Q4 2022 Otter Tail Corp Earnings Call
Speaker 1: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 11.
Speaker 2: Good morning and welcome to Otter Tail Corporation's 2022 earnings conference call. Today's call is being recorded and we will hold a question and succession after the paper marks. I will now turn the call over to the company for their opening comments.
Speaker 3: Good morning everyone and welcome to our 2022 earnings conference call. My name is Tyler Nelson. Last night we announced our 2022 fourth quarter in annual financial results.
Speaker 3: Our complete earnings release and slides accompanying this call are available on our website at autotail.com. Here recording of the call will be made available on our website later today.
Speaker 3: With me on the call today are Chuck McFarland, Honourtele Corporation's President and CEO , Kevin Moam, Honourtele Corporation's Senior Vice President and Chief Financial Officer.
Speaker 3: Before we begin, I want to remind you that we will be making forward-looking statements during the course of this call.
Speaker 3: As noted on slide 2, these statements represent our current views and expectations of future events.
Speaker 3: They are subject to risks and uncertainties which may cause actual results. Iifer from the latest presented here.
Speaker 3: So please be advised about placing undue reliance and reliance on any of these statements.
Speaker 3: Our forward-looking statements are described in more detail in our filings with the Securities and Exchange Commission, which we encourage you to review.
Speaker 3: Our total corporation disclaims any duty to update or revise or forward looking statements due to new information, future events, developments or otherwise.
Speaker 3: We're opening remarks. I will now turn the call over to AutoTill Corporation's president and CEO , Mr. Chuck McFarlane.
Speaker 4: Thank you, Tyler.
Speaker 4: Good morning and welcome to our 2022 Year End earnings call. Please refer to slide 4 as I begin my comments on our annual results.
Speaker 4: Auto-tail Corporation achieved record financial results in 2022.
Speaker 4: We generated diluted earnings per share of $6.78, a 60% increase from 2021.
Speaker 4: All segments produce double-digit earnings growth, led by our plastic segment, which capitalized on extraordinary industry conditions.
Speaker 4: to achieve another record level of earnings.
Speaker 4: Looking forward, we expect plastic segment earnings to receive in 2023 from our record level this past year.
Speaker 4: but remain elevated relative to our expected normalized earnings beginning in 2024.
Speaker 4: In a moment, Kevin will provide a more detailed discussion of our financial performance.
Speaker 4: Slight 5 illustrates our 5-year compounded annual growth rate earnings per share with and without the impact of our plastic segment.
Speaker 4: Through dependable earnings and steady growth at Autotel Power, BTD, TO plastics.
Speaker 4: and changes in corporate costs, we have produced a historic 10.8% earnings per share per share,
Speaker 4: excluding our plastic segment businesses.
Speaker 4: The additional earnings and cash flow generated by our plastic segments in 2021 and 2022 provide additional strength to our already strong credit metrics, liquidity and capital structure, and allow for capital investments in our operating company.
Speaker 4: Turning to slide 7, we'll illustrate outer tail powers efforts in working toward a cleaner energy future.
Speaker 4: We are targeting to reduce carbon emissions from our own generation resources approximately 50% from 2005 levels by 2025.
Speaker 4: and 97% by 2050, assuming targeted dispatch occurs.
Speaker 4: Additionally, our own and contracted energy generation is forecast to be more than 50% renewable by 2025.
Speaker 4: Last week Governor Wall signed the Clean Energy Bill into law in Minnesota.
Speaker 4: The bill requires Minnesota utilities to provide carbon-free electricity to Minnesota retail customers by 2040.
Speaker 4: It also requires utilities to provide 80% carbon free energy by 2030 and 90% by 2035.
Speaker 4: The legislation allows utilities to use renewable energy credits to offset carbon emissions to achieve these requirements.
Speaker 4: We expect to meet these requirements with our existing renewable fleet and available renewable energy credits.
Speaker 4: The bill also updates the state's existing renewable energy standard, now requiring utilities to provide it.
Speaker 4: Energy from renewable resources equal to at least 55% of the total energy by 2035.
Speaker 4: Based on our current projected energy resource mix, we anticipate we will meet the renewable.
Speaker 4: requirement in 2020.
Speaker 4: This will require some additional reduable additions between 2024 and 2035.
Speaker 4: The 11 includes an overview of AutoTill Power's 49 MW bootleg solar project.
Speaker 4: Project construction began in May of 2022 and is expected to be completed in mid-2023.
Speaker 4: All the costs and benefits of the project are assigned to Minnesota customers.
Speaker 4: Recovery of the $60 million investment has been approved through the Renewable Riders.
Speaker 4: Passage of the Inflation Reduction Act has increased the investment tax credit on this project from 26 to 40%.
Speaker 4: Turning to slide 12, our top-power completed the purchase of the ASH-3 WinFarm on January 3rd, 2023.
Speaker 4: Since 2013, we have had a purchase power agreement in place to purchase the off-take of this facility.
Speaker 4: acquiring the facility provides a lower cost alternative than maintaining the purchase power agreement.
Speaker 4: All regulatory approvals have been received to provide finite recovery of this rate-based investment.
Speaker 4: Flight 13 provides additional information on Torange 1 of Meisel's long range transmission plan.
Speaker 4: Otterto will be a co-owner in two Tronch1 projects, the Jamestown to Ellendale.
Speaker 4: and Big Stone South to Alexandria 345 kV transmission projects.
Speaker 4: Otter Tail's total and capital investment in these projects is estimated to be approximately
Speaker 4: 390 million.
Speaker 4: 40% of the capital investment is expected to occur in the next five years.
Speaker 4: Slide 14 provides an update on AutoTill Power's Integrated Resource Plan.
Speaker 4: In November , the Minnesota PUC supported our request to amend the resource plan procedural schedule.
Speaker 4: The amended schedule allows us to incorporate the effects of changes to micellos seasonal capacity construct.
Speaker 4: Increased MISO reserve margin requirements.
Speaker 4: Recent load additions.
Speaker 4: And the passage of the Emplacion Reduction Act.
Speaker 4: These items could have an impact on the 2021 initial preferred five-year plan.
Speaker 4: which requested authority to add dual field capability to a story station.
Speaker 4: They add 150 megawatts of solar and yet to be determined site.
Speaker 4: And to commence the process of withdrawing from our 35% ownership interest in...
Speaker 4: the coal-fired coyote generating station.
Speaker 4: We plan to file an updated resource plan in March of this year.
Speaker 4: The amended schedule does not modify the timeline for reviewing our proposal to add dual fuel capability.
Speaker 4: at a story of station.
Speaker 4: Flight 15 provides an overview of Otterkill Power's capital spending plan.
Speaker 4: The plan includes 1.1 billion of capital investment over the next five year period, producing a 6.4% annual compounded growth rate in rate base over this time frame.
Speaker 4: approximately 80% of this capital plan will be recovered through existing rates or riders
Speaker 4: This rate-based growth plan is a key driver in our ability to produce earnings per share growth at our targeted level of 5 to 7%.
Speaker 4: Turning to our manufacturing segment.
Speaker 4: Slide 21 highlights the financial performance for the year.
Speaker 4: Strong customer demand across most end markets drove our earnings growth in 2022.
Speaker 4: BTD, our metal fabrication business.
Speaker 4: produce double-digit volume growth and experience volatile steel prices during the year.
Speaker 4: with steel prices declining sharply in the second half of the year.
Speaker 4: Lower steel prices have negatively impacted our scrap metal revenues.
Speaker 4: We continue to monitor the impact of supply chains, which are improving, and economic conditions that may impact customer demand in our shipping volumes.
Speaker 4: Teo-plastics benefited from robust customer demand in 2022, along with product price increases offsetting inflationary cost pressures.
Speaker 4: Looking forward, slide 23 highlights our 23 market outlook for end market served by our manufacturing Sylvi Patrick rightly comes from the
Speaker 4: We expect recreational vehicle and the lawn and garden ed markets to soften in 2023, especially in the back half of the year as inflation and the interest rate environment impact customer discretionary spending.
Speaker 4: In contrast, we expect the ag, power generation, and horticulture markets to remain strong throughout 2023.
Speaker 4: Slide 24 highlights our financial results from our plastic segment in 2022.
Speaker 4: Our team effectively capitalized an extraordinary industry conditions to produce record financial
Speaker 4: Demand for PVC pipe declined sharply in the fourth quarter of the year as market conditions, including a softening housing market, and lower resin prices led to distributors and contractors to reduce purchase volumes to manage their inventory levels.
Speaker 4: To this point, we have seen only modest pressure on our sales prices.
Speaker 4: We expect margins will compress in 2023 after distributor and contractor inventories are right sized.
Speaker 4: At our vinyl tech location, our rail expansion project is underway and we are in the permitting and design phase of our plant expansion.
Speaker 4: Finally I would like to thank all employees.
Speaker 4: for their execution and persistence in 2022.
Speaker 4: Our team effectively managed a number of challenges during the year while maintaining our focus on achieving operational and commercial excellence.
Speaker 4: Now I'll turn it over to Kevin to provide additional commentary on our financial performance in 2022 and our expectations for 2023.
Speaker 5: Well thank you Chuck and good morning everyone.
Speaker 5: 2022 was an outstanding year.
Speaker 5: Consolidated revenues increased approximately 22% to $1.46 billion.
Speaker 5: and consolidate in earnings were $284 million.
Speaker 5: All of our segments produced double digit earnings growth over 2021. Electric segment earnings improved 10%, manufacturing was up 22%.
Speaker 5: and plastics earnings increase 99%.
Speaker 5: Our return on equity in 2022 was 25.6% compared with a 19.2% return in 2021.
Speaker 5: These returns were generated on a rolling 13-month equity layer of approximately 57% and 51% respectively.
Speaker 5: 2022, represented the 84th consecutive year of dividend payments.
Speaker 5: And we also announced an indicated annual dividend of $1.75 a share for 2023, which represents a 6.1% increase over the 2022 annual dividend.
Speaker 5: Please refer to slide 30 as I provide an overview of 2022 segment earnings.
Speaker 5: The electric segment net earnings increased $7.5 million over 2021.
Speaker 5: The increase in earnings was primarily driven by.
Speaker 5: Increased revenues due to higher demand from commercial and industrial customers, including a new commercial load in North Dakota.
Speaker 5: Revenues also benefited from the impact of favorable weather conditions in 2022 compared to 2021.
Speaker 5: An increase in fuel recovery revenues resulting from higher purchase power and production fuel costs related to increase natural gas and market energy costs.
Speaker 5: Also driving this increase for plant outages at Kios Station and Bichstone Plant.
Speaker 5: These items were partially offset by higher operating and maintenance costs related to increases in maintenance and other costs related to the outages at both CHIOs station and BICS ?y go on to plan.
Speaker 5: Increases in labor and employee benefit costs, higher transmission tariffs, and increases in travel and other expenses.
Speaker 5: This segment has been a consistent performer over the 2017 or 2022 time frame.
Speaker 5: It has converted a 9% rate-based growth into 9% earnings for shared growth over the same time.
Speaker 5: Yeah, earnings for the manufacturing segment increased $3.8 million over 2021, driven by an 18% increase in revenues, driven by higher sales volumes and increase in steel material costs at BTD.
Speaker 5: Sales volumes improved 12% due to strong end market demand.
Speaker 5: Steel material costs were up 8% over the previous year.
Speaker 5: These items were partly offset by a decline in scrap revenues due to lower scrap metal prices and lower scrap volumes.
Speaker 5: Teo plastics also experience higher sales prices and volumes.
Speaker 5: Segment net earnings were positively impacted by increased sales volumes, increased sales pricing, and favorable cost absorption.
Speaker 5: Net earnings from the plastic segment increased $97.6 million compared to 2021.
Speaker 5: Driving this change was an increase in revenues of approximately 35%.
Speaker 5: due to significant increases in the sales price per pound of PVC pipe.
Speaker 5: related to a continuation of unique market conditions that started in 2021 and continued into 2022.
Speaker 5: This uplift was partially offset by lower sales volumes.
Speaker 5: The lower sales volumes are caused by raw material constraints during the first half of the year and softening customer demand during the last half of the year due to contractors delaying projects because of supply chain issues.
Speaker 5: a softening housing market and customers reducing purchases of PVC pipe.
Speaker 5: in order to use up more of their Finnish goods inventory instead of buying additional PVC pipe.
Speaker 5: Our corporate costs were impacted by increased employee health care costs.
Speaker 5: increased professional service expenses and losses on our corporate own life insurance policies.
Speaker 5: and investments that are captive insurance company.
Speaker 5: These higher costs were partially offset by lower interest expense due to smaller amounts outstanding on the corporate credit facility.
Speaker 5: and the impact of death benefit proceeds from our corporate owned life insurance.
Speaker 5: Moving to slide 32.
Speaker 5: 32, this reflects.
Speaker 5: Our business outlook for 2023 of an earnings for share range of $3.76 to $4.06 a share.
Speaker 5: Our earnings mix for 2023 is expected to be approximately 51% from the electric segment and 49% from our manufacturing and plastic segment net of corporate costs.
Speaker 5: This is consistent with our previous discussions that there will be elevated earnings from our manufacturing platform in 2023.
Speaker 5: Changes in segment and corporate cost guidance are as follows.
Speaker 5: 2023 Electric Segment Earnings Guidance is increasing due to returns generated from the increase in our rate base as our average rate base in 2022 increased 3.1% to $1.6 billion.
Speaker 5: and increasing sales volumes from commercial and industrial customers.
Speaker 5: 2023 Electric Sigmund Guidance is based on normal weather for the year.
Speaker 5: We also expect lower operating and maintenance expenses to favorably impact 2022 earnings guidance as well.
Speaker 5: This reduction is primarily driven by lower pension costs due to an increase in the discount rate and the assumed long-term rate of return.
Speaker 5: These lower pension costs are partially offset by increase operating and maintenance expenses.
Speaker 5: related to the Astribula 3-Win Farm and the Lake Solar Farm increased employee compensation and benefit costs and the inflationary impacts on other operating and maintenance expenses.
Speaker 5: We expect our manufacturing segment earnings to decline 10 percent from last year, given overall concerns about a slowing manufacturing sector. We expect our manufacturing segment earnings to decline 10 percent from last year, given overall concerns about a slow manufacturing sector.
Speaker 5: given the continued decline in overall industrial production as our customers continue to experience slower demand for products.
Speaker 5: He assumptions driving this guidance, parts sales volumes are expected to decline in 2023, driven by year-over-year steel price declines.
Speaker 5: Partially, offsetting this decline has expected volume growth in agriculture and power generation end markets.
Speaker 5: Decrease scrap metal revenues at BTDE from anticipated lower scrap metal prices.
Speaker 5: and inflationary cost pressures and unfavorable cost absorption, putting downward pressure on operating margins.
Speaker 5: Earnings at T.O. Plastics are expected to be flat year over year as increased revenue is driven by customer demand and product price increases are offset by increased costs in the business.
Speaker 5: Backlog for the manufacturing segment as of December 31, 2022.
Speaker 5: It was approximately 388 million compared with 391 million a year ago.
Speaker 5: As we've been previously communicating, our plastic segment earnings are expected to be lower than the record 2022 earnings due to the following.
Speaker 5: Lower sales volumes, especially in the first half of 2023, as distributors and contractors continue to manage purchase volumes.
Speaker 5: and consume current inventories given the current industry dynamics of a slowdown and overall demand and rising interest rates impacting housing starts as developers are pulling back and the number of lots being developed.
Speaker 5: We also expect margins to decline over the years as industry supply and demand factors begin to normalize leading to reduced product sales prices.
Speaker 5: Contractors have started to see some projects being cancelled or delayed.
Speaker 5: This is being driven by long lead times for some project materials as well as a speculation that material costs will be lower by middle part of 2023.
Speaker 5: and distributors are shedding inventories. This has taken longer than expected to get back to the normal level of inventories they want to carry.
Speaker 5: Our corporate costs are expected to be lower in 2023, resulting from...
Speaker 5: Increase the earnings generated in our cash and cash equivalents.
Speaker 5: Lower expected losses on corporate investments, lower expected contributions to our foundation.
Speaker 5: lower expected claims on self-insured health plan and lower incentive compensation costs.
Speaker 5: These items are partially offset by inflationary increases in salary and benefit costs.
Speaker 5: other operating expense categories as well as no expectation of receiving any death benefit proceeds on corporate-owned life insurance.
Speaker 5: We continue to monitor various economic indicators such as single and multi-family housing starts mortgage rates.
Speaker 5: and consumer confidence levels to ensure we are well positioned when changes occur.
Speaker 5: Additionally, we are actively managing the impacts of inflation across all of our operating companies.
Speaker 5: There continues to be concerns related to the rising interest rate environment and what impact that will have on earnings in 2023, especially related to variable rate debt and the need to refinance or issue new debt during the year.
Speaker 5: We assess our exposure to rising bar and cost as low risk.
Speaker 5: Our variable rate debt consists of two credit facilities.
Speaker 5: We don't expect to have any outstanding borrowings on our parent company facility and minimum amounts are going to be drawn on the utility facility.
Speaker 5: the increased cost of these borrowings is considered in our 2023 guidance.
Speaker 5: and due to higher levels of earnings and cash flows over the last two years.
Speaker 5: We are in the enviable position of being able to earn a return on our excess cash.
Speaker 5: We don't have any new debt assuances scheduled until 2024, and our next scheduled bond maturity is in December of 2026.
Speaker 5: While we recognize the additional risk of having not electric businesses in our portfolio.
Speaker 5: These businesses have the ability to generate high levels of earnings and cash flows during strong economic times.
Speaker 5: This has been demonstrated over the last two years.
Speaker 5: The uplift in earnings, especially driven by the plastic segment performance, has further strengthened our equity layer.
Speaker 5: Our consolidated equity has increased by approximately $345 million.
Speaker 5: from December 31, 2020 through December 31, 2022.
Speaker 5: We now stand with a 59.4% consolidated equity layer at the end of 2022, and we expect that to increase further in 2023.
Speaker 5: This offers us a distinct advantage as compared to the utility sector as we have no equity needs in our five-year financing plan.
Speaker 5: Fast previously mentioned, our 2023 guidance reflects elevated earnings from our manufacturing
Speaker 5: We currently expect earnings mixed to move to 65% from our electric segment and 35% from our manufacturing platform beginning in 2024.
Speaker 5: As part of this shift in earnings mix, we currently expect to normalize earnings from our plastic segments to be in a range of $36 to $41 million.
Speaker 5: Slide 38 reflects the collective strategies of our platforms and financial performance targets.
Speaker 5: This business model serves us well and we remain well positioned to fund our rate-based growth opportunities at the utility.
Speaker 5: with our strong balance sheet.
Speaker 5: Ample liquidity to support our businesses and strong investment-grade corporate credit ratings.
Speaker 5: We are now ready to take your questions.
Speaker 2: As a reminder, please press star 11 on your telephone.
Speaker 2: and wait for your name to be announced.
Speaker 2: To withdraw your question, please press star 11 again.
Speaker 2: Once again, that star one one to ask the question, one moment for our first question.
Speaker 6: oneder has food.
Speaker 2: Our first question, Comforeline Chris Elleyhouse from Seabird Williams. The line is open. The line is open.
Speaker 7: Hey guys, how are you?
Speaker 4: We're good. Thank you, Chris.
Speaker 8: So...
Speaker 7: You know, one of the things that was striking that I was looking at was the balance sheet that you were talking about. Can you just talk about how, you know, the...
Speaker 7: Good fortune of the balance sheet in the last couple of years is changing Sir your strategic plans for the utility.
Speaker 5: I think that it clearly gives us additional flexibility as we look to.
Speaker 5: further look at additional rate based projects going forward.
Speaker 5: You know, we have our current five-year plan out there. I think we had about a, not quite a eight and a half percent uplift in the capital's plan from the second quarter of...
Speaker 5: Q2 or I'm sorry Q2 of 22 compared to our third quarter release when we that was driven in part by as we looked at the Inflation Reduction Act we saw you know well both impacted the Inflation Reduction Act for example when powering
Speaker 5: opportunities there of about 200 million. And then of course the Mysotronch1 projects that came on were in the midst of still...
Speaker 5: of putting together our amended integrated resource plan.
Speaker 5: that we'll be filing with the commission at the end of.
Speaker 5: of March. We would expect once that's filed, we would have an additional update on our CAPX spend Chris in the first quarter earnings call and then we continue to just evaluate additional inventories of rate based projects and so that.
Speaker 5: uplifting equity and the cash that we have just gives us further flexibility to help support that rate-based growth. I mean, that should also add, and we've talked about this before as well, it gives us additional flexibility with the plastics expansion project in...
Speaker 5: in Phoenix and then we continue to evaluate an expansion project in Georgia for BTD.
Speaker 7: So, in addition to what might be in the IRP, do you have any thoughts about the clean energy bill and how that might accelerate anything?
Speaker 4: The Minnesota Queen Energy Bill. Yes.
Speaker 4: Yeah, as we look through it, you know, there's two components to it, the carbon-free component, which...
Speaker 4: We anticipate we will use REX for and we will use
Speaker 9: you know.
Speaker 4: Rex generated from our existing
Speaker 4: wind facilities that are allocated to the Dakotas, most likely to meet those at a market price.
Speaker 4: transferred to Minnesota. The second component is a need to get a 55% renewable amount by 2035. We currently think that that will drive some additional renewables, but that may be outside of the five year.
Speaker 4: capital budget forecast.
Speaker 7: Okay. Can you give us some more details on the plastics expansion, you know, time frame, cost, those sort of things?
Speaker 5: Yeah, Chris, the...
Speaker 5: Collective costs including a second line that would be some time in the 2027 time frame would be right around 50 million. And so in terms of timing as a reminder we completed the land acquisition in the...
Speaker 5: Fourth quarter of 2021. Chuck mentioned in his comments we're now doing the rails spur expansion.
Speaker 5: And then we now in 2023 will also start to spend dollars related to the rest of the plant expansion, which is due to the driven by the property, the land acquisition that we did in 2021 and the rail expansion that we've been working on.
Speaker 5: There's an office expansion as a part of that, and then there's a capacity expansion as well to add a new 24-inch line that would add an additional 26 million pounds of pipe capacity.
Speaker 5: So it's about an 8% uplift in our overall capacity between the two plants.
Speaker 5: And then we would expect that
Speaker 5: And then we would expect that the...
Speaker 5: you know, in that 2024.
Speaker 5: Time frame is when that line would come on.
Speaker 5: and then once that expansion is kind of completed, then the facility is size to support a second.
Speaker 5: line that right now is currently being considered in that.
Speaker 5: 2026, 2027 time frame.
Speaker 5: 27 times, excuse me.
Speaker 4: Okay great that's helpful.
Speaker 8: Will you be careful? Ops! Come on Kevin!
Speaker 7: What was the foundation contribution from corporate in 22th?
Speaker 10: I'm drinking million
Speaker 7: And lastly, you talked about how there was a drawdown of PVC pipe inventories in the second half of the year, and you're kind of expecting that to continue in the first half of the year. Was there that much incremental?
Speaker 7: inventory or was to slow down just that, you know, dramatic.
Speaker 5: Of course I would say it was a combination of both where we first saw it was in...
Speaker 5: Q3.
Speaker 5: When there was
Speaker 11: two
Speaker 5: announced resin price decreases that occurred. There was one that we were aware of as we released second quarter earnings and then there was a second.
Speaker 5: kind of a large one in the latter part of August , early September , and that's where there was recognition that there was a fair amount of inventory that was sitting in the channel at distributors and contractors, and they recognized that they just needed to use up that.
Speaker 5: higher priced inventory in the projects that they had instead of buying additional higher priced inventory certainly anticipating that you know probably sales prices would start to come down.
Speaker 5: as we moved in the Q4. Excuse me.
Speaker 5: We started to get additional information about it.
Speaker 5: projects being either canceled or delayed.
Speaker 5: We learned of additional supply chain issues not necessarily with PVC pipe but other types of
Speaker 5: construction materials that go into these projects where that was causing a slowdown as well and then of course just the overall slowdown of the housing market continued into the fourth quarter and then certainly is expected to continue into to 2023.
Speaker 5: The other thought is that we're seeing is that
Speaker 5: contractors, distributors are expecting that by the middle of 23 that
Speaker 5: materials, PVC pipe and such will start to come down and that they have their views in general, they have sufficient inventories to probably work through most of that. Okay, great. Thanks for calling guys and congrats on a tremendous year.
Speaker 5: Thanks, Chris.
Speaker 2: Thank you.
Speaker 2: Once again, that's a reminder that Star 1-1 for questions.
Speaker 2: One moment for our next question.
Speaker 2: Our next question will come from the line of Brian Russo from Sdoti. Your line is open. Your line is open.
Speaker 12: Bye- Goodbye.
Speaker 12: Good morning. Good morning.
Speaker 13: Hey, so just first on the utility it's...
Speaker 13: It seems as if you have the interest market interest rate pressure on interest expense.
Speaker 13: under control and just looking at 23 earnings relative to where your rate base it looks like you're earning very close to your RRA way. Are those trends you know we can expect that to continue despite you know
Speaker 4: you know inflationary pressures. Brian , this is Chuck. I think we can at least through 2023. We had...
Speaker 4: significant on M expense in
Speaker 14: in our
Speaker 4: plant operations that we don't think will repeat year over year, and we are seeing a decrease in pension expense.
Speaker 4: We do have other items going up, but we do think that those two tailwinds help.
Speaker 13: Right, so outside of maybe the IRP process, you have no ray cases planned in any of the three jurisdictions. We do not. We go through exercise every year and by June we will complete cost of service studies by jurisdiction.
Speaker 4: I would say at this point we don't anticipate any rate cases if there would be one it is most likely in North Dakota.
Speaker 4: But overall, I would anticipate that we are not filing a rape case this year. This gets kind of wasted for me, but just a very last below the burning time.
Speaker 13: OK, got it and then just on the plastic side. Just to clarify the 36 to 41 million. Of normalized earnings. Does that exclude this 8% capacity expansion you have planned?
Speaker 5: No, it doesn't Brian
Speaker 5: So that is baked into the...
Speaker 5: the longer-term view and again it's a
Speaker 5: It's, you know, probably we won't start to see any real benefits from it in that.
Speaker 5: 24 or 25 time frame.
Speaker 13: Okay, great. And then just lastly on BQD. I'm just trying to find that range.
Speaker 5: is from a 2024 forward.
Speaker 5: time frame.
Speaker 13: Yep, right. And then just lastly on BTD, it seems like while you...
Speaker 13: while you might be seeing a slowdown in some of your end markets just due to the you know the macro environment are you still growing top line and it's just or is top line like organic growth slowing which is eating which is
Speaker 13: impacting your margins. Just trying to get a sense of what's structural and what might just be, you know, is it your cost structure or is it just, you know, what we see, the obvious headwinds in 2023.
Speaker 5: Yeah, Brian , we're not seeing top line growth.
Speaker 5: in 2023 and it's a large part of that is the decline in steel prices from 22 to where they're currently at in 23.
Speaker 5: As we mentioned, we're seeing the ag market, the power generation market, are...
Speaker 5: favorable, but then
Speaker 5: As Chuck mentioned, wreck vehicle, one in garden are expected to slow. And so overall we're seeing a drop in top, expecting to see a drop in top line revenue.
Speaker 5: in 2023 and another key factor is the scrap revenue scrap prices in 2022 you know we'll probably average in around 550 a ton.
Speaker 5: And we're seeing that now in the 400 ton range in 23. And so that's having a pretty significant impact on our year over year earnings as well. And then we are continuing to see inflationary pressures on the cost side of the business in terms of, you know, we do have inflationary.
Speaker 5: costs or increases built into our guidance in terms of wage and benefit pressures. We certainly are seeing increasing health care costs in the business and other types inflationary pressures as well.
Speaker 12: Okay, great. Thank you very much.
Speaker 2: Thank you. I'm not showing any further questions in the queue. I'll send a call back over to Chuck for any closing remarks.
Speaker 4: Well, thank you for joining our call and your interest in AutoCale Corporation.
Speaker 4: I would again like to thank our employees for their efforts in making 2022 an extraordinary year. Looking forward, we expect 2023 to be a transitional year as industry conditions within the PVC pipe industry normalized.
Speaker 4: In total, we expect to generate earnings per share in the range of $3.76 to $4.66.
Speaker 4: Over the long term, we are well positioned with our utility growth strategy and predictable earning stream, complemented by our strategic manufacturing and plastics businesses.
Speaker 4: to achieve our financial targets. We expect to produce compound growth in earnings per share of 5% to 7% off a base of 2024 earnings.
Speaker 4: and to increase our dividend in the range of 5 to 7% annually.
Speaker 4: Again, thank you for joining our call and we look forward to speaking with you next quarter.
Speaker 2: This includes today's conference call. Thank you for participating. You may now disconnect.
Speaker 2: Everyone have a great day.
Speaker 6: Thank you.
Speaker 6: Now. Josh Turner to She Haha's excuse for me.
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