Q3 2022 Eversource Energy Earnings Call
For our natural gas customers.
Residential heating costs in total bills will be up just over 20% on average compared with last winter somewhat less than that in Connecticut, while any increases in these times, it's difficult for our customers. We are looking at much more significant increases a month or two ago before the recent pullback in natural gas prices.
Turning to slide three.
I will provide you with an update on our offshore wind partnership with <unk> as you know construction of our first project self book.
Commenced early this year installation of the onshore conduit system, including cable vaults in town roads and along the long Island Railroad right of way is nearly complete and ahead of schedule.
Construction of our new onshore substation is on schedule and progressing well it should be complete in the second quarter of 2023.
In water construction will begin this month using horizontal directional drilling to install a conduit 80 feet below the beach that will extend offshore.
The transmission cable will be installed through that conduit next year to move energy from 12 offshore wind turbines to a new substation and into the long island power grid.
Installation of the largest components, including the foundations turbines in offshore Substations will begin next summer off the coast of Massachusetts.
We also continued to progress well on our larger offshore wind projects. The Bureau of Ocean Energy management issued a draft environmental impact statement for the 704 megawatt Revolution Wind project in September we expect the final EIS in the second quarter of 2023.
Have all permits in hand in the second half of 2023, we continue to target a 2025 in service date.
On Sunrise, our largest offshore project, we filed a joint settlement in September with the New York Public Service Commission. The settlement includes proposed mitigation for certain environmental community and construction impacts associated with constructing the project.
The joint proposal was signed by the New York Department of Public service Environmental Conservation Transportation.
And state as well as the office of Agriculture end markets and the long Island commercial Fisheries Association.
We also continue to target a 2025 in service date for Sunrise wind.
We are also making significant progress on our strategic review that review covers the three projects I, just mentioned, which will generate approximately 1700 and 60 megawatts once in service as well as up to 175000 acres of offshore wind lease areas where are we in.
<unk> have rights to build additional offshore wind facilities.
We're now engaged with a number of potential buyers for our 50% ownership interest in our offshore wind joint venture.
<unk> is actively supporting the process.
It's very possible that we contract with one buyer for the three projects and another for the open acreage we do not expect to have any incremental news on our strategic review before the EI conference, but we made by year end.
We remain very big fans of offshore wind and expect it to become a critical energy resource for the northeast, particularly in the winter when wind speeds or higher and more consistent.
You can see on slide four how much has been awarded to date in New England, and New York and how much still needs to be secured.
Contingent on the outcome of our review I expect that our principal role in the future will be that of a regulated transmission provider integrating this valuable resource into our region's grid rather than a turbine owner.
Thanks again for your time I will now turn the call over to John Moreira.
Thank you Joe and good morning, everyone. This morning, I will review our earnings results for the third quarter of 2020 to discuss recent regulatory developments and review our financing activity I will start with slide five our GAAP earnings were $1 per share.
Here in the third quarter of 2022, compared with earnings of 82 and.
In the third quarter of 2021 third quarter results and 2021 included a charge of <unk> 19 per share to reflect last year's settlement agreement that resolved a number of regulatory issues at Connecticut light and power. Both years included the impact of <unk>.
One penny per share.
Of charges related to transaction and transition costs associated with the former Columbia gas asset acquisition. Excluding these charges, we earned $1 <unk> per share in the third quarter of 2022 compared with earnings of $1 <unk> per share in the third quarter of two.
Thousand 21.
For the first nine months of 2022, we earned $3 13 per share on a GAAP basis compared with earnings of $2 65 per share in the first nine months of 2021.
Excluding charges related to transaction and transition and the <unk> settlement charges.
We recorded last year, we earned $2. We earned $3 17 per share in the first nine months of 2022 compared with earnings of $2 95 per share in the first nine months of 2021.
Looking at additional details on the on the third quarter earnings by segment, starting with our electric transmission segment, which earned <unk> 44 per share in the third.
In the third quarter of 2022, compared with earnings of <unk> 40 per share in the third quarter of 2021.
Improved results were driven by a large level of higher investments.
In our transmission facilities moving onto our electric.
Distribution segment, which earned <unk> 65.
For sure in the third quarter of 2022, compared with earnings of 62 per share in the third quarter of 2021.
Again, excluding the settlement charges I previously talked about the improved earnings were driven largely by higher revenues and lower pension costs, partially offset by higher O&M property taxes and depreciation expense.
Our natural gas distribution segment loss <unk> <unk> per share in the third quarter of 2022, compared with a loss of <unk> <unk> per share in the third quarter of 2021, the increase increased losses were due to a higher non tracked O&M property taxes depreciation.
And interest costs, which was partially offset by higher revenues and lower pension cost primarily at Yankee gas.
Our water segment.
Earned <unk> <unk> per share in the third quarter of 2022, the same as the third quarter of 2021.
<unk> parent and other companies lost <unk> <unk> per share in the third quarter of 2022 compared with earnings of <unk> per share in the third quarter of 2021, excluding the transaction and transition costs that I mentioned earlier the decline was due largely to two factors higher.
Interest expense, primarily related to new parent company.
Issuances, which lowered the results by <unk> <unk> per share.
Higher income taxes.
<unk>.
Of about <unk> <unk> per share.
Specific to the third quarter results.
This is when we finalize our annual corporate income tax returns.
Despite the headwind from higher interest costs, we continue to project our full year 2022 earnings of between $4 <unk> and $4 14 per share excluding transaction and transition costs that I spoke about earlier.
Turning to the longer term as you saw in our news release.
And as you can see on slide six.
We are reaffirming our long term EPS growth rate in the upper half of 5% to 7% range through 2026, we also reaffirm our $18 billion five year regulated capital program that we discussed during our February earnings call <unk>.
Including our $3 9 billion regulated capital investment projections for this year.
We will provide you with an updated five year forecast when we report our year end results in February .
As we mentioned during prior earnings calls.
There continues to be uneven increasing need for ever source to make capital investments in our transmission and distribution systems that will enable our region to achieve its aggressive clean energy targets more rapidly.
As a result of this strong public policy imperative and our ongoing focus on improving our systems to address aging infrastructure, we estimate that at least $3 billion of additional investments above our current $18 billion capital forecast will be required through 'twenty.
<unk> 26 in July we discussed the need to invest up to $500 million in our transmission system on Cape Cod to enable approximately 2000 megawatts of offshore wind generation to be connected.
Into the new England grid.
We also noted that ongoing regulatory reviews of our advanced meter infrastructure proposals at.
At this time regulators in both Connecticut and in Massachusetts are actively working through dockets, which.
Decisions are expected later this year in Massachusetts, and either at year end or early next year in Connecticut.
Moving to slide seven we want to highlight some new infrastructure needs to enable clean energy distribution resources to connect to our grid.
Our proposal.
Our proposals are currently before the Massachusetts Department of public utilities.
Massachusetts has very ambitious carbon reduction goals.
And 85% reduction by 2050, and two cornerstones of efforts to achieve those reductions are embedding.
Enable in offshore wind and solar generation, Joe discussed offshore wind earlier now.
Now on the solar front, a growing number of solar distributed energy resources are awaiting connection to the grid.
In certain areas of our state, particularly in southeastern Massachusetts, we are at a standstill and connecting new solar resources. Because there is a very there is very little available grid capacity.
Under the current existing model the developer who is project is the the last straw triggering the need for significant upgrades to certain infrastructure pays the full cost of resolve and capacity.
Capacity issue a bottleneck.
When large T&D equipment limits.
Our reached the cost to resolve such bottleneck could become cost prohibitive for these developers. So the project will not likely move forward nor will other projects behind it and.
And thereby stall in the interconnection queue.
That has created a backlog of construction of about 350 megawatts of distributed solar generation in the state a figure that is growing the map on slide seven shows the six areas of Massachusetts with the greatest bottleneck.
We have proposed a resolution whereby we would build out the system in advance and recover some of the costs from solar developers as they tie their projects into the grid.
Slide nine shows the upgrades.
It'd be a combination of.
<unk> mission and distribution infrastructure needs together, they would total about $900 million under our proposal developers would pick up about one third of those costs over time and the associated rate base would be adjusted accordingly.
<unk> decision.
On the first of the six projects is expected later this year.
With decisions on the remaining five projects to follow in 2023.
We view our proposal as an innovative solution to a vaccine issue that has slowed the build out of third party solar expansion in Massachusetts on the regulatory side, we are nearing the end of one general.
Rate review with hearings on another one about to commence.
A summary of these two cases can be found on slide 10.
<unk> briefing in the.
And our electric rate review concluded late September and a decision is expected on December <unk> with new rates going into going into effect January one of 2023.
Feel very good about the strength of our case as well as our proposals to enable the commonwealth's clean energy goals.
Moving to our new rate review on August 29th.
Aquarium water connected.
Connecticut filed its first rate review application in about 10 years.
Key elements of the three year plan are shown on this slide Aquarian, Connecticut case as a result of significant infrastructure investments made over the past several years to enhance the water service reliability for its customers evidentiary hearings will start in about three weeks and a final decision we expect.
In mid March.
Turning to recent financings, we completed our fourth green bond issuance at <unk> electric in September selling $400 million of 30 year notes at four point, 95% that issuance helped pay off of similar size issuance that matured in mid <unk>.
Tober.
With that issuance be now behind US we have completed our long term debt issuance program for the year in terms of equity issuances.
As you can see on slide 11, we have now issued about two 2 million shares through our at the market program at a weighted average price of $92 31.
Through October we also have issued approximately 810000 shares.
Of Treasury stock.
This year to fund our dividend reinvestment and employee equity plans the impact of those issuances reduced EPS by approximately one penny per share in the quarter.
Finally in terms of credit metrics.
As you will see shortly when we file our 10-Q, our cash flows from operations totaled $1 7 billion in the first nine months of 2022 compared with one 5 billion in.
In the first nine months of 2021. The improvement was primarily this improvement was primarily driven by higher net income.
Higher depreciation and amortization and lower pension plan contributions since shop since our plan is.
Is essentially fully funded as of the end of 2021.
Thank you very much for joining us this morning, and we look forward to seeing many of those on the call and at our annual <unk> Finance Conference in Florida. Later this month I will now turn the call back over to Jeff for Q&A.
Thank you John and I'm going to return the call to Kansas to remind you how to enter your questions Candace.
Thank you, Jeff if you'd like to ask a question. Please press star followed by one on your telephone keypad if for any reason you'd like to remains your question to start followed by <unk>.
To ask a question. It just stopped followed by one as a reminder, if you are using a speakerphone. Please pick up your handset before asking your question.
Great. Thank you so much alright first question. This morning is from Shar <unk> from Guggenheim Good morning Shar.
Morning, Jeff Good morning, guys.
Good morning.
So Joe just on the offshore wind sale process, you indicated I think on prior calls you were working on sort of the tax leakage offsets anything you have anything <unk> been able to identify there so far and are we still thinking 100% sale of the leases in the projects.
Irrespective of what stages, they are in and their construction cycles, so no build own transfer scenarios.
Yes, so we're definitely looking at a complete exit of the projects in terms of the tax I'm going to turn that over to John Moreira. He's better equipped to answer that question, Hey, Sean So as they continue to do.
<unk>.
We're looking at every.
Alternative to minimize on any tax leakage I think at this point, we're still going through those assessments working with our advisors I think it is.
Premature.
We do have.
Plan to to mitigate as much of that tax leakage as possible.
Okay, perfect and then.
You previously indicated that you need to find roughly $3 billion of spend to offset the loss of the wind to earnings if I recall.
Correctly, you had about $1 5 billion thats been identified so we simply stepping up here, having a line of sight on roughly $2 4 billion out of the $3 billion with the <unk> spending you just released or is there some overlap and I guess, where could we see the remaining opportunities, especially as we're thinking about.
This in the context of your overall growth guide as we look ahead to the sale and the next roll forward. Thanks.
Yes, well good news is that number we've got up to about $2 5 billion John's going to fill in some of the details on how we will we're going to fill that and so John E tail sure Shawn one once again.
Mentioned.
We've quantified and put on the table 1.5 billion.
Of that $3 billion number that we have shared with you. So let me take.
<unk> take you through that so $1 billion is AMRI.
And in my formal remarks, you heard me say that we do expect a decision out of Massachusetts by the end of this year and Connecticut, probably late late this year or.
Our early 2023, so thats about a billion billion and <unk> one okay. And then we also quantified for you all about a half a billion dollars of transmission interconnection of which we already have approval for 200 of them.
And today, we announce.
Close to $900 million of debt.
We are very excited about to.
Address this burn and issue in Massachusetts too.
To enable solar.
Generation to connect into our grid those investment opportunities will enable up to one gigawatt of generation to connect into our infrastructure both transmission and distribution. So right now we have about six cluster projects that we have before the GPU.
That amounts to.
$900 million and as I said in my formal remarks, primarily in.
Southeastern Massachusetts, where we we are stretched from a capacity standpoint, so that is from a regulatory standpoint that is well on its way and we do have some we've been working we think it's a very creative.
Proposal that we've put in front of the regulators to facilitate this.
This need so we're very excited about that so that we see materializing.
Between over the next four to five years.
We expect that that full infrastructure will be in place by 2026 to allow for at least 350 megawatts of that one gigawatt that I mentioned.
Got it terrific. So I guess the key messages are chopping wood on that $3 billion that you were looking to backfill. So that's good.
Absolute <unk>.
I feel very I feel highly confident that once we update our five year capital plan that we'll share with you in February that we will we will get to that number.
Fantastic Congrats guys. Mr. Known we'll see you in a week and a half thanks guys. Yes. Thank you shar.
Our next question is from David Arcaro from Morgan Stanley Good morning, David.
Hey, good morning, Thanks, so much for taking my questions.
Yeah.
Maybe following up on a couple of the topics in the chart raised on the offshore wind.
Our strategic review process could you just give an update on what interest levels youre seeing whether anything's changed with the rising rate backdrop.
Overall kind of number.
And in type of potential interested parties there.
Yeah. So we've had as a process is going along very well we have several highly interested parties.
The interest rate has not caused any concern for them.
And we're very very optimistic and continue to be optimistic on the process.
Okay got it thanks, and then on the level of costs that had been locked and it looked like the percentage hasn't changed since the last quarter. What are you seeing in terms of the inflation in offshore wind kind.
Construction costs.
Lately and in your current thinking around.
Willingness to lock in additional costs with the with the strategic review going on.
Yes, we are we are in the 80% range.
100, <unk> the contracts that we're talking about are not ones that I'm, particularly worried about around.
Costs are those types of things that we do have competition in that space. So we're going to be strategic in any type of contracting that we do but I feel very good about.
I advise on the remaining say, 15% to 18% non market started about it.
Okay. That's good to hear thanks, so much.
Thank you. Thank you David David.
Next question is from Steve Fleishman from Wolfe Good morning, Steve.
Yes.
Yeah, Hey, good morning, everyone.
So just.
We're getting near the end on the Massachusetts curious could you just.
Give us a sense of just how youre feeling about.
Getting a reasonable outcome there.
Yeah, Steve Good morning, it's Joe we feel very good about it we had some very very good.
Hearings, we had a lot of good discovery a lot of good exchanges and we.
We have been very actively engaged with multiple parties. So we are still extremely optimistic for very favorable outcome in that in that proceeding well.
It wasn't a big number in terms of increases and I think that folks recognize the extraordinary job, we do for our customers see our Massachusetts. So we continue to be very optimistic.
Okay great.
And then the.
Maybe just in terms of.
You're asking a question from the beginning a little different way just when you announced the offshore wind sale you talked about.
Net income that you would hope for in 2006 and be able to kind of.
Take the proceeds in.
And get get to that level with investment in our regulated business.
So obviously you are starting to get the investments all lined up here, but just overall how are you feeling about kind of.
Getting to the.
Kind of in game of whatever your growth rate was plus the incremental net income.
So.
Yeah. Good question and we are working on an update on our five.
Revised five year forecast taking into account all layering into our plan the additional capital that we.
We need to.
Execute on for the reasons that I stated.
We feel very confident that we'll be able to get.
Into our.
Zone of guidance that you all would expect from us so I'm feeling very good about it.
Okay great.
Great. Thank you.
Alright, Thanks, Steve.
Next question is from Nick Campanella from credit Suisse. Good morning deck.
Hey, good morning, everyone. Thanks for taking my questions.
I guess, Joe just on the on the bite and letter in the winter scenario. Obviously, the fact that you are writing this letter it's a serious situation and I just wanted to ask.
When you think about the ability to kind of deploy capital at the pace that you are in the current plan does it does it change your thinking at all in the ability to.
Spend capital with the pressure on customer bills from the fuel lines.
Yes, no I mean, I think the investments that we want to make a wrong transmission to one walk tap into some renewable resources.
Cannot yet.
Get onto the grid in a in a way that's meaningful for the operator so that.
That's something that will only reduce customer costs at the end of the day, if we're able to to get at some of those renewables. So.
I don't think that that would wood.
It would have an adverse impact on our customers. So no I don't feel it's going to affect it.
Thanks, a lot.
And then on IRI could see could you see no.
No A&P impact in.
You are saying kind of cash uplift in slides here. So can you maybe just update us on.
What you are asking floater that is in a post <unk> world versus kind of where it is today.
It's.
It will head in the right direction, there's no doubt about it with the IRI given the the deployment of our solar program in Massachusetts, where we get the ability to get that those tax benefits upfront and then as required.
Back to customers over time, so we do see.
<unk> to debt.
Okay. So just directionally positive I appreciate it. Thank you so much.
Alright, Thanks, Nick.
Next question is from their gas from Evercore good morning their gas.
Hey, good morning, Jeff. Thank you for taking my question guys.
What are sort of the key dates for us to watch on the six.
Dr related projects in Massachusetts, I believe you said one of them.
Is is under consideration for approval here shortly.
You can give us a timeline for us to kind of attract that'd be really helpful for regulatory approval.
Sure. Yes. This is John so could.
We have filed all six proposals.
Individually and we expect the first one.
Which is about.
Call it $150 million opportunity that's on the slide eight it's the Marion Fay Haven.
Project, So we expect to see a decision.
Some of the GPU late by the end of the year and then the remaining five will trickle in.
Over 2023.
Got it so basically by the time of your your.
Fourth quarter update Capex update you would've received.
As you know and one of the projects.
It will be layered in sometime next year.
That's correct, that's correct and the construct as I've mentioned.
Basically the same for all.
All six projects, obviously, there's varying degrees of investment.
For the six but the construct that we file for us it's very consistent.
That makes sense. Thank you guys appreciate the time.
Alright, thanks to our guests. Our next question is from Jeremy Tonet from JP Morgan Good morning, Jeremy.
Hi, good morning.
Just wanted to touch base on the offshore wind.
Process, a little bit more and just wanted to see.
How is the process tracking toward that potential year end announcement, just trying to look at the language here is your slide language pointing to a slightly longer process versus prior expectations just trying to parse through this end of the year as you put it in the slides.
Sure Yeah, it's Joe.
We're working very hard at this right now we've got very interested buyers.
We would like to be able to have an announcement by year end, but there's no guarantees around that but I would tell you that there are there were a very strong group of buyers that are in there and we feel very very good about the process.
So.
We're optimistic.
Got it that's helpful. Thank you.
And then just pivoting could you frame the impact of higher interest rate expense on growth within your EPS CAGR just wondering what levers are left to offset.
This higher expense and how much of a headwind could it be same thing for for pension overall.
Yes, yes.
It will be a headwind as you would expect but we're on it and we are working to mitigate that.
That impact.
Obviously, it's uncertain.
I'm framing this.
This higher interest rate environment will continue but.
As I mentioned earlier, we're focused on developing a plan for next year and I feel very good that we will have opportunities to mitigate that that headwind.
Got it I'll leave it there thank you very much.
Great. Thanks, Jeremy next question is from Ross Sandler from UBS Good morning Ross.
Good morning, Jeff Good morning, Joe Good morning, John how are you.
Great.
Well my question is on offshore wind have kind of been answered. So maybe we can move back to Joe Your comments at the front of the call about build pressure across this winter.
Sales would be up an average of 20% and that's given the pullback in natural gas I know it's.
It's been in the seventies in new England. So some good weather to which is which is nice but grow it up there it's going to get called.
Some point so can you just remind us how.
How you're hedged across the winter for that natural gas on price like through January and February and March and then maybe it's not even necessarily about hedging and price given your commentary, but more about even getting supply should it get colder than normal process winter. So just maybe frame that risk was a little bit more.
Sure sure.
Let's focus first on our gas business.
We have we are hedged we have LNG, we keep roughly 2020 day supply available of LNG at our facilities, we have multiple LNG facilities. So I feel very good about.
The supply in the natural gas situation.
For <unk> customers this would drive no concern around that.
We began planning for that and and putting our resources into storage starting may have on.
The springtime, we start and we feel all our tanks and we were at very very good shape. This year for that I think what I was what I'm pushing at is the issue around electric generators in the region, whether they are natural gas fired or they are oil fired they do not have a firm fuel supply and since they don't.
Have a from fuel supply when we get these days for a protracted cold spells. They do not have fueled to run and that is what my concern was in that was that was really the letter that I had written to president Biden looking for relief number one with the petroleum reserves. He certainly has a significant resources to help with oil.
And then relief around the Jones act to allow vessels to foreign vessels to operate freely.
Within within the U S foreign vessels just.
Just this past week, there are probably six to eight vessels down in the Gulf. They're filling up these are foreign vessels that they are headed to Turkey, Japan, South Korea Europe .
Fact that they can't come up to the northeast with the with the U S. Natural gas LNG, it's disturbing to me. So the precedent has the policy has done it before with with the prices in Puerto Rico and <unk>.
He's been a real champion for energy issues.
I don't believe he'll let us down here I think that I think the president will play an active role here and help us get what we need to be sure that our customers have an event free winter.
Yeah.
Okay. Thanks for that and then maybe maybe winding back a little bit more color on an earlier question.
You mentioned that all of these capital programs, you're deploying and filed for but aren't in approved yet some of them are really to sort of mitigate the rent pressure around electric bills could you take fuel cost out of the system.
And as deals are doing up in the near term are you worried about the pressure maybe not certainly taking those programs away because that's where we're trying to get to is mitigating that no pressure, but are you worried about regulators slowing the pace to alleviate some of that adult class.
Well listen.
We feel for our customers. This is a challenging time, but there's not anything new to this region. We have experienced this before and we have a long track record of working with our customers I think when the regulators see the type of investments that we want to make and the benefits.
I can I can list 10 transmission projects that have reduce customers' bills by billions of dollars. So these are all very very.
Very good projects to help our customers access lower priced electricity. So youll have to put you have to make the investments in order to get the savings and I think that's what the the regulators' key decision makers will we will look at and decide that it's the right decision.
Got it thanks, that's great.
Alright, Thank you Ross next.
Next question from Paul Patterson from Glen Rock.
Good morning can you hear me.
Yes.
So I wanted to follow up on a few things first of all on.
Proceeding in Massachusetts.
Most of us and asking for delay you guys slow the joint literally believe on on Tuesday.
With national grid, and Unitil I think big.
Basically, indicating that you guys had no intention to renegotiate the contract.
And then I guess I saw that yesterday.
The governor of Massachusetts.
Seemed a little bit more open to the idea.
Could you give us a little bit more color.
Color on on how you see.
And then I guess, if you can while you guys yourselves in a different position with your projects.
As opposed to.
As opposed to this.
Hum.
This one that's asking for renegotiation.
Keep in mind that our pricing.
<unk> is higher it's in the 100 to 110 megawatt hour range.
The project that we're talking about came in here and did very very well pricing against projects that we had bid.
I do not feel the likelihood of success for any renegotiation and keep in mind that.
What's the Governor said is that that he would allow avid grid to make a proposal. He didn't say that he was going to go and renegotiate with them and so there's a lot of players that will have to.
Decide on this certainly its our regulators and our regulars at the end of the day are the ones that are going to decide what is best for the customers.
And so.
That's the reason why you're not seeing any of our projects in there right now looking to renegotiate.
Okay, that's great and then.
I was wondering what kind of response, you've gotten I mean, you sort of answered. It I think just now with with respect to the White House.
Andrew letter, which which makes a lot of sense, but I'm just thinking in general is this.
I'm just wondering is this a wake up call maybe the I mean, you just sort of wonder you know the fact that LNG is being imported as a significant part of new England.
Reliability situation is this sort of a wake up call that maybe.
Construct for maybe the reasons to be more open to Pittsburgh fruit, where maybe the federal government should be sort of pushing this stuff a long before what I'm, saying I don't need to go through northern pass or just a whole variety of projects that have been delayed.
And it just sort of wondered.
Is there any change in Washington or that you're noting.
In the region.
With respect to perhaps it through.
Getting rid of about about about the reliability and default, what I'm, saying and the need for significant.
Significant infrastructure improvements.
To be streamlined and what happened.
All Europe region, you're preaching to the choir here absolutely.
I do see that each of these governance realize the seriousness of this I mean, we are at a fragile point in time as we transition to this clean energy environment and so consequently, we're going to need some relief.
It's the Jones Act relief or other types of projects certainly the.
It's disappointing I you know how hard we worked on northern pass that bring hydro down another great resource that this region could really use so I do think we're all working collaboratively with we were up in Burlington, Vermont, We had all of the states along with the FERC and we are looking at these issues.
Yeah listen a lot of smart people at the table a lot of people understand the seriousness of it and so I'm fully confident that we're going to be able to put steps in place that are going to allow us to transition.
Uneventfully to a clean energy future, it's going to be challenging it's gonna be challenging that's going to require a lot of work, but I know that the folks that the people at the table can get this done.
Okay. Thanks, so much have a good one.
Alright. Thanks, Paul next question is from Paul Zimbardo from Bank of America. Good morning, Paul.
Hey, good morning, Thank you.
Just a couple for me following on Jeremy's question, what interest rates are you assuming in the cost of debt on the offshore wind when you get those expected long term average hourly usage is that a.
Paul since you gave that original target.
Well the.
Are you referring to next year.
The expected long term average Roe.
From the slides.
Well.
Just looking at from a long term perspective.
<unk>.
The interest.
Costs associated with our offshore wind.
<unk>.
Close once we divest.
Proceeds will be used to reduce our short term as well as our long term debt.
2023, we have $1 2 billion of long term debt thats maturing at the holding company. Okay. So the timing could not align any any better for us and then on another positive note. If you look at the total utility debt Thats maturing, it's probably the lowest amount that I've seen in a long time.
We only have about $800 million of debt maturing at the utilities.
So that sets us up very nicely.
But we still have nevertheless, we have to fund our capital program. So I'm not seeing a huge headwind on that I'm not seeing a huge move.
<unk> in our in our long term guidance as a result of this environment that we are in from an interest rate perspective.
Yeah.
Okay.
Frankly, I like the actual projects I don't know if interest rates are a pressure and there is an offsetting mitigation positive can keep that.
The average ROE is intact.
Number one.
Because these projects are under construction the interest cost that we are incurring during construction is capitalized so we're not seeing any impact.
I'm, a finance standpoint for these projects.
Okay, and then one of them got.
Got it so we get the proceeds from the from the divestiture that will be used to offset the debt that we currently carry.
Yes, yes understood.
Okay, Great and then briefly I know you gave some commentary last call about pension just if you'd give any updated thoughts there about pension returns or just your overall thoughts as we head into next year. Thank you.
Sure sure glad to do so so pension returns just like our peers.
And not headed in the right direction for us.
But but even with that said.
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There will be some headwinds, but once again not anything material not anything that we cannot overcome.
Okay excellent thanks, a lot.
Thank you. Paul next question is from Travis Miller from Morningstar, Good morning Travis.
Good morning, Thank you.
Not to belabor the point here too much but.
Any idea about what might happen a harsh winter environments in the past on a regulatory standpoint, you guys have had some headwinds one of them.
Difficult weather events do you think something has changed or are you trying to set up.
Scenario here, where if there are issues in terms of energy deliverability.
Resilience reliability.
Is there a way you can turn that into a positive from a regulatory standpoint.
Get approval for more.
Couple of investment instead of getting penalized for not meeting certain requirement.
Well you know I think what we're focused on with our regulators and our solutions to deal with this current winter I don't know that.
I don't know that maybe that would translate into some longer term types of investments.
Right now Theres fuel security program, where maybe these generators get given some given funds to have say a seven day supply of fuel on site. Those are the types of measures will looking at short term measures with our regulators, but I think that during that dialogue is where you can demonstrate to the regulated that a particular transmission investment.
Unlock potentially.
Number of megawatt hours in a region and lower and lower the costs. So I think.
That is we have very good regulatory relationships, we have very good.
Regulators that are very engaged and we're engaged with them on these issues. So anytime you haven't engaged.
Parties, you get much better solutions.
Okay great.
And then one more on the Governor's race, so anything near term after the election that could be impacted either in programs that you're seeking approval for other things.
As you would expect in the next year or so on the policy front, depending on the outcome.
Right.
Yes, no I think we have.
Eyes on.
On all of the States I think we've got pretty stable regulatory.
Climate and we have plans, we have multi year plans, we don't expect that.
But everyone's agenda around clean energy.
Around <unk> those those.
Those are all consistent no matter, who the candidate is I think everyone recognizes that we need to have a.
Our grid that can enable all sorts of resources to operate on it whether it's you're charging your electric vehicle your solar panels or any type of the distributed resource.
So I don't I wouldn't expect any changes no matter, who wins in what state.
Okay, great. Thanks, so much I appreciate the thoughts.
Thank you thanks premise thanks Travis.
Well that was the last question that we that we have this morning. So we want to thank you all very much for joining US we look forward to seeing you at.
Any of you at the <unk> annual Finance conference. If you have any more follow ups. Today. Please send me an email or give me a call. Thank you.
Ladies and gentlemen. This concludes today's conference call you may now disconnect your lines.
Yeah.
Yes.