Q3 2023 Emera Incorporated Earnings Call
Good morning, ladies and gentlemen, and welcome to the Amira Q3, 2023 earnings Conference call.
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Following the presentation, we'll conduct a question and answer session.
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Remember that this call is being recorded on Friday November 23.
I would now like to turn the conference or to Orient you broke Kelly. Please go ahead.
Thank you, Sir Jim and thank you all for joining US this morning for Amyris third quarter 2023 conference call and live webcast.
I mean, our third quarter earnings release was distributed this morning via newswire and the financial statements management's discussion and analysis and the presentation being referenced on this call are available on our website at <unk> Dot com.
Joining me for this morning's call are Scott Balfour, <unk>, President and Chief Executive Officer, Greg Blunden, <unk>, Chief Financial Officer, and other members of the management team.
Before we begin I will take a moment to advise you that this morning's discussion will include forward looking information, which is subject to the cautionary statement contained in the supporting slide two.
Today's discussion and presentation will also include references to non-GAAP financial measures.
You should refer to the appendix for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure and now I will turn things over to Scott.
Thank you Ryan and good morning, everyone.
This morning, we reported third quarter adjusted earnings per share of <unk> 75.
Compared to $6 76 in the third quarter of 2022.
Our regulated portfolio led by Tampa Electric continues to drive our strong financial results.
Earnings contributions from our regulated portfolio increased 8% this quarter over the same quarter last year or <unk> and adjusted EPS terms, driven by higher rates supported capital investment customer growth and by favorable weather in Florida.
This increase was partially offset by lower earnings from <unk> energy and the impact of higher interest costs across the business.
The sustained customer growth and overall strong demand, we continue to see across our portfolio combined with the investment opportunities identified in our refreshed capital program reinforce our confidence in our continued delivery of long term earnings cash flow and dividend growth to our shareholders.
To that end during this quarter, our board of directors approved a 4% increase in our dividend and extended our dividend growth guidance of 4% to 5% to 2026.
This represents 17 years of continuous dividend increases.
Looking forward our updated capital plan reflects $8 9 billion of capital investment over the next three years.
With the majority of that focused on reliability.
Leaner energy and infrastructure modernization.
This investment profile translates to 7% of annualized growth in consolidated rate base over the same period.
In addition to our baseline capital plan, we see incremental investment opportunities that could drive rate base growth to 8% or more on an annualized basis over this period.
However, as always we are focused on optimizing our capital investment strategy to manage the timing of capital deployment to consider the rate impacts on customers.
That's particularly important now because as Greg will discuss shortly we are sensitive to the current higher cost of capital environment and the impact that is having on customer rates.
Also increasingly important in this higher cost of capital environment is the need to align the deployment of capital with planned regulatory filings to minimize regular regulatory lag to the greatest extent possible.
In this context I will share that in addition to the rate cases currently underway in new Mexico gas and in the Caribbean.
We expect to file for new rates at Tampa Electric in 2024 to be effective in 2025.
We expect that to the extent the incremental investment opportunities. We have identified are supported by regulatory outcomes, including required REIT support or support from potential government funding initiatives such as clean energy tax credits. These investments will be incorporated into updates to our baseline capital plans over time.
With both Tampa electric and peoples gas continuing to experience strong customer growth over 75% of our three year capital program will be invested in our Florida operations, where population growth and economic conditions also continued to be very strong.
We also continued to see the impacts of electrification and changing weather patterns on customer demand.
In August Tampa Electric set new record load levels and during the quarter, Nova Scotia power experienced their highest third quarter residential load.
And on the gas side peoples gas continues to see customer growth of around 5%.
As the economies in populations and overall demand in our service territories grow so does the level of capital investment required to support that growth.
In addition to supporting growth across our portfolio. Our capital plan continues to be focused on advancing our strategy of delivering cleaner and more reliable energy to our customers with over 60% of our capital spend focused on investments that will support reliability and reduce the carbon intensity of our generation mix.
Our solar program and investments in storm hardening of Tampa Electric continued to be the two largest projects in our three year capital program.
By the end of this year Tampa Electric will have over 200 megawatts of solar generation on the system, representing 14% of their generation capacity.
This will grow to over 600 megawatts by the end of 2025.
Thanks in part to these investments as well as the very successfully completed Big Bend modernization project by 2025, we expect less than 2% of our generation at Tampa Electric will come from coal.
In addition, this capital plan includes $165 million of investment in battery storage to complement the solar build out.
The value of these investments for our customers is clear and.
In 2022 solar investments in Florida saved customers around $80 million and avoided fuel costs.
And our investments in reliability and storm protection resulted in Tampa Electric's best ever reliability performance with an impressive 17% increase in reliable reliability metrics compared to last year's results, which were also record best.
In Nova Scotia, our capital program continues to be focused on supporting the customer growth. We are seeing in the province, as well as key investments in the safe and reliable operation of the system.
Since 2015, we've increased our annual investment in the transmission and distribution system by over 50%.
Giving us to achieve the second best reliability performance last year duration and frequency of outages among all comparable utilities in Atlantic, Canada and Maine.
Similarly at our gas utilities.
<unk> focus on our capital plan is.
As investment in maintaining the reliability and safety of the system.
As well as investments to support growing customer demand at peoples gas.
We're also continuing to invest in cleaner energy initiatives like the renewable natural gas projects being advanced in Florida.
I mentioned that our capital plan in Nova Scotia is currently focused on the safe and reliable operation of the system.
However, we're also working to meet the ambitious federal and provincial clean energy goals for 2030.
Last month the <unk>.
Vince of Nova Scotia, released their clean energy plan, which aligns with one of the pathways within Nova Scotia Power's most recent integrated resource plan.
Our plan, we feel is achievable by the 2030 timeline.
We're encouraged by this recent progress and we continue to work with the province, and the federal government on the next steps to achieve the climate goals for Nova Scotia.
I also wanted to highlight that yesterday, we received a very successful regulatory outcomes at peoples gas.
This rate case outcome will add 107 U S $1 billion in expected revenue for peoples gas starting next year.
Proving its targeted return on equity to 10, 5%, while maintaining its equity thickness of 54, 7%.
This was a fully litigated regulatory process that took considerable time and effort by our team at peoples gas as well as the intervenors and the Florida Public Service Commission.
These are not easy processes, but we landed in a place that has both the best interest of customers and the financial health of the utility in mind.
Thank you to everyone.
Involved in getting this over the finish line.
Achieving successful and balanced regulatory outcomes is critical to our success, but.
But also to the success of the customers and communities that we serve.
The growth opportunities in front of us are as robust as we've seen in decades.
Customer expectations for cleaner and more reliable energy drive a higher need for capital across the utility industry.
However, as we're all aware the cost of capital across our industry is much higher today than it was even just a few months ago.
When we walk you through our financial priorities at Investor Day earlier. This year, we were clear that our priority was strengthening the financial position of the company to allow us to deliver on the organic growth opportunities in front of us.
Based on the increase in the cost of capital we've seen over the last year. The continued deleveraging and strengthening our balance sheet is even more important.
This is why you will see that select asset sales now form part of our capital investment funding plan.
We're working to optimize our portfolio. So that we can fund our best growth opportunities and maintain a strong foundation for our business.
Just as we've done successfully through asset sales in the past.
We've been evaluating our portfolio through several financial and strategic lenses, including value marketability and opportunities for future growth.
We know that redeploying capital into the growth investments of our strongest performing assets will lead to higher quality earnings and cash flows, creating an even stronger mirror that offers the best value proposition for both current and future stakeholders.
I'll now turn it over to Greg to take you through our results and to share a bit more of our thinking on the funding plan Greg. Thank.
Thank you Scott and good morning, everyone.
This morning, we reported third quarter adjusted earnings of $204 million and adjusted earnings per share of <unk> 75, compared to $203 million and 76 in Q3 of 2022.
Year to date adjusted earnings were $634 million and adjusted earnings per share was $2 33, compared to $601 million and $2 27 for the same period in 2022.
Operating cash flow before changes in working capital continued to strengthen through the third quarter and we continue to be pleased that the cash flow challenges from 2022 are fully reversing as we had expected.
Operating cash flow increased by 125%, primarily driven by fuel and storm cost recoveries at Tampa electric compared to under recoveries in 2022.
In addition, operating cash flow has benefited from the commissioning of the Labrador Island link in April of this year, new base rates at three of our four core utilities and the impact of customer growth and demand across the portfolio.
These increases were partially offset by continued interest rate headwinds.
Excluding the impact of fuel deferrals and the collection of 2022 fuel and storm costs, we delivered over $1 5 billion in operating cash flow in the first three quarters of 2023, representing a 6% growth year over year.
Looking forward to 2024, we see several levers for continued cash flow growth across the portfolio, including the constructive regulatory outcome, we achieved at peoples gas, which will drive approximately $107 million in incremental cash flow.
As well as the already approved rate increases from the Tampa Electric and Nova Scotia power settlement agreements.
In total new rates at these three utilities will drive a combined approximately $300 million Canadian and incremental cash flow in 2024.
We will also continue to collect the remaining fuel and storm costs at Tampa Electric which will be completed by the end of next year.
And as Scott mentioned, we will be filing for new rates at Tampa Electric that will also have a meaningful impact in 2025.
We have mentioned a few times the impact that higher interest rates are having on our business year to date. These rate impacts are impacting both our utility operations and our corporate costs.
The impact of higher interest costs on our utilities is transitory new rates at peoples gas the rate application in new Mexico, and our planned filing for new rates at Tampa Electric early next year, we will incorporate these higher financing costs and rates and will eliminate the drag we're seeing on our 2023 results to date.
At the corporate level, our planned financing financings and asset sales will reduce the exposure to higher rates and position us well in 2024 and beyond.
And in the meantime, we have seen rates stabilized since mid year and the year over year impacts will be moderated going forward.
Turning to our quarterly results Tampa electric delivered strong results with growth of $17 million in earnings or 10% over the third quarter of last year, driven primarily by new base rates customer growth and favorable weather.
The weakening Canadian dollar increase the earnings contributions from our U S operations by $5 million for the quarter.
Contributions from our Caribbean utilities increased modestly during the quarter, primarily primarily driven by the impact of interim rates to Barbados light <unk> power.
Turning to premiere energy decreased $5 million compared to Q3, 2022, but that was not unexpected.
The third quarter is a shoulder season, there is generally a weak one for emera energy 2022 was anomaly driven by high gas prices and volatility due to geopolitical upheaval.
Our corporate costs increased $17 million this quarter, primarily driven by higher interest costs, the timing of share based compensation and related hedges and realized losses on foreign exchange hedges.
Earnings from our gas and infrastructure segment decreased $8 million quarter over quarter, primarily driven by higher interest and operating costs, resulting from continued investment to support customer growth at peoples gas.
Contributions from our Canadian utilities. This quarter was challenged by the impact of post tropical storm Lee at Nova Scotia power looking forward as a result of the newly implemented storm rider that was approved as part of our settlement agreement earlier this year, our exposure to costs incurred for this type of storm is now eliminated for the remainder of the year.
This means to the extent that we incur additional storm costs for this type of severe weather in the fourth quarter those costs can be deferred as a regulatory asset with a clear mechanism for recovery.
And finally higher share count decreased adjusted EPS by <unk> <unk> compared to the second quarter of 2022.
Year to date adjusted earnings per share increased by <unk> to $2 23, driven by strong performance from Tampa Electric favorable foreign exchange movements and higher contributions from mere energy, partially offset by higher corporate costs and an increased share count.
At Tampa electric new rates sustained customer growth and favorable weather have driven a 4% or $14 million increase in contributions year over year.
Contributions from our Canadian and Caribbean utilities increased a combined $8 million year over year.
With earnings from our Canadian equity investments.
Interim rates of Barbados light <unk> power, partially offset by higher storm interest costs at Nova Scotia power.
As I mentioned, a moment ago. Despite the decrease in contributions for the quarter.
Year to date, Emera Energy's marketing and trading business generated 23 million Canadian of adjusted net earnings compared to $26 million for the first half of 2022.
That $17 million U S dollars compared to $21 million last year Mirror energy continues to expect its earnings within its guidance range of $15 million to $30 million this year.
Consistent with the quarterly results higher interest costs and realized losses on foreign exchange hedges and the timing of share based compensation expense and related hedges contributed to the increase in corporate costs year over year.
Contributions from our gas utilities decreased modestly driven by higher interest and operating costs at peoples gas largely offset by new rates and favorable asset management agreements and new Mexico gas.
Finally, higher share count decreased adjusted earnings per share by <unk> <unk> year over year.
As Scott highlighted over the next three years, we are committed to an $8 9 billion capital plan driving an annualized 7% rate base growth.
Investment opportunities in 2025, and 2026 across our portfolio could increase our rate base growth to over 8% annualized.
And this higher cost of capital environment, we have a heightened focus on both managing the pace for our capital plan to ease the cost impact to our customers and reduce regulatory lag and the incremental opportunities will be evaluated at the appropriate time through these two lenses.
Turning to our funding plan over the next three years, our funding plan can be broken down into four components first we will maximize reinvested operating cash flows which are expected to contribute 50% to 55% of our funding needs. We are focused on prudently managing our regulatory cadence to reduce regulatory lag during a fair and timely cash recovery on our investments.
Secondly, our equity requirements over the next three years is expected to be raised through a dividend reinvestment plan, which is expected to raise approximately $250 million to $280 million per year and through our ATM program, a very efficient and cost effective way to issue common equity.
In September we renewed our base shelf for $600 million and this will allow us to access the ATM market until the base shelf expiry at the end of 2025.
And in addition to our common equity needs, we continue to manage the hybrid and preferred capital portion of our capital structure at approximately 10% consistent with our targeted capital structure.
Thirdly, we will raise debt at each of our operating companies to fund their capital programs in line with our regulated capital structure.
The fourth and final component of our funding plan is select asset sales as Scott mentioned, we recognized the cost of capital today is much higher than it was even a year ago and as such we are committing to raise equity through asset sales to help fund the robust growth opportunities in our portfolio while at the same time strengthening our balance sheet.
We expect this prudent and practical approach to our funding plan will improve the business risk of our portfolio the strength of our credit standing and the overall value we offer to investors we have been diligent in developing our capital and funding plans to achieve the key objectives of growing both earnings and cash flow and strengthening our balance sheet, achieving our targeted credit metrics and serving our customer needs over the fourth.
Cast periods.
We are confident that our highly regulated diversified portfolio is well positioned to deliver on these objectives, while achieving a 7% annualized rate base growth through important and needed capital investments in the markets we serve.
And now with that I'd like to turn it back over to ARIA.
Thank you Greg. This concludes the presentation and we will now open the call for questions.
Ladies and gentlemen, we will now begin the question and answer session.
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One moment. Please for your first question.
Your first question comes from Maurice Choy from RBC capital markets. Please go ahead.
Thank you and good morning, everyone, maybe I could start with the asset sale of up to 15% of our funding plan.
Maybe if I could ask you for additional color as to what brought you to position I know you mentioned the high cost of capital environment, but.
If you could just elaborate on battle and yeah. There are other factors beyond that and it's a quick follow up to that one asset.
<unk>.
The process is.
Completed what would you view as a successful outcome would be that that credit metrics.
At the time, you shouldn't accretion all that stuff.
Yes, good morning Maria.
And thanks for the question so.
Look the rationale for this I think you've you in.
Investors have heard us say many times that we're fortunate enough to have them.
A diverse portfolio with a number of strong and well performing assets and within that as we think about on a regular and ongoing basis the allocation of capital.
Within and across our business to make sure that we are being disciplined in that allocation of capital, including where that capital is already invested in so.
In this market, we see the opportunity for <unk>.
The word commonly used now was asset recycling, but effectively.
Redeploying some of that existing capital into the.
Higher value growth capital that we see across the business and when the cost of raising new capital is higher as it is today relative to where it's been.
And previous markets. It makes the importance of that discipline and frankly the value of those decisions.
Even higher so.
That's really it.
The motivation in.
And reflection.
Have led us to talking about it this way.
At this time and you're right. The objectives of course, our are to ensure that we're doing that to optimize the outcome as we think about impacts on.
On EPS growth on credit metrics on payout ratio.
And we look at all of those factors as well as of course the strategic.
Critically important strategic factors as we as we think about this program and successful outcome of that.
And on the discussion about what is the successful outcome could you help.
Quantify that or even describe what that means is that a cushion versus your 12%.
What did you see that successful I'll come to you.
Yeah. So so.
You've heard us say before our commitment to to achieving.
Our targeted threshold credit metrics, but tend to create some cushion in that very much continues to be.
To be our focus and looking at asset sales really just provides the ability to accelerate insurer and accelerate that path.
Thanks, and maybe just to finish up on.
To my being I assume you would have seen a.
Our recent reading action by on one of your Canadian peers relating to physical asset risk thoughts on what that May mean for humira and whether that cushion that you're speaking of from from potential asset sales will be sufficient.
Yeah, Hi, <unk>.
It's Greg.
Yeah, I don't think the accident that you're referring to has much applicability to us we have very different physical risk profile on our assets.
And then the peer you're mentioning, albeit I should defer to them to respond directly to.
To that.
If you think of the implications of that rating action they would have.
Previous to the action on Friday, they would've had a downgrade threshold of 10, 5% ours is 10% today.
But of course that downgrade thresholds for them was for a rating that was a couple of not just higher than us. So I think it's it feels from our perspective, and we haven't had any conversations with S&P about any such changes.
It feels like it's probably trying to get both US and then probably more in line from a credit profile perspective.
Got it thank you very much.
Youre welcome.
Thank you. Your next question comes from Robert Hope from Scotia Bank. Please go ahead.
Good morning, everyone.
I want to go back to the asset sale.
Commentary.
Have you started processes here or is this more of a 2025.
Pac just given the fact that in 2024, where you will get some kind of residual on the.
Our cash flow metrics from storm costs and fuel.
Look I'm not going to get to telegraph too much ended into timing wrong, but I'd say it's.
Very active file.
For us as we think about this that is not new.
Obviously something that we.
<unk>.
Always our thinking about but.
But I would just say, it's a it's a very active discussion for us now.
Alright, I appreciate that.
And then just maybe moving over to Nova Scotia.
Can you walk us through kind of your updated thoughts on the pathway to being off call.
Just given recent announcements by the province, as well as the Atlantic Leo quick chat.
It would be off the table right now.
Yeah. So unfortunately, Peter Peter conflicted this morning with.
With the public speaking engagements.
So he's not able to respond, but but yes. So the Atlantic loop is really.
Not now not yet as we've been saying for some time of course.
The Atlantic loop at the very least was challenged from a timing perspective and now in a place where that is a practical solution to achieve 2030 climate goals.
Really not not possible.
<unk>.
We're thankful for the.
Encouraged at the province has.
As established of clean energy.
<unk> plan that achieves those 2030 climate objectives that plan is aligned with one of the scenarios from Nova Scotia, Power's very detailed IRB work its integrated resource plan.
Work.
Plan the clean energy plan involves <unk>.
Significant more wind resources in Nova Scotia.
Involves some grid scale battery.
To support that incremental wind. It involves of course continued use of the hydroelectric energy through the maritime Maritime link that continues to perform well and will involve some some fast acting gas generation. In addition to an important reliability transmission.
Tie a new transmission tie between the province of Nova Scotia, and the province of New Brunswick, So those would be the major components of the clean energy plan that.
Is geared and structured to achieve those 2030 goals.
Thank you.
Thank you.
Your next question comes from Ben Pham.
From BMO.
Please go ahead.
Alright, Thanks, Honda, Nova Scotia power.
Clean plan.
Very hard to achieve.
You have got a placeholder for some investments are needed then in.
And this capex update.
Are you able to quantify.
How much in aggregate you need through <unk>.
It hasn't gotten to meet that.
Sorry.
Hi, Ben it's Greg.
I don't have a full.
Yes, it's still work that's been done in the timing of course, a lot of those investments would be outside of our current 2024 to 2026 period.
But.
It's a plan that would have I would say less capital requirements than what the Atlantic loop would've had but in terms of how much capital what years and who's going to invest that capital. For example, we would anticipate a lot of the new wind developments would be based on.
What would be funded by independent power producers.
So.
At this point in time, we're still working through those details and hopefully in the coming quarters, we'll have a better visibility over the long term requirements.
Okay.
In response to some of the questions around <unk>.
<unk> sales in.
The balance sheet, you mentioned, a couple financial metrics Youre looking at.
Credit metrics payout ratio on <unk>.
And whatnot.
Are you rank order.
Priority for those.
Natural metrics and then.
That 15% asset sales is that our enterprise value.
Or is it the equity consideration we expect.
When we talk <unk>.
15% of our funding required spend would be referring to proceeds net proceeds.
To give you.
That's how we're thinking about it it's really funding flexibility and as Scott mentioned credit metrics in EPS.
We believe that we have.
Some opportunities within our portfolio.
That will be accretive to our funding flexibility accretive to our balance sheet and credit metrics and at <unk>.
Best slightly accretive Dps, but.
Certainly not dilutive to EPS as how we'd be effectively looking at it but it's premature to get into any more specifics than that.
Okay alright, thank you.
Youre welcome.
Okay.
Thank you.
Our next question comes from.
Yes, Sir.
TD Cowen. Please go ahead.
Thank you.
Just wondering if you could help us understand a little bit more in terms of asset sales.
How do you think of a partial sale versus a full interest sale in terms of.
Maybe governance and financial complexity of a <unk>.
Partial sale versus maybe achieving a higher valuation.
Might you.
Potentially increase optionality or bidding tension by putting more assets on personnel than you think.
Tend to sell or is it more of a targeted process.
Can you comment on.
Whether any regulated utilities might be considered including new Mexico, or maybe what contracted assets be more of a focus.
Okay.
It's Scott so.
Look I know that the that the challenge with with coming out and saying that we're going to look at select asset sales.
Leads one to start to quickly question exit exactly which assets and how and I'm going to I'm going to resist the temptation.
To get in to that.
For hopefully obvious reasons, but you know.
I do think that from our perspective, we're we're looking at this in the context of.
Making sure that the portfolio was set up.
On a forward looking basis.
Continuing to drive the best.
The profile of growth with strong financial financial footing as you know, we do have a number of assets in our portfolio that.
Many many investors would speculator or maybe last quarter than others are a little more financially driven and strategically driven and of course, we think about all of those all of those things but.
But I'm going to resist the temptation to get into specifics about.
Commenting on any specific asset until we're in a position to announce something more formally.
Okay understood and maybe just as a follow up looking at your 2025 Capex that increased capex.
Capex has increased can you maybe stratify across what is behind that is there how much of that is inflation versus additional scope and projects.
Maybe some moving parts on FX and.
What factors and when might we see kind of an upsizing of that two additional capex.
Capex.
I would assume that's likely just trying to figure out the timing of when you might be adding staff.
Yes, it's Greg So we've tried to keep our capital forecasts.
On a constant FX rate so 130.
Is what we're using so we're trying to take out any effect of noise as a result of <unk>.
Foreign exchange.
And in terms of what's driving a little bit of the increase in 2025, and 2026 quite frankly as well.
I'd say theres, a little bit of inflation, obviously, we're all experiencing some inflation, but that's not really the main driver for any of it.
Scott alluded to in his comments, where we're just seeing.
An increased demand for capital across all of our business because of customer growth demand for our more renewables demand for stronger reliability and so the themes that have been driving capital investment in our sector for the last arguably the last decade.
We are just continuing to accelerate.
And so it's really those fundamental themes that we're seeing and that's driving the capital investment as capital investment that we need to service our customer growth.
Thank you and then just another follow up as you look to potentially increase the frequency of your rate applications to eliminate regulatory lag might there be other levers you would seek to incur.
Incorporate that you don't already have in terms of riders to maybe recover capital spent more frequently especially through the visibility too.
Some important programs.
Programs and initiatives to benefit customers in many ways.
Or are there other ways to to address that that lag.
Yeah I think.
Thank you right on Linda obviously riders can be an effective mechanism.
We use them quite frequently in our U S utilities, New Mexico gas peoples gas in Tampa Electric.
They are incredibly effective when they're being used to respond to specific capital investments driven by public policy.
The storm protection plan at Tampa Electric.
Gas utilities, the replacement of cast iron bare steel.
Pipe that's in the ground.
And so taking that learning.
It's an effective tool from a shareholder and customer.
Lens to support those those public policy driven.
Driven investments, we think it makes sense and so it's obviously something that we've utilized in the past and continue to see if theres an opportunity to expand it as we continue to respond to new government policies.
Thank you.
Youre welcome.
Thank you your.
Your next question comes from reached or Sunderland from Jpmorgan. Please go ahead.
Hi, Good morning can you hear me.
Good early morning for you.
Yes, thank you for the time today.
I wanted to dig in a little bit more to the <unk> side.
Looking back to <unk> and the 2.1 billion targeted in the walk you had in the deck. There could you speak a little bit more to trends on a year to date basis outlook for the fourth quarter and I guess expand a little bit upon your remarks on what youre seeing into 2024 here as well.
Yes, Richard Thank you.
Certainly we've been obviously very pleased with how the performance of cash flow has been for the year.
We would've said on a normalized basis, we are targeting 11, 5% with I think the expectations of at least one rating need see to be more in the 11% 12% range, we're probably more towards the lower on a trailing 12 month basis, probably more like 11% at this point in time.
And really a lot of the progress we've made and the execution of things. We've done has been partially offset by obviously higher interest costs that wouldn't have been expected a year ago.
As we sit here today, if we were to take our trailing 12 months and put it into as an example, moodys <unk>.
<unk> based methodology that would put us probably we think it around 11, 5% to 12%, although we know there is obviously.
Adjustments that get made to that up or down on any given year. So we're feeling pretty good about that.
Which is really why at this point in time, we're really transitioning our focus on 2024 and beyond.
That means refiling, the ATM shelf and starting to access the ATM market.
The contemplation of asset sales as part of that funding program and making sure we're incredibly disciplined on the timing.
And filing of rate cases, and so obviously the peoples gas.
Outcome is very positive 24.
Both Scott and I have alluded to we'll be filing for new rates in Tampa electric likely in the first quarter of next year for 2025.
In New Mexico is filed so so believers that we havent front of us the path in front of us.
Just reconfirms, our confidence in getting to 12% in 2024 as planned.
Got it very helpful and.
And maybe just to unpack that final bid a little bit more with the asset sales in that 2024 and beyond look is that all is that all incorporating the full 15% level of asset sales. So as part of that 15% contemplate any of the incremental capex you laid out.
Today, I guess, maybe even to take a step back how do you think about funding that incremental capex overall.
Yeah, I think it goes back to Richard comment I made a couple of questions ago for another analyst.
First and foremost it provides an incredible amount of flexibility.
And thats flexibility on credit metrics and flexibility on funding and both of those things will then allow us to be better positioned to capitalize on those incremental growth opportunities. If in fact, there are realized in the 25% to $26. So we're really positioning ourselves to be able to capitalize on those in a <unk>.
Prudent way in 'twenty five 'twenty six.
Understood. Thanks for the time today.
Thanks Richard.
Thank you.
Ladies and gentlemen, as a reminder showed you have a question. Please press star one.
Your next question comes from Mark Jarvi from CIBC.
CIBC capital markets. Please go ahead.
Yes, good morning, everyone.
Just in terms of the asset sales kind of imply that there is probably some different candidates you could you could look at selling just wondering whether you could upsize the scope of the asset sales or why wouldn't you upsize the scope of asset sales to meet minimize the amount of needs on the ATM, how do you look forward.
Wouldn't save Mark sorry, it's Greg I wouldn't say that we've precluded that it's always going to be a combination of what we think makes strategic sense and positions our portfolio in the best possible way going forward, obviously market interest valuations play a role in that as well.
But we haven't necessarily precluded.
Anything in terms of the scope of what we might be looking at at this point in time.
And just to clarify on that Gregg if you did the 15% on the asset sales still requires you to roughly $2 $50 million to $300 million annually on the ATM.
Yes, I don't think we see much of a change in that in that part of the funding plan market and I say that because I think as everybody knows we're in an industry. That's a negative free cash flow industry and you can't continue to grow at 7% to 8% rate base growth of having some equity requirements over the period and we.
Think it's a prudent way to raise the equity to fund that capital growth in our business. So I suspect that the ATM. It means maybe and maybe some years that we don't need to lean into it to the extent, we've laid out but I think over over the entire period I think it will remain part of our funding plan.
And then.
Last question, Richard possibly upside in funding for incremental investment so I think with US right, 7% rate base growth, but as you sell some assets you lose vacation, maybe down to six 5% rate base growth.
Your view then be that you would then pursue more aggressively some of those incremental investments and get yourself back to 7% rate base growth of them. I think are the right way to think about it as a net rate base growth March six 5% over the next three years.
I'll leave it up to you to decide whether if you sell something whether you take it out of the base or not.
But.
Our focus.
Can see 75% of our capital investment is in the state of Florida.
And so as we think of the portfolio going forward.
I don't think the math is going to move quite as much as you may be calculated right now.
Thanks, Amit.
Or maybe said another way Mark Theres assets in our portfolio.
Our financial assets as an example that actually are not growing at all today.
So you have to think about those kinds of things as well.
Yeah understood. Thanks.
Okay.
Thank you.
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Okay.