As the investigation relates to our capital investment plan.
We believe the primary impact is timing and continued to expect renewable investments to total approximately $2 billion.
Primarily between 2022 and 2024.
With any remainder expected in 2025.
At the beginning of our discussion today.
<unk> mentioned, the flexibility of nice versus financial plan.
And this is where the diversification of our operating companies can support our long term commitments.
We expect to adjust our modernization investments to account for the timing changes in renewable energy project investments.
To remain on track to make capital investments totaling approximately $10 billion during the 2021 and 2024 period.
These capital investments are expected to drive compound annual base rate growth.
A 10% to 12% for each of the Companys businesses through 2024.
Now I would like to turn the call over to Donald who will discuss our investor day and financial performance in more detail.
Thanks, Sean and good morning, everyone I'd like to start with that we have moved the timing to hold an investor day event to this fall we believe shifting the timing of our Investor day will allow us to gain a clearer line of sight into the solar project timing and provide more details around the business review so that we can provide.
But definitive long term plan beyond 2024.
During this fall that we intend 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.
Now turning to our first quarter 2022 results on slide four we had non-GAAP net operating earnings of about $329 million or <unk> 75 per diluted share compared to non-GAAP net operating earnings of about $305 million or <unk> 77 cents per diluted.
Sure in the first quarter of 2021.
The first quarter 2022 results represent a solid start to the year and as Lloyd mentioned, a few minutes ago. We have reaffirmed our 2022 guidance of $1 42 to $1 48, and all of our long term diluted non-GAAP net operating earnings per share growth rates.
Taking a closer look at our segment non-GAAP results on slide five.
Gas distribution operating earnings were about $405 million for Q1 of 2022, representing an increase of approximately $31 million versus the same quarter last year.
Operating revenues net of the cost of energy and tracked expenses were higher by approximately $66 million, mainly due to new rates, resulting from base rate cases, and regulatory capital programs.
Operating expenses again net of cost of energy and track the expenses were higher by approximately $35 million.
In our electric segment non-GAAP operating earnings for the first quarter were about $99 million.
Which was about $8 million higher than 2021.
Operating revenues net of the cost of energy and track expenses increased by approximately $9 million.
Due largely to revenue from regulated investments and other operating expenses were essentially flat to 2021 levels.
Now turning to slide six I'd like to briefly touch on our debt and credit profile.
Our debt level as of March 31 was about $9 8 billion of which $9 2 billion with long term debt with a weighted average maturity of approximately 14 years and a weighted average interest rate of approximately three 7%.
At the end of the first quarter, we maintained net available liquidity of about $1 9 billion.
Consisting of cash and available capacity under our credit facility and our accounts receivable securitization programs.
We also continue our commitment to retaining our current investment grade credit ratings and I would note that <unk> has completed their 2022 annual credit review with no change to our rating or outlook.
Our debt and credit profile continue to represent a solid financial foundation to support our long term safety and infrastructure investments.
As you can see on slide seven and eight we are in the process of making some adjustments to our financial plan to reflect expected delays in solar generation projects that will help mitigate the earnings impact of these delays and enable us to maintain our 2024 EPS growth commitment.
Both the long term visibility of our capital plan and the flexibility in our regulatory mechanisms illustrates the resiliency and strength of our business and provides us confidence to maintain all of our commitments, including EPS growth.
Taking a quick look at slide nine which highlights our financing plan.
The only slight change to our financing plan is to extend the potential timing related to the debt financing of the renewable generation investments, which as we indicated on slide eight provides incremental interest savings to mitigate the renewable project delays.
Again this balanced financing plan is consistent with all of our earnings growth and credit commitments.
Now I'll turn it over to Lloyd who will discuss our utilities highlights.
Thanks Donald.
Let's look at the Nisource gas distribution highlights for the first quarter starting on slide 10.
Columbia gas of Virginia filed a rate case on April 29, two continued safety and modernization investments.
The case seeks an increase in annual revenues of approximately $58 million.
Columbia gas of Ohio is preparing its response to the report from the staff of the public Utilities Commission of Ohio. Once that is filed we look forward to beginning settlement discussions.
Columbia gas of Pennsylvania filed a rate case on March 18th.
It focuses on upgrading and replacing gas lines for the long term safety of customers and communities.
The case request additional revenues of about $82 million.
It also seeks to provide additional energy efficiency options, while balancing cost.
NIPSCO filed a proposed settlement is gas rate case.
The agreement will provide a revenue increase of approximately $72 million annually.
In addition to infrastructure modernization.
Proposal would enable NIPSCO to continuing to serve customers with a safe.
<unk> supply of natural gas, while remaining in compliance with state and federal safety requirements.
NIPSCO also filed a petition on April one seeking approval of federally mandated pipeline safety calls.
Nearly $229 million of capital call and about $34 million operating and maintenance programs.
In addition, I'd like to mention that <unk> has joined the coalition for renewable natural gas.
We believe natural gas infrastructure will play an important role in America's energy future potentially carrying renewable natural gas as well as other low carbon fuels such as hydrogen.
As nice source exploring opportunities to further decarbonize. Its natural gas system is local distribution companies are pursuing programs that will allow customers to reduce the carbon intensity of their natural gas usage due to renewable natural gas and carbon offsets.
Regulatory filings seeking approval of these programs are underway in Pennsylvania, and Virginia, Virginia.
To NIPSCO Green power rate program has been in place for several years.
Let's turn now to our electric operations on slide 11.
Analysis continues on new generation investments, resulting from the 2021 integrated resource plan.
NIPSCO filed a petition with the Indiana utility regulatory commission seeking approval of NIPSCO federally mandated calls for remediation of the coal combustion residual Ash Pond, Michigan City generating station.
We will be removing coal combustion residuals and replacing them with clean Phil.
Federally mandated costs include a toll estimate $40 million and retirement costs.
Before we take your questions I'd like to highlight our safety progress.
Safety continues to be the foundation of everything we do at <unk>.
To give stakeholders a view of our strategy and achievements, we have published our inaugural annual States report.
Highlights include our risk management and continuous improvement activities.
Turning to safety investments in technology integration to enhance safety.
The report is available on the Nisource website, and I would encourage everyone to take a look.
One very significant item in the report is the launch of the natural gas safety management system collaborative and effort amongst safety focused energy companies.
Its aim is to drive progress in maturity of safety management system at member companies.
<unk> will benefit from sharing information and learning from the experiences of others.
I want to thank you all for participating today and for your ongoing interest.
In 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 then the number one on your telephone keypad.
First question comes from the line of Nicholas Campanella from Credit Suisse. Your line is open.
Hey, good morning, everyone. Thanks for thanks for taking my question lots of good detail on the deck.
I guess just to kick it off.
On the $1 billion of renewable investments and service by 'twenty three.
I know you talked about the six month to 13 month window can you just kind of give us a little bit more detail on what's giving you confidence in being able to get these projects done and the 23 window I guess, just the risk would be that the $1 billion was slipped to 'twenty four.
Are these 23 projects just on that six months side of the window.
Six to 13 month window or just what.
What can you kind of tell us there.
Hey, why don't you handle that Sean but thanks, a lot appreciate that Nick appreciate the question.
So first off I think you said six months to 30 I just want to make sure. It's clear we are projecting a six to 18 month delay at this time for all projects. It will vary by project and to your point the reasons that we might see a different duration of delay for the projects that are currently under construction are because we began the construction process for <unk>.
Those projects in 2021, and there is simply further along in the process to have a better understanding of the timing to complete despite the disruption that we've witnessed more recently so for these projects were comfortable advancing them to completion, given the compelling economics and.
They provide great line of sight to what it would take to complete at this point. The team is very active in that process for the 2023 projects. So the other projects, we simply Havent started the construction process, yet which gives us the ability to assess the impacts of the tariffs and the timing associated with the investigation to better inform what the timelines might be.
So and to your other point with the $1 billion, we've got approximately $400 million of that already constructed and operational those are those are operating assets. Today. Likewise, we see low risk in the transmission related projects, which is another $150 million of high confidence projects. So.
The projects that are limited in scope here to the dose investigated risks are or just those two projects that amount for the balance of the $1 billion. So that $4 40 on the two projects currently under construction.
Okay.
I'd also note.
I'd also note as well we do have wind projects that you wouldn't be subject to the same dose related risk. Some operational of course also included without a delay in 2023.
So it's really just to clarify it's really just the <unk>.
Four to 500 million Thats in this six months to 18 months delay window.
Terms of 'twenty three capital now.
No it's $440 million associated with the two existing projects that are going to continue construction.
During the conclusion of this investigation.
The delays could also apply to the balance of projects.
Meaning most of our projects could experience a delay of six months to 18 months.
We would need clarity from the investigation to better inform the duration of delay associated with all of the other projects.
Okay. That's helpful. I appreciate that and then I guess just.
Question for Lloyd on strategy, you have been in the seat for a few months now.
Last call you kind of talked about being open to buying and selling assets. Just how has your thinking evolved at all here. If you could just update us. Please.
So were still in midst of our strategic business review.
We have a group of senior executives in the company and board members and we're walking down.
Specific process to do those evaluations.
We have an outline in terms of timeline, we're operating on.
And I expect to reveal that information in the fall when we do our Investor day.
Thanks, a lot I'll get back in the queue.
Our next question comes from the line of sharp <unk> from Guggenheim Partners. Your line is open.
Okay.
Hey, good morning, guys.
Good morning Shar.
Let me just fine tune the prior question just as far as strategy and the analyst day.
Curious if you know.
Since it was pushed off from from obviously the tentative. This month till the fall are you going to be in a position to actually announce some strategics moves of the utilities, meaning transactions with defined closing dates would you just sort of highlight which utilities could be under a strategic review and that.
We will continue to update us as time goes on so maybe taken a playbook from one of your Texas peers.
Not far enough along in the process to determine that right now shar of specifically, what I'm going to announce.
I think that.
I think <unk>.
And you are getting at will we have answered it in the fall and the answer to that will be yes.
I'm not going to foreshadow announcing any kind of transactions or anything on this phone call.
Without.
I want to foreshadow that we'll have answers in the fall and we expect definitive announcements in terms of where we're taking the business.
Got it that's helpful. And then just one more on the prior question is just on sort of the DLC investigations.
Hopefully we will get a proposed decision in August , but then theres going to be 150 day common period. So I mean, you can actually have some pricing uncertainty that'll carry.
Beyond sort of what you guys are thinking so what's the level of confidence that when you guys have the analyst day youre going to have enough information to be able to provide a longer term capex number and we don't see incremental projects being shifted out.
So I'll start it and I'll turn it over to Sean.
I think.
By the time, we get to Investor day, we're running different scenarios and alternatives and our integrated resource plan and those scenarios and alternatives do include further delay.
So in this commerce investigation, we have I'll say a diverse.
Set of utilities with significant modernization projects and other capital opportunities that we believe we can pull forward and continue to execute our plan until those investigations is done by Sean you went away on anything else there.
Thanks, Bill I appreciate it sure. Thanks for the question good morning.
I think that at a minimum I'd expect we'd have a range or an idea of where the projects could could potentially grow.
ROE if you will.
Although I would say that anything that you can do to help refine and narrow the scope would be helpful for us to understand how it could possibly apply to our specific projects, where it seems to be unique about this investigation is that it can be very component specific and how it's applied and thus how it impacts your specific supply.
And so it's hard to look at.
Headlines so to speak and then apply it directly to your situation you really have to look at things on a project by project basics, how it's financed and what efficiencies we might already have been somewhat earlier in the Q on some of these projects like dun's, one in Indiana Crossroads, So I think our focus for the <unk>.
Next few months is going to going to be understanding from our developer partners. The range of outcomes that could grow and also look to the department of commerce to hopefully refine the scope of the investigation to help us better inform the very answered your question.
Got it got it and then just real quick lastly for me is on slide eight you guys show sort of the impacts of the delayed renewable investment and that you are able to pull forward track capex in sort of other investments in 'twenty two 'twenty three to help offset the impact in 'twenty four right, but you also do kind of highlight that.
Sort of that annual Capex timing and amounts can shift so if we're sort of thinking about your 7% to 9% CAGR are you now kind of more backend loaded. So we should be should we should be modeling maybe bottom end in the near term I guess, how do we think about the shaping in light of the Capex shuffling the.
Delays seem a little bit more impactful versus what you can track forward.
No I wouldn't do any shaping of that you think about our capital programs in the tracker mechanisms. We've got in place. It really does allow us to good earnings and cash flows on average about 12 months out.
Make those investments we will start that in 2022 and go into 2023, and so it really does support.
Our annual guidance as well as our long term CAGR.
Terrific. Thanks, Donald Thanks, Laura then Shaun talk to you guys soon.
Your next question comes from the line of Richard Sunderland from JP Morgan Your line is open.
Okay.
Hi, good morning, Thanks for the clients today, maybe turning to the Schaefer update do you need any approvals whether MISO, Indiana on the extension there are there any implications with the change in the retirement.
So.
I'll turn it to Shawn.
The specifics, but we do not need any specific EPA approvals to move that retirement Daylon shafer.
Yes, that's right and we've begun discussions with key stakeholders, including MISO the IRC.
As well as our team there to understand the ramifications with that.
Okay.
Understood.
You've talked about timing around the renewables capex, but just curious on the cost side, if you're seeing any potential ramifications here I know you reiterated the <unk>, but just thinking about the risk maybe as you move further out.
Any consideration or thoughts there.
I think yes.
Answer that we do I mean, especially around labor costs on some of these projects.
Just like the rest of the world everybody's seen inflation everywhere. So just like the labor costs on these projects have gone up I mean, those the price of our commodity natural gas in the overall price of energy. So I think when you think about investing that we're continuing to invest in.
In renewable projects I think you have to look at it.
Holistically and understand how that compares with the price increases on other.
Forms of energy and.
Decide which ones you want to continue to invest and to provide reliable service to customers.
Okay got it and follow up it's too early.
We are in the process, we're working with our developers for us to update any estimates on the individual projects as we get more clarity and negotiate and work with those developers we will update the amounts as appropriate terrific appropriate.
That's very clear thank you for your time.
Okay.
Your next question comes from the line of Brian Lee from Goldman Sachs. Your line is open.
Okay.
Brian Lee from Goldman Sachs. Your line is open.
Yeah.
Your next question comes from the line of Travis Miller from Morningstar. Your line is open.
Morning, everyone and thank you.
Okay.
Just wanted to.
Be crystal clear here these are anticipated or potential delays.
Those projects right or have you actually heard from suppliers that they won't be able to deliver.
On those projects.
Wanted to be sure I understand that.
Let's see.
Are you asking are these about projects that we have started that Sean mentioned starting to start in 2021 of the projects that have not started at all.
Yes, the ones that haven't that's the 440 that you're referring to right that's correct yes.
Yes. It is projects that have not begun the construction process to your point are projected.
<unk> of six months to 18 months and Thats. The updated in service date that we are estimating on the slide in the supplemental materials. The projects currently under construction is our best line of sight to what it would take to conclude construction and have those become <unk>.
So those would be a little bit more definitive in terms of how the delay would impact an in service date in contrast to the ones that haven't begun the construction process and we're still just estimated.
Okay. So if something were to resolve quickly around sort of center of this uncertainty it's possible that you'd still be on track.
For the Capex budget that you laid out before yes, okay, alright, just wanted to clarify that.
Second just thinking about gas prices have gone and your cadence of rate increases and rate filings any thoughts on that.
Customer Bill.
Might impact you.
<unk> got the two rate cases early here, but any.
Any future later this year or next year.
Yes.
Yeah.
Thanks for asking that question and we're always thinking about customer rate impact customer Bill I think part of this is we try and.
Put capex in the system to drive value for customers. We're also trying to drive productivity and efficiency to offset some of those customer increases.
And answer to your question, we are thinking about customer bill impact and continuously having.
The conversations with regulators about what that means.
Okay, great. Thanks, so much that's all I have.
Your next question comes from the line of Brian Lee from Goldman Sachs. Your line is open.
Hey can you guys hear me okay, yes.
Yes, Brian Good morning, Hey, I apologize this is into I don't know.
Alright got it put it on the call, but it's Anthony here and thanks for taking my question.
My first question is on.
Your commentary on how the.
How the solar installed on the shift for retirement, it's fair that's gone on the original timeline would've helped meaningfully lower customer bills.
Now thats delayed in with the plan that you've laid out in place to replace some of that capex with other items as well as O&M.
How confident are you that the customer bill impact from this revised plan.
While face potential regulatory hurdles I know part of that is supported by tracker related capex, but just wanted to see your confidence.
Color on confidence that 24 earnings power should remain unchanged.
Pablo LNG take that yes, great question, and I'd say that I'd point to the kind of a diverse portfolio across the companies that we're going to be leveraging so it wasn't necessarily fall slowly in the Indiana jurisdiction, where we would be making investments to help pull forward some of those <unk>.
Capital opportunities, so we'd be spreading that to the extent that we can across our companies, where we have those investment needs and we've got the capacity to do that so that would help to moderate the impacts on any one customer group and then of course, we'll continue to look for opportunities to refine efficiencies and productivity savings across all.
The jurisdictions to help offset that as well.
Okay got it that's helpful. Mike.
A question just looking at the quarterly results.
Unless I missed something it seems like on the gas O&M side, there was a meaningful decent amount of increase there and I think you've just got you've laid out on the supplemental.
Forms the labor materials inflation.
I don't know if that was more directed towards gas only and I didn't see it really on electric but is there anything on the gas side that was having more of an inflationary impact on just related to that how.
Just commentary on how you think you will be able to manage that.
And b at the at least the middle of that 'twenty two guidance range for the year.
So I'll start that and travel are down.
<unk>.
At our gas business, especially in this winter, we had a very challenging winter and when you do gas work, you're doing a lot of digging in the ground and you're dealing with weather weather incidents to your productivity levels.
<unk>, not where you need them to be.
Ground's harder a lot harder to get to some of our leaks over time as the weather clears up we expect to gain get those productivity gains back. So I think it's more of a weather.
Issue.
That weekend.
Turnaround here in the near term Pablo Yeah, I agree with that it's been kind of extra.
Extremely wet start to the season, which delays some of our construction work, which then puts folks working on other types of.
Compliance and operations work that that shifts that capital O&M mix a bit. So we saw that shift happened in the first quarter, we expect to see that shift back and have the ability with the work out there to make up that difference as we look at the balance of 2022.
And then I can follow up on inflation, we are seeing higher inflation on materials.
And fleet.
Some outside services, we're seeing ranges of 6% to 10%. This year, we're actively managing that and looking to lock in some multiyear contracts. So that we can limit those increases in leap <unk>.
<unk>.
Predictability around those increases.
However, I will go back to.
All of this is included in our guidance for this year and our long term plan. So we're comfortable.
With our guidance were uncomfortable with the expenses, we're seeing but we're also actively managing.
Going back to thinking about long term customer affordability of our programs.
Okay got it.
Largely known Okay. That's helpful. Thank you so much.
Our next question comes from the line of Julien Dumoulin Smith from Bank of America. Your line is open.
Hey, good afternoon. Good morning team. Thanks for the time appreciate it.
Hope you guys are doing well.
So maybe just to kick off to kick things off a little bit here I am going back to that last question on the 6% to 10% cost inflation. What metric are you quoting there on that 6% to 10%, but more more germane. If I can the real question I wanted to throw in there was.
Can you touch on your cost reduction measures specifically of Nisource next what are the costs that are being pulled out against the backdrop of that inflationary environment and maybe Tim could you be more specific.
Terrific are these sustainable cost cutting measures on the three to four <unk> or are they more one time ish in nature and what is it what kind of latitude are you seeing given this inflationary environment substantially lean in and find more than three to four of opportunity here is when you look at the business to more than offset some of these impacts.
Yes.
<unk> got a couple of parts to your question.
So take your time.
Okay.
So first question was around inflation, what we're seeing so we're tracking each I'd say category of spend across the business electric <unk> gas.
Looking at year over year impacts looking at contracts.
To really understand what we're seeing and how to best manage the so that's where we're seeing kind of the six to 10 across certain categories. In some places it's flat because we've got multiyear contracts already in place, but certainly seeing some inflation there.
Other question I think you were referring to.
The four to five.
In 2024.
We've got line of sight to that and we think about both from a I would say <unk> to your point those would be.
Cough that we'd go out over time and to get back to.
Lloyd and Pablo's point around productivity Nisource next really is designed to increase productivity across our business, especially in the field.
And so thats been long term savings, but certainly we've got levers on a year over year basis to ensure that we're hitting our targets.
Really all of the above.
Just to clarify the $3 three to four is then I'll start on the slide here on the O&M and that is an ongoing savings opportunity, but we still got to wait for what you guys have to say in the fall here for more.
That's right, yes that is right.
So so far.
<unk>.
I will say and O&M agility methodology as we build our O&M budgets every year, we'll have a plus or minus 2% agility in there that we can flex and then the other part is Donald talked about with nice sort of snacks and gaining productivity is more structural focused on continuously building more productivity and.
NC into the business as we go along and we will have more detail and following that on both of those.
Okay.
Got it alright excellent. Thank you guys and then just a super quick if I can on Ohio, I know that thats in.
In flight here, but can you discuss a little bit more specifically the delta between your asking SaaS rack, obviously, there's some obvious ones but.
The percent of ask was low can you reconcile that a little bit but more even more critically.
Not looking to front run the rebuttal here, but what is the opportunity to potentially address some of these discrepancies here more formally.
Hey, Julien this is pablo.
I'll say first off.
<unk> had and expect to continue to have constructive regulatory outcomes in Ohio over the last many years between our.
Capital expenditure program and our RSP programs and so we're working constructively on this issue as well so certainly the staff report on the Delta between our application and their recommendation is as meaningful.
<unk> taken the opportunity since we have seen that report to help clarify some of the elements inside of ours and so some of the specific elements are certainly O&M assumptions. There are some plant and service assumptions that drive some differences and there is some.
Liabilities.
And.
I haven't thought along those lines on environmental and such that that we're working on so we're working to clarify where we think some of the differences have been we think that will in a response to their staff reporting a rebuttal, which we're going to file. This week still will have an opportunity to do that and then we're going to file a supplemental testimony.
By Friday of next week and during that time, we're going to also work to initiate settlement discussions. So we still fully expect that a settlement is possible, we'll be working towards that and we think that theres a reasonable settlement out there that's going to benefit all the stakeholders in this and we're going to be tracking towards that Joanne.
Wish you the best of luck, Rob will talk to you guys soon alright. Thanks.
Yeah.
Our next question comes from the line of Steve Fleishman from Wolfe Research. Your line is open.
Okay.
Yes, hi, good morning, Thanks for.
The details that you provided this morning.
Solar issue and offsets and such so.
One question following up on the cost.
If there are cost increases for the projects.
Can you give more clarity of how.
How the relationship is between your developer partners.
Yourself in terms of who's who is kind of on the hook for cost increases.
Is it.
Yes.
Yes, Steve this is Sean so the cost of the project itself.
Build transfer agreements fully contracted for at a known price the cost increases themselves are on the side of the developer to construct those projects to the extent that tariffs are applied we'd have to evaluate what the application of those tariffs are to understand that that cost pressure and risk aware that libs.
Okay.
So it's not clear where the tariffs.
If it's tariff related who's who.
<unk> kind of.
Got it deal with that issue.
That's correct.
Okay.
Yes.
And as it is at all.
Are the contracts consistent or do they vary on that topic.
Each country each car.
Tracts unique Steve, but certainly there are some components that are consistent that particular element has the entire construct itself and how it's financed can vary.
It would come in to into consideration so I'd describe it as each project each contract is unique.
The application of that itself, we'd have to evaluate as the projects steps closer.
Okay.
And I know you just announced this today, but the idea that you an investigation is.
Causing delays in solar projects, forcing you to extend the life of a coal plant <unk>.
Seems like kind of a meaningful policy issue.
<unk> for the.
The same administration Thats actually.
Doing this investigation.
Aye.
It seems like it's been so far very technical process, but just what kind of.
There's obviously a political aspect to this I'm just curious kind of if youre getting any sense.
Whether that's resonating at all or not.
Okay.
Yes, Steve I mean, I would highlight as I did in my comments that we're disappointed that disruption in the solar chain is going to constitute potential delays for customers to realize benefits and some cost certainty related to fuel price volatility.
The premise by which these projects really were born in.
It's disappointing that that might occur that said were optimistic the department of commerce can work expeditiously to provide some refinements that its investigation that can enable these projects to move through as quickly as possible at.
At the core of what we do it's about reliability for our customers and the communities, we serve and Thats a critical component that we were focused on which is part of what shafer can deliver and has delivered for many years, which is part of the decision that we've laid out here today, but were optimistic that even with recent refinements. The DLC has.
Provided it can give us enough information to get clarity through the conversations with our developers to advanced our specific projects as expeditiously as practical to get to I think what you alluded to which is.
We really are.
Lower cost energy solution with more price certainty for customers.
Okay.
Yeah.
Great. Thank you very much.
Your next question comes from the line of Ryan Levine from Citigroup. Your line is open.
Good morning.
If there are any cost overruns for solar that nice versus responsible for can you speak to the recovery mechanisms for these cost overruns and delays trigger any legal rights.
For the company with its Counterparties on these projects and then somewhat related given the announced delay expectations. How are you looking at these delays impacting financing plans as it relates to the ATM and other sources of funds. Thank you had footnoted insight on that alright.
Go ahead.
I think the first part of your question I think it's too early to speculate on if the tariffs would be applied how it would be what the circumstances would be by nature of the <unk> give us the regulatory approval to move forward with these projects, we'd address any cost variance from the projects that would be different than the existing CPC ads through the regulatory.
The process with the IRC.
So I think the question on that front end is is addressed through the regulatory process itself with the IRC against the existing CPC and to move forward.
But let me ask a clarifying question when you talk about cost overruns, you mean, the cost general cost overruns, the project or cost overruns with just with respect to the tariffs which question are you asking what are the first but it's both of them play okay.
I think when you talk about general cost overruns I think those are covered in the contract with the developer.
With respect to the tariffs I don't think those are contemplated in the contracts. Therefore, we have to work with the developer and or the regulator to decide who bears that risk.
And with regard to the financing plan.
Certainly we expect that if there is delays.
It's going to impact it's going to delay the.
Any debt financing that we do on the projects.
That's where we expect we'd see some savings from deferring some of that debt.
Debt issuance as regards to with regard to ATM.
No changes to our financing plan now you would see the ranges that we've got outlined outlined here certainly.
<unk> in 2023 is possible.
And that's certainly taking into account the both our overall business as well as those renewable projects.
Thank you and then one unrelated question through for Lloyd with the business review process are there certain areas of the review that has been decided to evaluate more comprehensively and is that part of the reason for the delay in timing.
Analyst day are you could share on that would be appreciated.
Let me be clear I was never.
The delay in the Investor day is primarily focused on.
The delay in the solar projects.
I was never.
I didn't believe I would be finished their review.
Hi.
Our spring Investor Day, I think the level.
The level of review that we're taking looking hard at each of the utilities, how they contribute to the overall business.
What our corporate services are what productivity looks like in the organization, how we benchmark all of that's ongoing and it just so happens I believe and at target, making sure that we're finished and the fall in conjunction with these projects that are leaking getting what I'll call a comprehensive review of strategy, a nice source and.
In terms of how we will grow after 2024.
Appreciate the color. Thank you.
And there are no further questions at this time, Mr. Lloyd Yates, our CEO I turn the call back over to you for some closing remarks.
So first of all thank you for your questions I'd like to close by reiterating our reiterating a few key takeaways.
One nisource expects the Commerce Department Solar panel investigation to delay solar projects, we are developing and implementing a mitigation plan to maintain our 2024 growth commitments.
We're reaffirming our 2022 guidance of $1 42 to $1 48 diluted non-GAAP EPS, 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 2000.
23.
We continue to make strong progress on our regulatory agenda with a settlement the NIPSCO gas rate case in new cases filed in Pennsylvania, and Virginia and.
<unk> will host the Investor day in the fall, we intend to provide you with a definitive long term plan beyond 2024. Thank you.
Does this I appreciate you doing this morning.
This concludes today's conference call. Thank you for your participation you may now disconnect.
[music].