Q3 2024 Fortis Inc Earnings Call

Before we begin today's call I want to remind you that the discussion will include forward looking information, which is subject to the cautionary statements contained in the supporting slide show actual results can differ materially from our forecast.

Projections included in the forward looking information presented today.

non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U S. GAAP financial measures in our third quarter 2024 and DNA.

Speaker Change: Also unless otherwise specified all financial information referenced is in Canadian dollars with that I will turn the call over to David.

David: Thank you and good morning, everyone. The third quarter was another solid quarter in the books for Florida's operationally, we continue to deliver safe and reliable service to our customers and financially our results continue to demonstrate the success of our regulated growth strategy.

September we invested $3 6 billion and our energy systems, and we expect capital expenditures of $5 2 billion for the year.

David: During the quarter, we also announced our 2025 to 22009 capital plan of 26 billion supporting average annual rate base growth of six 5% through 2029.

David: Additionally in September our board of directors declared an increase in the fourth quarter dividend of approximately 4% and extended our 46% annual dividend growth guidance to 2029.

And beyond the plan momentum continues to build on the tranche $2 one projects associated with the MISO long range transmission plan as weather as well as other investment opportunities.

David: As mentioned our annual 2024 capital program is now expected to be $5 $2 billion or 400 million higher driven mainly by the timing of expenditures associated with the Eagle Mountain pipeline project in British Columbia.

Our new five year capital plan of 26 billion, there's 1 billion higher than the previous five year plan driven primarily by projects associated with the MISO all our G P and resiliency investments at ITC as well is gross add Florida, Alberta.

David: Our capital plan remains a low risk and highly executable with nearly all being regulated investments in only 23% consistent with major capital projects.

The five year plan supports our transition to cleaner energy resources and includes investments that enhance and strengthen our infrastructure and support customer growth.

David: As we execute our capital plan, we remain keenly focused on investing in the resiliency of our energy systems, while maintaining customer affordability.

We continue to control operating costs and support programs, such as energy efficiency and Bill assistance as well as secure tax credits for the benefit of our customers.

David: Over the five year horizon rate base is expected to increase by approximately $14 billion to $53 billion by 2029 supporting an average annual rate base growth of six 5%, which is up from six 3% and our prior five year plan.

David: In September MISO released its final map of the tranche $2. One L. R. G. P projects with 24 projects totaling $21 8 billion U S dollars.

The projects are subject to MISO board approval, which is anticipated next month.

David: ITC estimates its portion of tranche 2.1 to be at least $3 billion of investing the majority of which is expected beyond 2029.

Speaker Change: Yes, and that assumes itc's expected portions of two projects in southern Minnesota and three projects in Michigan were rights of first refusal are in effect.

David: Other transmission investments continue to progress as they relate to customer connections.

David: Notably I T C in collaboration with Alliant Energy received approval in October under MISO is expedited review process for the big Cedar load expansion project in Iowa. This project relates to transmission upgrades to serve up to six to 800 megawatts of new data center load at the Big Cedar Industrial Center.

David: The first phase of the project would require transmission upgrades to support 800 megawatts of new load with a targeted in service date of 2027 and phase two requires another 800 megawatts with an in service date of 2028.

David: The project requires franchise approvals from the Iowa Utilities Commission prior to construction. The transmission project has the potential investment of up to 400 million U S dollars.

David: In our view this development underscores the attractiveness of the Midwest region for future growth.

David: With ample land availability high renewable penetration competitive utility rates and overall speed to market aided by MISO is expedited review process. We see this as a positive step forward in bringing tangible load growth to the region.

Speaker Change: We continue to make progress on new datacenter mining and manufacturing opportunities across several of our jurisdictions and are working to secure additional investments in Arizona related to our integrated resource plan as we transition to cleaner energy.

David: Last month, Tep's 2023, I or P was acknowledged by the Arizona Corporation Commission based on modest load growth projections of one 5% per year.

David: Since the IR team was prepared our load growth expectations have been have increased as reflected in our current capital plans. In fact G. P is seeing significant service requests from data centers and other large potential customers that could create substantial new energy needs above our current expectations, but at this.

David: Point it is difficult to estimate what percentage of that will come to fruition.

David: We are making progress in negotiations.

David: With one large new customer while others are at various stages of the process. We are actively developing the infrastructure options to serve this growth.

David: This new retail growth materializes that would drive significant upside to our existing capital plan and sales growth in Arizona.

David: And with TEP being a vertically integrated utility we have the ability to invest in generation transmission and distribution to serve these opportunities.

David: We expect this loan growth to be met with a combination of gas renewables and storage depending on the customer's needs.

David: To advance these opportunities we expect regulatory approvals will be required outside our standard tariffs to ensure protections are in place to avoid negatively impacting our existing customers.

David: We expect more visibility into these negotiations over the next few quarters.

David: As a reminder, this new retail load would be on top of the two and a half to 5 billion U S dollars of investments expected from the U N. S. U S is IR piece outside the existing plan as well as the at least $3 billion U S.

David: At ITC for tranche 2.1, as well as other transmission opportunities as part of the New York Transco.

David: Overall, we remain bullish about our long capex run rate and the role we play in to support climate adaptation grid resiliency load growth in the clean energy transition across our footprint.

David: As highlighted in September our board of directors declared a four 2% increase in our fourth quarter dividend, marking 51 years of consecutive dividend increases during.

David: During the third quarter, we also extended our annual dividend growth guidance of four 6% through 2029.

Jocelyn: Now I will turn the call over to Jocelyn for an update on our third quarter financial results.

Jocelyn: Thank you David and good morning, everyone for the third quarter reported and adjusted EPS were <unk> 85 cents, one cents higher than adjusted EPS last year year to date September reported and adjusted EPS were $2 45, eight cents higher than adjusted EPS last year.

David: Key drivers of growth for the third quarter, where rate base investments across our utilities and strong earnings and Arizona underscored by new customer rates that went into effect in September 'twenty two 'twenty three.

David: EPS growth quarter over quarter was impacted by timing of both the favorable cost of capital decision in British Columbia in September 2023, and the disposition of Aitken Creek in November 2023, and finally unrealized gains on total return swaps, reflecting changes in the corporation's share price.

David: Year over year were largely offset by higher finance costs.

David: The chart on slide 10 highlights the EPS drivers for the third quarter by segment.

David: Our U S electric and gas utilities contributed a 5% EPS increase quarter over quarter, driven by U S. Energy. The increase that you announced was mainly due to new customer rates higher production tax credits associated with it also Grande wind facility and an increase in the market value of investments that support retirement benefits.

David: Were moderated by labor related inflationary increases.

David: At Central Hudson EPS contribution was comparable to the third quarter of 2023, the favorable impact of rate base growth and a higher hourly effective July 1st were offset by the timing of operating costs in comparison to the related recovery in new customer rates impact of July 1st.

David: At ITC, the two cent EPS increase reflects rate based growth, partially offset by higher finance costs.

David: The EPS contribution from our Western Canadian Utilities segment was four cents lower for the quarter. If you'll recall, we recognized a favorable five cent retroactive adjustment in the third quarter of last year related to the cost of capital decision.

David: Apart from this adjustment earnings for higher up borne itself out I'm, reflecting rate base and customer growth and a higher allowed Roe.

David: The corporate and other segment reflects the two cent EPS decreased due to the timing of the disposition of income Creek in 2023, and as mentioned the impact of unrealized gains on derivatives. During the quarter were largely offset by higher finance costs are higher average U S to Canadian dollar foreign exchange rate contributed a one cent EPS increase for the quarter.

David: And lastly, higher weighted average shares like shares issued under our dividend reinvestment plan.

David: Many of the drivers discussed for the quarter are the same for the year to date period I do have a few notable comments first at the U S electric and gas segment C. EPS drivers that you announced are substantially the same as the quarter, but also reflect higher margins on wholesale sales.

David: Central Hudson was down once that year to date, driven by higher operating firms, including timing upfront relative to recovery and new rates effective July. One 2024 also there was a favorable regulatory adjustment recognized in 2023.

David: The western Canadian utilities segment, unlike the quarter the impact of the 20th twenty-three constant capital decision in British Columbia was not a driver on a year to date basis.

David: <unk> M. P. S increase reflects rate base growth and higher returns in Alberta.

David: And in the corporate and other segments. The disposition of Aitken Creek accounted for approximately a five cent EPS decrease year to date as well.

David: As stated previously this is timing as the disposition of Aitken Creek will be neutral to EPS on an annual basis. The remaining four cents EPS decrease in this segment is driven by higher finance costs, which are somewhat offset by higher unrealized gains on derivatives overall year to date earnings are in line with expectations and primarily.

David: It looks like new rates and rate base growth across our utilities.

David: Yeah.

David: Through September we have raised approximately $2 6 billion of debt repay borrowings and to fund our capital program in terms of our preference share right. We said 600 million series and what we said on December 1st with an annual dividend rate of five 5%.

David: Earlier this fall we met with the rating agencies ahead of releasing our new five year capital plan and we continue to engage particularly with S&P unfortunate as mitigation plans around physical and climate risk in October S&P did reaffirm our rating and maintained a negative outlook.

David: We update our funding plan, which remains largely consistent with the previous plan. It is comprised of cash from operations and regulated debt as well as equity proceeds from our dividend reinvestment plan and we expect the corporations $500 million at the market common equity program to remain available and provide funding flexibility as required.

David: Our new funding plan supports average cash flows and debt metrics up over 12% through 2029.

David: Turning now to recent regulatory activity last month Berk issued an order lowering the base. My so early by four basis points to 998%, bringing itc's MISO all in early including incentive adders to 10, 73% essentially the order removes the use of the risk prime.

David: Liam model and establishing the base Roe.

David: Going forward, we anticipate this reduction in base early to impact EPS by less than one cent annually.

David: We're also direct certain refunds by December 2025, the refunds for ITC are estimated to be approximately 26 million U S dollars, which will be recognized in the fourth quarter.

David: You know I guess MISO also concluded its variance analysis reaffirming the original allocation of tranche, one projects, including the allocation of ITC as a result work on all I T. C tranche one projects in Iowa has resumed.

David: In October the Arizona Corporation Commission held a second workshop on their generic regulatory lag docket.

David: Recall, the ACC is looking at the possibility of using formulaic rates or forward looking test years instead of historical test years currently in use.

David: There's potential the commission will provide guidance in late 2024 or early next year, we remain encouraged by the prospect of improving rates stability for our customers, while concurrently reducing regulatory lag.

David: In August Central Hudson filed is 2025 general rate application with the New York Public Service Commission requesting an increase in its electric and gas delivery rates effective July one 2025, the application seeks a 10% allowed ROE and 48% common equity component of the capital structure, the timing and outcome.

David: This proceeding remain unknown.

David: In October the New York Public Service Commission issued a show cause order directing central Hudson to explain why a proceeding should not commence in connection with the gas related explosion that occurred in November 2023, when a third party contractor struck a gas line, while performing work in central Hudson's behalf Central Hudson will file it.

David: Spots within 30 days of the order.

Speaker Change: And while not on the slide we expect for the Subpart F. 'twenty 'twenty five allowed ROE to be set at approximately 9% and with that I'll now turn the call back to David.

Speaker Change: Thank you Jonathan.

David: We're very pleased with our operational and financial results. So far in 2024, and the advancements made on the regulatory front, particularly at ITC.

David: Looking ahead, we are focused on executing on our new five year capital plan as well as securing growth opportunities beyond the plan.

David: Delivering reliable and affordable energy is at the heart of what we look to do for our customers, while providing dependable yet strong total returns for our shareholders.

David: That concludes my remarks, I will now turn the call back over to Stephanie. Thank.

Stephanie: Thank you David This concludes the presentation at this time, we'd like to open the call to address questions in the investment community.

Stephanie: Thank you we will now conduct a question and answer period, if he would like to register a question. Please press star followed by the one on your telephone. If your question has been answered and you would like to withdraw your registration. Please press star two if youre using a speakerphone. Please list I have said before entering your request and we will kindly request you speak loudly and slowly.

Stephanie: All participants can hear your question one moment. Please for the first question. Your first question comes from Rob Hope with Scotiabank. Your line is now open.

Rob Hope: Good morning, everyone.

Rob Hope: Wanted to talk about the potential upside believers on the capital plan that you highlighted specifically in and in Arizona. It looks like more of the near term and longer term and myself.

Rob Hope: Or do you think about funding it just given where you are on the balance sheet and if you do see.

Rob Hope: And near term capital requirements could then push more on the ATM could you look at asset sales or can you.

Rob Hope: Maybe broadly about how youre going to finance it.

Speaker Change: Sure, Rob let me kick that over to Jocelyn, Yeah, Rob I'm, you know, it's hard to say right in terms of how we're specifically going to fund these because it all depends on timing of when these projects come to play, but you know the one thing we have said for a while now is that you know we are committed to keeping our balance sheet.

Rob Hope: The position that it's in today, we've done a lot to bring it to where it is today. So we don't plan to work that backwards.

Rob Hope: Thank you right I mean, we do have the ATM available to us and I guess I'll say, what I always say, which is it all goes back on the table and and I hope that that's the problem that we have is it in terms of trying to find incremental capital, but everything goes back on the table, but.

Rob Hope: In fact, since we do have the ATM available to give us immediate flexibility.

Rob Hope: But we don't need it we don't need it right now.

Speaker Change: Alright, I appreciate that.

Speaker Change: And then sticking with the theme of upside growth.

Speaker Change: Dave You mentioned, Arizona, a number of large kind of well call it potential demand increases in our electrical load. When you think about the data center opportunity or even large users of electricity. There. How are you thinking about adding new capacity versus just the poles and wires and investment.

Speaker Change: And could you see some of these large users of electricity potentially co locate some of their own generation, there or would that be something that you'd prefer to be done on the broader system.

Speaker Change: So I would say generally nowhere in the footprint here in Arizona, and others, probably very limited co location type opportunities, so and plus when you think about how condensed our T. P system is down in southern Arizona, It would probably make more sense to just connected to the grid and.

Speaker Change: From a grid perspective, then.

Speaker Change: Co location, the only really remote plants that we have that you can consider co location or a couple of combined cycles, one in new Mexico and.

Speaker Change: And another one in Arizona that isn't necessarily all that are conducive to co location and then of course, the coal plants that we have.

Speaker Change: Already shutdown timeframes for so.

Speaker Change: Overall, we're looking at resources and every spot that we currently have resources to replace them like you know like for like generation may be and where we have some of the coal renewables storage et cetera that we can add across the entire grid. So we're looking at it more from a portfolio perspective than sort of what you're seeing in these conversations.

Speaker Change: <unk> around co location, because obviously the generation has to have the <unk>.

Speaker Change: Things that we need which are you know.

Speaker Change: Pending on the type of Jackson generation, obviously land transmission interconnection benefits natural gas generation, we also need.

Speaker Change: Water and gas pipelines and then of course, you throw on top of that the the fiber access this data for data centers, a new you know you can kind of define that part of the available sites, but keeping it wide open right now for sure.

Speaker Change: Alright, I appreciate that thank you.

Speaker Change: Your next question comes from Maurice Choy with RBC capital markets. Your line is now open.

Maurice Choy: Because the data center see him and ask for a little bit more elaboration on your prepared remarks at TEP and ITC. So a T. P. I know that there is firm resource capacity of about 3000 megawatts today could you see a situation where this doubles.

Maurice Choy: Even triples, if data center low rise and at ITC, how many of these big feeder expansion projects out there do you think.

Speaker Change: So yeah.

Speaker Change: Theres a lot in the queue to speculate as to how much of that is actually going.

Speaker Change: Youre going to come down to getting customers to locate here.

Speaker Change: There is probably a fair bit that has gotten argue that are in other people's Skus.

Speaker Change: There is obviously a bit of a an early rush to get the data centers.

Speaker Change: In places that have existing capacity and that that I think gives you a bit of a leg up for longer term potential growth. So yeah. There is big potential I wouldn't want to put it in and like the multiple of current system system peak, but it's it's pretty darn substantial so.

Speaker Change: So we and then of course on a on a smaller system like T be a you know a larger data center would have a bigger impact than maybe on a on a broader on a much larger system from a percentage perspective, well I guess, that's just obvious baton Rouge, sorry about that but you know that's.

Speaker Change: That's it but it does change the way that we have to operate the system too when you get a big load on that but I also got to emphasize that when we talk about these data center opportunities another state or datacenters or other manufacturing opportunities that we see in the Q. These are the potential not just in good investment opportunities, but on overall.

Speaker Change: Good stuff.

Speaker Change: Sorry for the rest of our retail customers right. Because this is bringing in a big large facility that take that uses a lot of energy that spreads are those fixed costs that we have in our system across much more megawatt hours. So that allows us to hopefully have a.

Speaker Change: Downward impact on our on our customer rates. So that's that's what we're shooting for.

Speaker Change: As far as ITC, Linda will probably have a little bit better view than me on the the rest of the potentials like we see it big Cedar.

Speaker Change: But we have seen that just go from the little bit of conversation that we had at the beginning of the year around the data center that was had two phases going from 300 up to 600 and now we're talking about one of these that having a <unk> hundred megawatt type sites. Those are the ones that really can get dramatically.

Speaker Change: <unk>.

Speaker Change: Even some of the smaller utilities in the footprints Linda you've got any color on additional opportunities up there.

Speaker Change: Yeah, I would just say I mean, I think similar theme I think it's it's it's difficult to specifically say what the.

Speaker Change: Kind of opportunity set is however.

Speaker Change: There is no doubt right both whether it's in Iowa are here in Michigan and you know obviously, there's a lot of different potential prospective customers.

Speaker Change: You know that we are working with we're knocking on that are knocking on doors. It's you know it's one of those things that obviously they they have a they have multiple options. Some of them are waiting for potential legislation and so it's premature to specifically say or quantify what.

Speaker Change: Those are but I would say directionally speaking.

Speaker Change: There is no doubt there are some other significant load potentials that exist, but we're just not at a point that we can specifically identify them or announced that they are confirmed.

Speaker Change: Understood.

Speaker Change: Maybe just to finish up.

Speaker Change: I'm sure someone's going to ask you about your selection so I want to turn your attention to the other election that just finished how much finished here in BC.

Speaker Change: Slender majority for the NDP, but the Green party may or may not have some kind of influence.

Speaker Change: Any thoughts on Fortis BC gas distribution growth prospects under this new political landscape for the next coming four years.

Speaker Change: Well Maurice Roger's sitting right next to me, who is our our expert from from D. C to answer that question.

Speaker Change: <unk> of course, the BC election.

Speaker Change: Just as important as the one happening today for some of US I'd say that.

Speaker Change: If there was a minority are.

Speaker Change: With the Greens, having more influence it might have been a bit of a different answer but.

Speaker Change: The ADP still maintain a majority obviously a reduced majority.

Speaker Change: <unk>.

Speaker Change: Think there, whereas a focus on.

Speaker Change: Affordability on other issues.

Speaker Change: Less than a climate given past elections, so I would say that we don't see much change going forward.

Speaker Change: I think if you look at the power in D C.

Speaker Change: Energy environment plan that was published in July.

Speaker Change: Would be my best guess as to the near term roadmap, where theyre going to go on energy there'll be still a focus on expansion of our electrification opportunities.

Speaker Change: We launched our own request for energy.

Speaker Change: Our electric service territory following BC hydro has called for power.

Speaker Change: I don't see a near term change to the direction of the gas infrastructure opportunity. We just filed our October storage facility plan last week.

Speaker Change: And our expectation is that they were going to be focused on.

Speaker Change: Promoting their powering E C plan, which are they published in the summer.

Speaker Change: Okay.

Speaker Change: Great. Thanks for the color.

Speaker Change: Thanks Marty.

Speaker Change: Your next question comes from Ben Pham with BMO. Your line is now open.

Ben Pham: Yeah. Thanks, good morning.

Ben Pham: On your Capex program.

Ben Pham: Part of that increase was for us a brighter and I'm just wondering Ken.

Ben Pham: An update on.

Ben Pham: I see.

Ben Pham: How have you seen rate base growth trending.

Ben Pham: In the near term and long term outlook on.

Ben Pham: So britta franchise.

Speaker Change: Yeah, we're seeing some good upward growth projections.

Speaker Change: In the short term here when you look at our five year capital Planet for Florida, Alberta, We see five little over 552% rate base, CAGR, which is which is stronger than it's been in the past not as strong as it's been in in a very.

Speaker Change: Say 10 years ago.

Speaker Change: But it's always been a good strong growth jurisdictions. So we're seeing customer growth. There, we're seeing additional investment opportunities and you know obviously in the in the distribution system to connect those customers and we're hoping to see some knock on impacts from things like data center growth that will well, we typically want to have.

Speaker Change: We want to serve data centers from a generation or transmission perspective, but depending on what voltage. They hook up at and then also some you know overall growth opportunities that economic growth in that area brings will have some kind of secondary impacts and then we're also seeing growth opportunities in <unk>.

Ben Pham: Some of the other kind of bigger projects that we're focused on our like our Ami project up there as well as additional investments in wildfire technology from a from a rate base perspective.

Speaker Change: Okay, that's good to hear.

Speaker Change: And then maybe on the I T C.

Speaker Change: The MISO ROE is.

Ben Pham: Is that pretty much in terms of incrementals going forward or is that a pretty much wait to Russ.

Ben Pham: And then.

Ben Pham: Are you hearing anything on the incentive adders in timing from FERC.

Speaker Change: Yeah, so it's a bit TBD to see who's who will throw in for rehearing on that order and I think we're pretty darn happy with it.

Ben Pham: <unk> landed in the right spot they pulled out the risk premium left everything else intact. It was not.

Ben Pham: Not a big Delta to the ROE for us So that was definitely a positive what was the second part of your question.

Ben Pham: Such a matter so it doesn't matter yeah, that's still yes, that's still a back burner, we haven't heard.

Ben Pham: Anything from FERC on any scheduled discussion on that as well. So we have we have not seen anything.

Ben Pham: With that we would.

Ben Pham: Concern us about that.

Speaker Change: Okay got it thanks David.

Ben Pham: Okay.

Speaker Change: Your next question comes from Mark Jarvi with CIBC capital markets. Your line is now open.

Mark Jarvi: Yeah. Good morning, Arun, please coming back to the emerging.

Mark Jarvi: Retail load increases in Arizona.

Mark Jarvi: What point would you guys have clarity in terms of being able to define the scope and timing of that and then I think Dave you said something about requiring sort of.

Mark Jarvi: No different tariff structure to protect existing customers.

Ben Pham: Is this going to be a little bit of a longer process. Before you can put this into the backlog and growth Capex until you have that sort of regulatory clarity.

Ben Pham: It'll take us some time I think once we get to the stage of getting.

Ben Pham: [noise] agreements in principle.

Ben Pham: That's the first step that you would hear from us on Okay. We got this customer we've got an.

Ben Pham: An Mou this as you know in essence, what we what we plan broader from a from a big picture perspective, the non starts.

Ben Pham: Figuring out what the what the Capex would be required and I know you know very high level basis, and then draw sort of that timeline of what we would need to do to bring that deal to.

Ben Pham: Kind of a final status ready to start.

Ben Pham: Start building.

Ben Pham: That would require not just the contractual agreements between us and that that counterparty, but typically and I'm expecting that we would have.

Ben Pham: They may be.

Ben Pham: A special tariff.

Ben Pham: Tariffs for serving them because these we don't have we don't have a specific data center type service.

Ben Pham: Service tariff.

Ben Pham: So we would want to make sure that we.

Ben Pham: Got.

Ben Pham: An agreement that covered the costs and we've done this for large customers in the past and we've done it not just in Arizona, but in BC, where we create these sort of one off tariffs to make sure that we have the protections needed, especially if we're if we're building a large amount of infrastructure form so that can be you know that's a regulatory process.

Ben Pham: But I wouldn't expect it to be a very long run because it feels that Arizona and our regulators are very supportive of this type of growth in our area and obviously when it has a positive impact for our customers. We can get stuff done extremely quickly so.

Ben Pham: I don't expect it to be like a long drawn out regulatory process, but it wouldn't be a processed on the less but that would also be done.

Ben Pham: In parallel with the development and supply chain and the rest of the things that you'd have to do to bring it to bring it online.

Ben Pham: Is the expectation that you'd be able to put them on the table and provides some clarity at some point in 2025 and it.

Ben Pham: With this many investments and rebates growth within our current five year period.

Speaker Change: Yeah. So yeah, I think 2025 is a reasonable periods well, mostly because that's a pretty broad target here.

Speaker Change: So you're asking me to pick a quarter in tornado if I'd be a bit tougher, but yes. I think this would be something that we would have a fair level of clarity and in 2025 for sure that would be that that would be that would be our goal.

Speaker Change: And then in terms of the timeline to put capital to work and impact to the actual growth.

Speaker Change: Current five years, yes.

Speaker Change: Yeah. So we would see probably we would see some this.

Speaker Change: Given how fast these data centers a lot of move.

Speaker Change: And given of course with a caveat doesn't get in the things that we need from a supply chain perspective. This would definitely have some impact in the five year period.

Speaker Change: I can't swear that it would have did would have a complete impact of the five year period, but probably a significant impact with them. Because that's you know if we have if we have an agreement one year from now and then.

Speaker Change: They would be probably looking at a two to three year type time frame from their construction standpoint, I think they typically put out about a two year timeframe for them to be able to stand up a data center. So we'd be really rushing to get that done, but again that has to do with all the rest of the timing related to supply chain permitting and sighting.

Ben Pham: You have to put in a new generation of support them et cetera.

Speaker Change: Understood and then Jonathan just to follow up on Rob's question about funding.

Ben Pham: Even absent new investments this year, some higher spend pull forward FX.

Ben Pham: How are you thinking of where you are in terms of balance sheet buffer.

Ben Pham: And is there something where you have to maybe tap the ATM a little bit sooner just given how the timing of capex is flowing through the business. This year.

Speaker Change: But no we don't see any need to do.

Speaker Change: Or do anything different than what we've outlined with the changes that we're seeing I mean, the pull forward of the wood fiber project is not not changing our funding plan. So now right now is steady with the plan that we have in place. The ATM is available, but there's no expectation.

Speaker Change: The expectation that we need to tap it for anything we see today.

Speaker Change: We are sitting today.

Speaker Change: Paul.

Speaker Change: Okay. Thanks, everyone.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Ladies and gentlemen, as a reminder, should you have a question. Please press star One. Your next question comes from Patrick Kenny with National Bank Financial Your line is now open.

Patrick Kenny: Oh, Thank you, maybe just to dive a little bit deeper into the the Alberta footprint.

Patrick Kenny: And as you mentioned.

Patrick Kenny: Even though you don't have the same vertically integrated model as you do in Arizona just.

Patrick Kenny: Given the some of the big numbers, we've seen thrown around in terms of the opportunity set around.

Patrick Kenny: Co location opportunities.

Patrick Kenny: Coming into the province.

Patrick Kenny: Just how should we be thinking about.

Patrick Kenny: The rate base upside.

Speaker Change: As you look at <unk>.

Speaker Change: Some of these behind the meter customers for their redundant power needs.

Speaker Change: Yeah, let me I'll kick that over to Janine to add a little color. Obviously is as you know.

Speaker Change: Alberta has been extremely receptive to the conversation around data centers, they've got their bring your own power.

Speaker Change: Policy up there, but as far as the transmission and distribution investments G&A do you want to opine on that a little bit.

Janine: Sure. It's certainly an evolving story here in Alberta, as the provinces Pink very vocal in terms of wanting to attract them yet.

Speaker Change: Still going through the process of understanding how we're going to support them. So we've been certainly on a bit of an education journey as to the importance of interconnecting. These loads to the grid to ensure the reliability of power that a lot of these customers will require so you know clearly there's a balance between.

Janine: Supporting a fossil fuel based economy, which gives province would still want to do in life My senses.

Janine: Using gas for example is backup power supplies for these types of data centers, but also looking at the reliability.

Janine: The liability aspect the interconnection with the grid and its another consideration and that's where we've been focused in terms of understanding how we can best support the customer from a distribution perspective.

Janine: And understanding what the implications for those behind the meter types of generation could mean in terms of accessibility and reliability. So.

Speaker Change: Lots of conversation going on our certainly front and center with discussions with customers as well as with the government in terms of how policies might be determined around east.

Speaker Change: And waiting to see how some of these might actually interconnect and what they might brain when they decided to come to Alberta.

Speaker Change: Okay. That's great color. Thank you and then maybe for Jocelyn and I know you touched on it already but.

Speaker Change: With this rate base or capital plan up sorry.

Speaker Change: The potential for an even weaker Canadian dollar outlook going forward.

Speaker Change: So if there's been any change to your thoughts.

Speaker Change: And to lock in the longer term cash flows at a higher FX rate as well or is it just status quo on the.

Speaker Change: The currency hedging policy for now.

Speaker Change: Is never status calls pantry and we're always looking at the market. We did extend our hedging program to be two years out for our U S cash falls, a little while ago and we are still there, but it's something we are looking at and where we're definitely taking.

Speaker Change: They're all quite significant lately in terms of just locking in the current rate. So no it's an evolving.

Speaker Change: The item that we're always evaluating but right now we're two years out our U S cash flows.

Speaker Change: Okay.

Speaker Change: Okay. Thank you I'll leave it there.

Speaker Change: Yes.

Speaker Change: Your next question comes from Michael Sullivan with Wolfe Research. Your line is now open.

Michael Sullivan: Hey, good morning.

Michael Sullivan: Hey, Michael.

Michael Sullivan: Hey, Dave.

Michael Sullivan: Couple more questions on an Arizona, just how do we think about the timeline for <unk>.

Michael Sullivan: Implementation of whatever may come of the remainder of these workshops.

Michael Sullivan: Yeah.

Michael Sullivan: What is the process from Europe.

Speaker Change: Yeah, Let me turn it over to Susan since we're in Arizona. This week for a for their board meetings or we've got a break here in person to answer that yeah. Good morning, Michael Thanks for the question. So as you probably know on October 3rd we had a recent workshop.

Speaker Change: <unk> brought in a couple of first Representatives just talk about how the formula works for FERC and.

Speaker Change: And so the commission may hold another one to two workshops, but I think they're motivated to get something done fairly soon I'd say late late this year or early next year. So I think that I think we're getting pretty close to a solution and I think that's going to be good for our customers in terms of a more gradual.

Speaker Change: It will impact on rate rate increases and obviously good for us in terms of regulatory lag, but I think I think we're narrowing in on installation pretty quick here.

Speaker Change: Okay, Great and then I think just in the spirit of elections here I think there's one in Arizona as well.

Speaker Change: How do you think about the range of candidates there and just what that could mean for for regulation in the state.

Speaker Change: Yeah.

Speaker Change: Go ahead, yeah. So theres three open seats that chairman is not rerunning them. So that's a Republican open seat.

Speaker Change: Commissioner Marcus Peterson is running for reelection and then commissioner Tovar is not running for reelection. So three open seats three candidates on each party. Your guess is as good as mine on how that's going to turn out today.

Speaker Change: Okay, and then just pivoting to <unk>.

Speaker Change: Sure.

Speaker Change: Theres been some talks out there of potentially the Duane Arnold nuclear plant coming back would you all have any involvement with that if that were to happen.

Speaker Change: Firstly, Brian the nuclear side no.

Speaker Change: And Linda I don't I'm not sure if that would have any impact on us.

Speaker Change: The L. R. T P. Like basically then the $2 two phase because that obviously would be putting a big additional generator back online which might have to go back into the calculus of.

Speaker Change: What's needed from a transmission perspective, but let me have you guys thought about if that's got any impact on your.

Speaker Change: Yeah, I mean, obviously, where we're tracking and monitoring some of the conversation you know remember they existing there's existing transmission infrastructure.

Speaker Change: That is still there and in place you know that was there to serve be the Duane Arnold facility. When it was in operation, but as Dave mentioned, certainly on a going forward basis as we continue to invest.

Speaker Change: Invest and build out the regional transmission infrastructure, certainly, bringing new generation back online certainly has an impact on system dynamics and so it's certainly something that we would have to study.

Speaker Change: To determine what impacts if any.

Speaker Change: It has on the power flows are you know, obviously delivering load and so I would say, it's a TBD, but I would say there is some pretty robust transmission infrastructure that currently serves that are at that location.

Speaker Change: Okay, and just to be clear, that's your transmission infrastructure or someone else's.

Speaker Change: That is ours ITC, okay. Okay. Thank you very much.

Speaker Change: Thanks, Michael.

Speaker Change: Thank you as there are no further questions I would like to turn the call back over to Mr. <unk>.

Speaker Change: Okay.

Speaker Change: Thank you all we have nothing further at this time. Thank you for participating in our third quarter Duane Tony Park results Conference call. Thank you for your time and have a great day.

Speaker Change: Thank you for participating this concludes today's conference call you may now disconnect.

Speaker Change: Okay.

Speaker Change: [noise].