Q3 2023 CorEnergy Infrastructure Trust Inc Earnings Call

[music].

Yes.

Speaker 1: Greetings. Welcome to the Core Energy third quarter, 2020 three results call. At this time, all participants are in a listen only mode. A question and answer.

Greetings and welcome to the core energy third quarter 2023 results call. At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

Speaker 1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Note. This conference is being recorded.

Speaker 1: I will now turn the conference over to your host, Matt Kreps, Investor Relations at Core Energy.

I'll now turn the conference over to your host, Matt Kreps Investor Relations at CT Energy you may begin.

Thank you Holly and thank you everyone everyone for joining today's core energy infrastructure Trust conference call.

Speaker 2: Thank you, Holly, and thank you everyone for joining today's CORE Energy Infrastructure Trust conference call.

Speaker 2: With me today are Dave Schulte, CEO and Chairman, Robert Waldron, President and CFO , and Chris Huffman, our Chief Accounting Officer.

With me today are Dave <unk>, CEO, and chairman, Robert Waldron, President and CFO, and Chris Hoffman, Our Chief Accounting Officer.

Speaker 2: Robert and Chris will provide updates on our business operations and results, and will be available for Q&A.

Chris will provide updates on our business operations and results and will be available for Q&A.

Earlier this morning with published a press release announcing our third quarter results for 2023, we expect to file our Form 10-Q later today.

Speaker 2: Earlier this morning, we published a press release announcing a third quarter result for 2023. We expect to file our Form 10-Q later today.

Speaker 2: I would like to remind everyone that the statements made during the course of this presentation, they're not purely historical, may be forward-looking statements and subject to the safe harbor protection available under the applicable securities laws. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in our filings with the SEC. These documents are available on the investor relations section of our website. We do not update our forward-looking statements. In this call, we will make reference to the following documents.

I would like to remind everyone that the statements made during the course of this presentation. There are not purely historical maybe forward looking statements are subject to the safe Harbor protection available under the applicable securities laws.

Factors that could cause actual results to differ materially from those in the forward looking statements are discussed in our filings with the SEC.

These documents are available on the Investor Relations section of our website, we do not update our forward looking statements.

During the call, we will make reference to certain non-GAAP measures, which are reconciled in our filings as part of our results reporting.

Speaker 2: are reconciled in our filings as part of our results reporting. We encourage you to review our complete disclosures, risk factors, GAAP financial numbers, and those non-GAAP metrics with the related reconciliation.

We encourage you to review our complete disclosures risk factors GAAP financial numbers and the non-GAAP metrics with the related reconciliations.

And with that I would like to now turn the call over to Robert Walter. Please go ahead.

Speaker 2: And with that, I would like to now turn the call over to Robert Waldron.

Speaker 3: Hello, everyone. The third quarter came in largely as expected as we worked through lower volumes and escalating expenses, which are primarily being addressed through our rate filings, as well as work to improve our capital structures through the MoGas sale. I'm pleased to say that we have made progress in each of these areas, but still have work to do.

Hello, everyone. The third quarter came in largely as expected as we worked through lower volumes and escalating expenses, which are primarily being addressed through our rate filings as well as work to improve our capital structure through the moga. So I'm pleased to say that we have made progress in each of these areas, but still have work.

To do so.

Speaker 3: Starting with the sail process for MoGas and Omega, we continue to expect it will close around the end of the calendar year.

Starting with the sale the sale process for Mo gas and Omega, we continue to expect it.

We will close around the end of the calendar year.

Speaker 3: As you may recall, our initial closing was delayed due to an additional information request from the FTC.

You may recall, our initial closing was delayed due to an additional information request from the FTC.

Speaker 3: Both Core Energy and SPIRE have submitted all requested items, which puts the FTC on the clock for a decision around the end of the calendar year.

Both core energy inspire have submitted all requested items, which puts the FTC on the clock for a decision around the end of the calendar year.

Speaker 3: With the proceeds from the sale, we plan to deleverage our balance sheet, addressing our pending Crimson Credit Facility maturity in May, which will allow us to then focus on the convertible debt due in August 2025.

With the proceeds from the sale, we plan to deleverage our balance sheet and addressing our pending Crimson credit facility maturity in May which will allow us to then focus on the convertible debt due in August 2025.

Speaker 3: Our MoGas and Omega operations, which serve the St. Louis area, continue their steady performance in the third quarter.

Our more guests in Omega operations, which serve the St. Louis area continue their steady performance in the third quarter.

Speaker 3: These entities are included in the proposed $175 million sale to Spire announced May 25.

These entities are included in the proposed $175 million sale to spire announced may 25th.

Speaker 3: Turning to our crimson assets, we continue to see headwinds on the volume side as the regulatory environment for the upstream has not.

Turning to our Crimson assets, we continue to see headwinds on the volume side as the regulatory environment for the upstream has not changed the producers in California continue to have difficulties in permitting and it is unclear when or if that will change. The producers are finding ways to slow decline. Despite the lack of new <unk>.

Speaker 3: The producers in California continue to have difficulties in permitting, and it is unclear when or if that will change. The producers are finding ways to slow decline despite the lack of drilling new wells, but unless something changes, it will likely result in steeper volume declines over the next decade compared to the last three decades.

Drilling new wells, but unless something changes it will likely result in steeper volume declines over the next decade compared to the last three decades.

Speaker 3: On a positive note, we did see new volumes as a result of the pending P66 refinery conversion to renewable refined products.

On a positive note we did see new volumes as a result of the pending P 66 refinery conversion to renewable or refined products.

Speaker 3: November nominations on SPB were approximately 15,000 barrels a day higher than the nine-month historical average in twenty-

November nominations on SBB, where approximately 15000 barrels a day higher than the nine month historical average in 'twenty three.

Speaker 3: The P66 refinery isn't scheduled to officially convert until Q1 2024. So we can't draw any long term conclusions on one month of data, but it is a positive data.

The P 66 refinery isn't scheduled to officially convert until Q1 2024, so we cant draw any long term conclusions on one month of data, but it is a positive data point.

Speaker 3: The volumes over the next six to nine months on SPB and KLM...

The volumes over the next six to nine months on SPV and KLM.

Speaker 3: could experience material volatility as the California crude oil supply chain adjusts to a California refining complex without P66 redempt.

Could experience material volatility as the California crude oil supply chain adjusts to a California refining complex without P 66 were down.

Crimson like the rest of the World has experienced cost escalations in virtually every expense category given the extraordinary inflationary pressures over the last two years.

Speaker 3: Crimson, like the rest of the world, has experienced cost escalations in virtually every expense category given the extraordinary inflationary pressures over the last two years.

Speaker 3: However, there are three expense categories which have increased well above inflation.

However, there are three expense categories, which have increased well above inflation.

Speaker 3: Maintenance, electricity, and interest expense. While I don't anticipate the interest rate to continue to move higher from here, our maintenance and electricity costs are anticipated to continue their upward trajectory into 2024 and potentially beyond.

Maintenance electricity and interest expense.

Don't anticipate the interest rate to continue to move higher from here or maintenance and electricity costs are anticipated to continue their upward trajectory into 'twenty 'twenty, four and potentially be odd.

The California State fire Marshal has increased focused on crude oil pipelines, which has resulted in higher interest expenses in 2023 and likely higher yet in 'twenty for all of the new requirements are reasonable and result in safer and more efficient operations. So we're glad to comply.

Speaker 3: The California State Fire Marshall has increased focus on crude oil pipelines, which has resulted in higher interest expenses in 2023 and likely higher yet in 24.

Speaker 3: All of the new requirements are reasonable and result in safer and more efficient operations, so we're glad to comply. The reason for high... prevented

The reasons for higher electrical expense.

Speaker 3: is the per unit electricity rates charged by California electric utilities has dramatically increased and is expected to continue to increase as they support the energy transition and also address general grid safety around firehouses.

Is the per unit electricity rates charged by California Electric electric utilities has dramatically increased and is expected to continue to increase as they support the energy transition and also address general grid safety around fire hazards.

Speaker 3: As a regulated utility, Crimson should be able to adjust tariffs to overcome these higher costs. However, the rate-setting process is too slow to accommodate the speed of change. We have seen in these expenses and also volumes over the last one to two years.

As a regulated utility crimson should be able to adjust tariffs to overcome these higher costs. However, the rate setting process is too slow to accommodate the speed of change we have seen in these expenses and also volumes over the last one to two years.

Speaker 3: As a result, this week, SPB and KLM will file a request for an acceleration of the pending rate the tariff increases previously requested on those.

As a result, this week S. P b and KLM will file a request for an acceleration of the pending rate the tariff increases previously requested on those systems.

Speaker 3: The filing requests an immediate tariff increase of 24.3% on SPB and 27.6% on KLM. This filing does not increase the previously requested total tariff increases, but rather just accelerates them to help eliminate the current negative cash flows.

The filing requests and immediate tariff increase of 23 point 24, 3% on S. P. B and 27, 6% on KLM. This filing does not increase the previously requested total tariff increases, but rather just accelerates them to help eliminate the current negative cash flow.

<unk>.

The timing of the response.

From the CPUC is unknown, but the company is hopeful for a Q1 'twenty 'twenty resolution at the latest.

Speaker 3: from the CPUC is unknown, but the company is hopeful for a Q1 2020 resolution at the latest positive.

Speaker 3: Our filing simply says that crimson is operated with negative cash flows in 2023, which will likely spill over into 2024, and it's not fair that the crimson shareholders have to fund the cash flow gap. The shipper should pay for these increased expense.

Our filing simply says the Crimson is operated with negative cash flows in 2023, which will likely spill over into 'twenty 'twenty four and it's not fair that the Crimson shareholders have to fund the cash flow gap. The shippers should pay for these increased expenses to safely operate the pipeline, which is critical for their business. While this type of.

Speaker 3: to safely operate the pipeline, which is critical for their business.

Speaker 3: While this type of request is not frequently granted by the CPUC, I believe we are on the right side of the facts on the right.

Our request is not frequently granted by the CPUC I believe we are on the right side of the facts on this one.

Speaker 3: We continue to see promising opportunities in energy transition, which are expected to contribute positive cash flow in three to five years. However, our primary focus in the near term is selling oil, gas and Omega, addressing our capital structure and restoring Crimson to profitability. With that, I'll turn it over to Chris to address the financials and other notable items.

We continue to see promising opportunities in energy transition, which are expected to contribute positive cash flow in three to five years. However.

Our primary focus in the near term is selling biogas at Omega addressing our capital structure and restoring Crimson Crimson to profitability with that I'll turn it over to Chris to the rest of the financials and other notable items.

Speaker 4: Thanks Robert. Two minutes last quarter with the sale of Mogassan Omega pending, I will address crimes and results, been corporate and know where the balance sheet is.

Thanks Robert.

Similar to last quarter with the sale of Madagascar, Omega pending I'll address Crimson results incorporate and noteworthy balance sheet items.

Speaker 4: Crimson transporter volume is decreased in Q3. However, that to reduce was offset by the impact of rate increases on our Southern California pipeline and favorable PLA results to generate a slight increase in transportation and distribution revenue of quarter of a quarter.

Crimson transported volumes decreased in Q3, however that trade case was offset by the impact of rate increases on our southern California pipeline and favorable P. L. A results to generate a slight increase in transportation and distribution revenue quarter over quarter.

Speaker 4: Crimson volumes remain below historical levels and natural decline rates continue to be affected by new limitations on California drilling permits and low development activity.

And volumes remain below historical levels and natural decline rates continue to be affected by new limitations on California drilling permits and low development activity.

Speaker 4: I should also note that the previous quarter included 7 million in PLA sales, which was unusually high compared to historical trends, as Crimson was reducing PLA inventory levels during that quarter.

I should also note that the previous quarter included $7 million in P. L. A sales, which was unusually high compared to historical trends as Crimson was reducing inventory levels during that quarter.

Speaker 4: The 4 million PLA sales during the third quarter are representative of more normal sales levels.

The 4 million Pls sales during the third quarter are representative of more normal sales levels.

Speaker 4: These PLA barrels are reflected with in transportation revenue in the quarter they are earned regardless of the quarter in which they are sold.

These DLA barrels are reflected within transportation revenue in the quarter their earned regardless of the quarter in which they are sold.

As a reminder, on our progress on implementing tariff increase as Robert previously mentioned as of the end of the third quarter. We are collecting 21% of our request to 35% total rate increase on our southern California pipeline system, 10% of our requested 36% and total rate increase on our SPV system and 10%.

Speaker 4: As a reminder on our progress on implementing tariff increases, Robert previously mentioned, as at the end of the third quarter, we are collecting 21% of our requested 35% total rate increase on our Southern California pipeline system, 10% of our requested 36% total rate increase on our SPB system, and 10% of our requested 128% total rate increase on our KLM system.

Of our requested 128% total rate increase on our KLM system during.

Speaker 4: During the fourth quarter, we will implement an additional 10% increase on our KLM system, and during the first quarter of 2024, we will implement an additional 10% increase on our SPB system. If our request for accelerated rate increases is not granted.

During the fourth quarter, we will implement an additional 10% increase on our kaolin system and during the first quarter of 2024, we will implement an additional 10% increase on our S. P. B system, if our request for accelerated rate increases is not granted.

Speaker 4: The full benefit of the 21% rate increase for SOCOV and 10% rate increases on SPB and KLM are included in the financial resorts for the quarter. The requests are subject to refund if found not to be earned.

The full benefit of the 21% rate increase for Socal and 10% rate increases on SPV and KLM are included in our financial results for the quarter the.

The requests are subject to refund it found not to be earned.

Speaker 4: Turning to the cost side, the full implementation and benefit of our previously announced cost reduction initiatives are evident in the company's third quarter results, with general administrative costs down approximately $800,000 quarter over quarter.

Turning to the cost side, the full implementation and benefit of our previously announced cost reduction initiatives are evident in the company's third quarter results with general and administrative costs down approximately 800000 quarter over quarter.

Speaker 4: These savings were already included in our 2023 outlook and rate case filing.

These savings are already included in our 2023 outlook and rate case filings.

Speaker 4: Even with these cost reductions, we believe Primsons' cost of service fully justifies all requested increases and we have defended our cost inside the formal CPUC process.

Even with these cost reductions, we believe Crimson as cost of service fully justifies all requested increases and we have defended our costs inside the foremost CPUC process.

Speaker 4: I might note that as a publicly traded company, our shippers are aware of our costs, and we believe the protests on our rate cases will only succeed in delaying not avoiding the implementation of requested tariffs.

I might note that it is a publicly traded company. Our shippers are aware of our cost and we believe the protest on our rate cases will only succeed in delaying not avoiding the implementation of requests of tariffs as part of our rate application process. We've requested retroactive application of our rates and as a result shipper motivation to delay may be reduced since their litigation costs are not recover.

Speaker 4: As part of our rate application process, we have requested retroactive application of our rates and as a result, shipper motivation to delay may be reduced since their litigation costs are not recoverable.

Verbal.

Speaker 4: We continue to evaluate whether the requested rate cases, once fully implemented, will be enough to bring us back to earning our cost of service, given the uncertainty around SPB and KLM volumes and the expense escalation. We have seen since the filing the initial rate case.

We continue to evaluate whether the requested rate cases, once fully implemented will be enough to bring us back to earning our cost of service given the uncertainty around S. P. B and KLM volumes Indians expense escalation, we have seen since the filing the initial rate cases, we expect to have more clarity on SPV and KLM volumes posted <unk> 66 or five.

Speaker 4: We expect to have more clarity on SPV and Kaelin volumes post to P66 refinery conversion, as well as our finalized R2024 and beyond forecast in light of the escalating electrical and maintenance expense.

Reconversion as well as our finalize our 2024 and beyond forecast in light of the escalating electrical and maintenance expenses.

Speaker 4: At the end of the day, Crimson is a regulated entity and should expect to earn a reasonable return on its capital. But the regulatory process was not designed for the highly dynamic environments. We have found ourselves in over the last one to two years.

At the end of the day Crimson is a regulated entity and should expect to earn a reasonable return on its capital, but the regular the regulatory process was not designed for the highly dynamic environment. We have found ourselves in over the last one to two years.

Speaker 4: For the three months at September 30th, we had adjusted EBITDA of $4.8 million and adjusted net loss of $3.3 million. Our adjusted EBITDA was insufficient to cover both maintenance capital expenditures and accrued interest expense during the quarter. The Board evaluated these results and agreed with management's recommendation to continue the suspension of dividends on both our Series A preferred and common equity.

For the three months ended September 30th we had adjusted EBITDA of $4 8 million and adjusted net loss of $3 3 million. Our adjusted EBITDA was insufficient to cover both maintenance capital expenditures and accrued interest expense during the quarter. The board evaluated these results and agree with management's recommendation to continue the suspension of dividends on both our <unk>.

Series, a preferred and common equity.

Speaker 4: As a reminder, Core Energy 7.375 series A cumulative redeemable preferred stock will approve dividends during any period in which dividends are not paid. Any approved series A cumulative redeemable preferred dividends must be paid prior to the company resuming common dividend payments. Although no cash payments were made on the preferred stock, the company has included the effects of a cumulative unpaid dividends in the financial statement.

As a reminder, core energy seven 375 series, a cumulative redeemable preferred stock will accrue dividends during any period in which divisions are not paid any accrued series a cumulative redeemable preferred dividends must be paid prior to the company resuming common dividend payments.

No cash payments were made on the preferred stock. The company has included the effects of a cumulative unpaid dividends in the financial statements.

Speaker 4: The board will continue to evaluate dividends each quarter and make a decision on dividend payment based upon the most current data available. We're focused on implementing our requested rate increases and completing the MoGAS sale in order to do leverage the company and mitigate the associated financial risks we face. These risks and mitigants are disclosed in our third quarter 10Q, which will be filed later today.

The board will continue to evaluate dividends each quarter and making the decision on dividend payments based upon the most current data available.

Focus on implementing our requested rate increases and completing the moga sale in order to deleverage the company and mitigate the associated financial risks, we face these risks and mid against are disclosed in our third quarter 10-Q, which will be filed later today.

Speaker 4: Regarding our outlook, which includes the results of Moe Gastro-Mega, we are maintaining our full year 2023 adjusted EBITDA range of 24 to 26 million inclusive of maintenance expense in the range of 9 to 10 million. Maintenance capital expenditure is expected to now be in the range of 11 and a half to 12 and a half million. These costs are not expected to be uniform throughout the year due to project timing, which is resulted in the back half of 2023 varying the majority of these costs.

Regarding our outlook, which includes the results of Mo gas and Omega them, we are maintaining our full year 2023, adjusted EBITDA range of $24 million to $26 million inclusive of maintenance expense in the range of nine to 10 million.

Maintenance capital expenditures are expected to now be in the range of 11 five to $12 5 million. These.

These costs are not expected to be uniform throughout the year due to project timing, which has resulted in the back half of 'twenty to 'twenty three bearing the majority of these costs.

Speaker 4: Well, Yacht, well, not yet providing our 224 Outlook, our comments reflect the cash flow on third-newy face as we enter our 2024 budgeting process.

Well not yet providing our twenties for a plenty of room for outlook, our comments reflect the cash flow uncertainty we face as we ended our 2020 for budgeting process.

Speaker 4: At this time, we will take questions from our covering analysts or institutional stockholders before closing the call. Thank you.

At this time, we will take questions from our covering analysts or institutional stockholders before closing the call. Thank you.

Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker 1: Certainly. At this time we will be conducting a question in...

Speaker 1: If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For part 2.

A confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue for.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Your first question for today is coming from Selman <unk> at Stifel.

Speaker 1: The first question for today is coming from Selman, Akul at Stevele.

Thank you good morning.

Speaker 5: one in Selman. So in this quarter you guys had, I guess, transaction expenses, 900 to a million. And I guess all of that would be related to MoGAS. And I guess going forward, do you still see more of that? Is it related to, I guess, trying to get approval and get all sign-offs, or should we expect that to come down pretty materially?

Good morning, gentlemen.

So E. In this quarter you guys had I guess transient transaction expenses 900 to a million and I guess all of that would be related to Mo gas and I guess going forward do you still see more of that.

As it relates to I guess I'm trying to get approval and get all sign offs or should we.

That to come down pretty materially.

I'll take that I think the you know the.

Speaker 3: I'll take that. I think the bulk of the...

The bulk of the.

Speaker 3: FTC work for us was largely done in the third quarter. There was a little spill over, probably in the first of the fourth quarter, but that expense should be down significantly.

FTC work for for US was largely done in the third quarter there.

It was a little spillover probably in the in the first of the fourth quarter, but it should that that expense should be down.

Differently from there got.

Got it and then.

Speaker 5: Is it more now on Spire's End or...

Is it more now on spires and or your.

Okay I get it.

Speaker 5: I guess any additional color you got there.

Any additional color you got there.

Speaker 3: Yeah, it's, you know, it really is, everything is in and certified and it's in the, it's in the FDC's hands right now. Okay.

Yeah. It's.

You know it really is everything is is in and certified and it's it's in the it's in the F D. CS hands right now.

Okay.

And then.

You guys talked about.

The fire Marshal in our additional regulations do you guys see more of that coming as we go into 'twenty. Four is it just kind of like and ever increasing tightness or is it.

Speaker 5: fire marshal and additional regulations. Do you guys see more of that coming as we go into 24? Is it just kind of like an ever increasing tightness or is it you think you pretty much complied with everything?

Hi.

You you think you've pretty much compliant complied with everything in.

You're done.

Yeah, so everything.

Speaker 3: Everything that we know of, we think we've gotten our arms around, understand the requirements. It's very specific areas, not just specific to Crimson, it's Crude Oil Pipelines in California.

Everything we everything that we know of them.

We think we've gotten our arms around understand the requirements. Its very specific areas not just specific to crimson its its crude oil pipelines in California.

Speaker 3: But it's things like corrosion under insulation on insulated pipes, long-seam welded pipes which have a history of

But its things like corrosion under installation on an insulated pipes long seem welded pipes, which you know you now have a history of.

Speaker 3: potentially having issues, idle lines, and, you know,

Potentially having issues idle lines and you know.

And how to deal with them make sure that they're properly idled.

Speaker 3: and how to deal with them, make sure that they're properly idled. And then also around facilities that...

And then also around facilities that.

That normally don't have the typical inspection like you know smart pigging or in line inspections.

Speaker 3: that normally don't have the typical inspections like smart picking or inline inspections.

Speaker 3: Just a little heightened awareness and scrutiny around You know those assets and pipeline

Just just a little heightened awareness and scrutiny around you know those assets and pipeline.

Speaker 3: All of those things, as I mentioned, are great. And the right thing to be doing, operated in California.

All of those things as I mentioned are great and they're the right thing to be doing operated in California.

Speaker 3: And we've been working with the Fire Marshal I'd say over the last year, so to understand what is required of us on a go forward basis. And I think...

And we've we've been working with the fire Marshal I'd say over the last year or so to understand what what is required of us on a go forward basis and I think.

Speaker 3: You know, we pretty much have that figured out now. And it'll be, we'll have a lot more detail in our 2024 outlook.

We pretty much have that figured out now and it'll be a we will have a lot more detail in our 2020 for outlook.

Speaker 3: But we've been facing those expenses. They've been rolling in through 23 as we as we work through those different areas of focus. And I'd also say that, you know, the Fire Marshall is just more focused in general on, you know, post COVID, you know, they, they significantly increased their staffing levels and they're just, they're, we have more audit.

But we've been facing those expenses they've been rolling in through 'twenty three as we as we worked through those different areas of focus and I'd also say that you know the fire Marshal is just more focused in general on post Covid.

You know they they significantly increased their staffing levels and they're just there that we have more audits and.

Speaker 3: and higher level of scrutiny on the operations. And that is reflected in higher maintenance.

A higher level of scrutiny.

On the all the operations in and that is reflected in higher maintenance expenses.

Speaker 5: Got it and that's where it's gonna, I guess the uptick in maintenance expense. That's all related to this.

Got it and in that sort of just going to I guess the uptick in maintenance expense Ah that's all related to this.

Speaker 3: Exactly. I mean, it's, you know, there's obviously some general expense escalation that we see, but generally the increase in 23 was due to some of these.

Exactly I mean, it's it's you know there's obviously some general expenses escalation that we see but generally the increase in 23 was was due to some of these.

Speaker 3: Initiatives by the Fire Marshal and increased activity and and you know we expect to see that spill over into 24 and our 24 hours.

Initiatives by the fire Marshal and an increased activity in.

And.

We expect to see that spill over into 'twenty, four 'twenty and our 24 outlook.

Speaker 5: And then just the last one for me in terms of sort of the accelerated filing on the pending rate cases. And I think you alluded to this in your comments and I just missed it. So it doesn't, on Crimson on the SPB system, that will get you the remaining 26% of the tariff increase that you've asked for and then something less on the KLM system of the remaining 107%.

Got it and then just the last one for me in terms of sort of the accelerated.

Filing under pending rate cases.

And I think he alluded this your comments and I just missed it so it doesn't keep on on Crimson on the on the S. P. P system.

That will get you your the remaining 26% of the tariff increase that you've asked for and then something less on the KLM system of the remaining hundred and 7%.

Speaker 3: Exactly. So it takes SPB to the full rate and then, you know, KLM, we didn't double the rate on KLM. We took it to something slightly higher, but not to the full <expletive> .

Exactly so it takes S. P b to the full rate and and then KLM didn't we didn't double the rate on KLM, we took it to something slightly higher but not not to the full ask and and there is gonna be.

Speaker 3: And there is going to be, or we're, we recommended that there is an adjustment period.

Oh, where we recommended that there is an adjustment period.

In the summer of 'twenty for just in case, you know depending on where volumes go into depending on where expenses go up but what we're really trying to solve for with this bringing forward of what we think are the right rates on this system instead of waiting for the rate case to be resolved.

Speaker 3: you know, in the summer of 24, just in case, you know, depending on where volumes go and depending on where expenses go. But we're really trying to stall for with this, bringing forward of, you know, what we think are the right rates on this system instead of waiting for the rate case to be resolved.

Speaker 3: is to really reduce the cash burn on the crimson assets. Now we've asked for...

Is is to really reduce the cash burn on the Crimson assets now we've we've asked for.

Speaker 3: retroactive treatment on our rate cases. So, you know, that would come back and we'd be able to collect all that negative cash flow that we incurred, you know, while we were weighted for the rate increases, but we just feel like it's too much and given where the company is and what we're trying to do, it's a reasonable request.

Retroactive treatment on on our rate cases so.

That would that would come back and who we'd be able to collect all that negative cash flow that we incurred.

While we waited for the rate increases, but we just feel like it's just it's too much and given where the company is and what we're trying to do it's a reasonable request and we feel like it's it should be granted in it and it has it's I think there's been three cases that have received approval for our situation.

Speaker 3: and we feel like it should be granted. And it has, I think there's been three cases that have received approval for situations like this. And I think our fact pattern is right in the bull's eye.

Like this and I think our fact pattern is is right in the Bull's eye.

Got it and then.

How long is what will it take them to either say, yes or no.

Speaker 5: How long will it take them to either say yes or no?

[laughter].

Speaker 3: It's hard to say we've been

It's hard to say we've been.

Speaker 3: It's been challenging to predict CPC timelines as you can.

It's been challenging to predict CPUC timelines as did you can you can.

Speaker 3: We've all lived through the change of control process. We think...

We've all lived through the change of control process.

We think you know.

Speaker 3: You know, look, the CPC doesn't want a utility to struggle. I think the utility should be earning its reasonable cost to capital, certainly not be negative cash flow. So we're optimistic that it will garner the attention of the CPC and they'll respond.

Look the CPC doesn't want a utility to struggle or they leave.

The utility should be.

It's a reasonable cost of capital is certainly not be negative cash flow. So.

So we're we're optimistic that it will garner the attention of of the CPUC and they'll respond.

Speaker 3: In a, in a expedited manner, but. You know, it's just this is kind of, it's not unprecedented, but it's just. Not a very well trodden path and so it's hard to predict timing, but we would. We're obviously going to do everything to get it in front of the commissioners or the ALJs.

And.

Expedited manner, but.

Just this is kind of a it's not unprecedented but it's just not a very well trodden path and so it's hard to predict timing, but we would.

We're obviously going to do everything to get get it in front of the of the commissioners or or the ALJ is.

Speaker 3: so that they are aware of the situation, explain it, and we think it'll gain traction, but timing is very difficult.

So that they are aware of the situation explain it and we think you know it.

It'll gain traction, but timing is very difficult to estimate.

Speaker 3: But I will say one thing about that is, you know, the Southern California rate case, and that's why we did include it in this request, is we expect that to be resolved, Q1, 24. And San Pablo case and KLM, which is now combined, we expect that to be resolved, Q4, 24, or maybe Q1, 25, the latest.

Okay, but I will say one thing about that is you know the southern California rate case, and that's why we didn't include it in in this request as we expect that to be resolved Q1 24.

And San Pablo case.

Oh lab, which is now combined.

We expect that to be resolved Q4, 'twenty four or maybe Q1 25 at the latest.

Speaker 3: And so, that's why we think it should be resolved. This immediate acceleration should be resolved in short order, in the order of months, because of...

And so you know that's why we think it should be resolved. This this immediate acceleration should be resolved in short order and the order of months because of.

Speaker 5: The total rate case is going to get resolved and let's call it 12 months, 12 to 14 months from now. So it should be acted upon pretty quickly. All right, thank you very much. Thanks.

The total rate cases going to get resolved in let's call. It 12 months 12 to 14 months from now.

And so it should be acted upon it pretty quickly.

Alright, Thank you very much.

Thanks, so much.

We have reached the end of the question and answer session and I will now turn the call over to Robert for closing remarks.

Thank you for joining us today, we are diligently working to resolve our current challenges and we will provide updates as appropriate I want to thank our team for their hard work and dedication. This year are more guests in Omega team has remained focused on maintaining efficient and safe operations throughout the divestiture process.

Speaker 3: Thank you for joining us today. We are diligently working to resolve our current challenges and will provide updates as appropriate. I want to thank our team for the hard work and dedication this year. Our MoGAS and Omega team has remained focused on maintaining efficient and safe operations throughout the devestager process.

While our Crimson team has really stepped up after the senior management changes earlier. This year, it's an honor to work with such a dedicated and professional group of people, including our corporate group.

Speaker 6: While our Crimson team has really stepped up after the senior management changes earlier this year, in honor to work with such a dedicated and professional group of people, including our corporate group, please contact our IR team if you'd like to arrange a meeting time. Have a great day.

Please contact our IR team, if you'd like to arrange a meeting time have a great day.

This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.