Q3 2024 DTE Energy Company Earnings Call
Good morning, and welcome to the DTE Energy third quarter 2024 earnings Conference call.
All participants are in a listen only mode.
After the Speakers' remarks, we will have a question and answer session to.
To ask a question you will need to press star followed by the number one on your telephone keypad.
As a reminder, this conference call is being recorded.
Speaker Change: I would now like to turn the call over to Matt Krupinski Director of Investor Relations. Thank you. Please go ahead.
Speaker Change: We're looking disclosures.
Speaker Change: On the point 24 year end earnings call.
Speaker Change: Our updated plan will reaffirm our commitment to deliver premium shareholder returns that our investors have come to expect.
Speaker Change: Let's turn to slide five to highlight some of the achievements across our portfolio.
Speaker Change: We are achieving success and progressing on our key initiatives across the company.
Speaker Change: We're progressing toward constructive outcomes for our rate cases at both DTE gas and DTE electric while there is still work to do to ensure the outcomes do not put pressure on our near term ability to complete our customer focused investments.
Speaker Change: We believe these outcomes will ultimately support the investments in grid reliability and.
Speaker Change: And cleaner generation that we need to make on behalf of our customers.
Speaker Change: And we are expecting these constructive outcomes in November for DTE gas and.
Speaker Change: And January for DTE electric.
Speaker Change: Additionally, we received a follow report from the independent audit of our electric distribution system as directed by the Michigan Public Service Commission.
Speaker Change: We're really appreciated working with the independent audit team over the last year and we appreciate the insights and recommendations to further improve our system.
Speaker Change: <unk> will go over some of the key items from the audit, but one key takeaway.
Speaker Change: Is the confirmation that our proposed investment plan is what is needed to achieve the significant reliability improvements that we have committed to over the next five years, which is reducing power outages by 30% and cutting outage time in half by 2029.
Speaker Change: We are continuing to progress on these investments in reliability improvements this year and our customers are seeing the benefits of this work.
As I mentioned, we had one of our most effective storm restorations in our company's history in August.
Speaker Change: Demonstrating that our efforts to improve processes and automate the grid are working.
Speaker Change: Joey will provide some detail on our progress in this area.
Speaker Change: But I'll just say that we are making great progress on all aspects of our plan as we transition to a smarter grid update existing infrastructure.
Speaker Change: Rebuild the oldest sections of the grid.
Speaker Change: And continue our significant tree trimming efforts.
Speaker Change: We are also making significant progress in our renewables build out at DTE electric last month.
We broke ground on three new solar parks and have three additional solar park currently under construction.
Speaker Change: Together these projects will add 800 megawatts to our renewable portfolio, which is enough to power more than 220000 homes and each project is supporting our my Green power voluntary renewable program.
Speaker Change: <unk> continues to grow with 2500 megawatts now subscribed and nearly 100000 residential customer subscriptions.
Speaker Change: And at DTE gas, we continue to progress on our gas main renewal program. This year as we modernize the gas transmission system and our distributions.
Speaker Change: Start on slide eight to review, our third quarter financial results.
Speaker Change: Operating earnings for the quarter were $460 million this translates into $2 22 per share.
Speaker Change: Can find a detailed breakdown of EPS by segment.
Speaker Change: Cleaning a reconciliation to GAAP reported earnings in the appendix.
Speaker Change: I'll start the discussion with our utilities DTE.
Speaker Change: DTE electric earnings were $437 million for the quarter.
Speaker Change: This is a $169 million higher than the third quarter of 2023.
Speaker Change: The main drivers of the earnings variance, where implementation of base rates warmer weather and lower storm expenses and timing of taxes.
Speaker Change: Partially offset by higher rate base costs.
Speaker Change: Moving onto DTE gas.
Operating earnings were unfavorable $8 million versus the third quarter last year.
Speaker Change: Driven by higher rate based costs and a return to a more normalized O&M level.
Speaker Change: This was partially offset by increased revenue from the <unk>.
Speaker Change: Let's move to DT vantage on the third row.
Speaker Change: Operating earnings were $33 million for the third quarter of 2024.
Speaker Change: This is a $23 million decrease from 2023.
Speaker Change: Due to a combination of some timing and one time items in 2023, primarily in our RMG and steel related businesses.
Speaker Change: We remain highly confident in our full year guidance for vantage.
Speaker Change: As new projects continue to ramp up in the fourth quarter and provide both earnings and associated investment tax credits.
Speaker Change: Our next row, you can see energy trading finished the quarter with earnings of $25 million.
Speaker Change: We continue to see strong performance in our contracted and hedged physical power and physical gas portfolios at this segment.
Speaker Change: Finally, corporate and other was favorable by $30 million quarter over quarter, primarily due to the timing of taxes.
Speaker Change: This timing will reverse through the balance of the year and we expect to land within the current full year guidance range for this segment.
Speaker Change: Overall, DTE earned $2 22 per share in the third quarter.
Speaker Change: When you look across our portfolio of businesses, we are in a great position to achieve our full year operating EPS guidance in 2024, which at the midpoint provides 7% growth over the 2023 original guidance midpoint.
Speaker Change: And we continue to position ourselves to deliver strong results in 2025 and beyond.
Let's move to slide nine to highlight our strong balance sheet and credit profile.
Speaker Change: Our significant customer focused investment is supported by our strong cash from operations.
Speaker Change: Due to our strong cash flows we have minimal equity issuances and our plan.
Speaker Change: As we are targeting annual issuances of zero to 100 million through 2026.
Speaker Change: Our long term financial plan incorporates debt refinancing and new issuances to fund our capital investment plan and is consistent with our 6% to 8% operating EPS growth target.
Speaker Change: We have largely executed our 2020 for financing plan at interest rates consistent with our plan, including reducing refinancing risk by successfully pre funding in the fourth quarter debt maturities at the parent company.
Speaker Change: We continue to focus on maintaining our strong investment grade credit rating and solid balance sheet metrics as we target an <unk> to debt ratio of 15% to 16%.
Speaker Change: Let me wrap up on Slide 10, and then we will open the line for questions.
Speaker Change: Our team remains focused on our commitment to deliver for all our stakeholders.
Speaker Change: We continue to invest heavily within our utilities to improve reliability and move toward cleaner generation.
Speaker Change: Our robust capital plan supports our customers as we execute on these critical investments while focusing on customer affordability.
Speaker Change: <unk> is well positioned to serve increased load as opportunities for new load continue to solidify in our service territory.
Speaker Change: The 2020 for operating EPS guidance midpoint.
Speaker Change: <unk>, 7% growth over the 2023 original guidance midpoint.
Speaker Change: And we continue to target long term operating EPS growth of six 8%.
Speaker Change: As Jerry mentioned, we will provide the details of our long term plan on our year end earnings call.
Speaker Change: We remain well positioned to deliver the premium total shareholder returns that our investors have come to expect with a strong balance sheet that supports our future capital investment plan.
Speaker Change: We look forward to seeing many of you at <unk> in a couple of weeks and with that I. Thank you for joining us today and we can open the line for questions.
Speaker Change: As a reminder to ask a question. Please press star followed by the number one on your telephone keypad.
Speaker Change: To withdraw any questions press the button again.
Speaker Change: Our first question comes from Charterers.
Speaker Change: <unk> partners. Please go ahead your line is open.
Speaker Change: Hey, guys good morning.
Speaker Change: Sure sure Okay.
Speaker Change: Morning, Jerry.
Speaker Change: Obviously, congrats on the quarter.
Jerry: Just appreciate that the financial update is moving to the <unk> print, but you kind of remove that reference to the $25 billion. Capex plan can you maybe just talk about what youre seeing in terms of assistant needs that could prompt a reconsideration any generation needs pulling forward at this stage I don't want to front.
Jerry: On the Q4 update but just a sense there would be super helpful. Thanks.
Speaker Change: That's a good question is sure and what we're seeing.
Speaker Change: Take it by the two major components our generation, we are seeing opportunity there for incremental investment and that's primarily driven by the fact that we had forecasted to subscribe 2500 megawatts of voluntary renewables over the next four years.
Speaker Change: And we've already filled the Q. So we're seeing continued investment opportunity with our voluntary program.
Speaker Change: And also as we update.
Speaker Change: The plan generation plan for the clean energy legislation that was passed last year.
Speaker Change: We're also seeing opportunity there as well.
Speaker Change: And what the report.
Speaker Change: Independent audit report on our distribution system.
Speaker Change: We do see some opportunity there and when you bring that all together I think there will be an overall incremental opportunity to invest and we will update that at our year end earnings call.
Speaker Change: Got it.
Speaker Change: Just on that.
Speaker Change: Storm resiliency audits it sounded like the plan is the plan to meet that sort of target of cutting the outages in half by 2029, but it sounds like you still need some additional spending there as well as a result of the storm resiliency audits is that correct.
Speaker Change: We do see incremental opportunity, but Joe you may want to yeah, Yeah, Yeah, Yeah sure.
Joe: The results really service is confirmation of our five year plan to deliver on our liability commitment and no commitments align with the service quality standards set by the a M. P. S C.
Joe: So the plan noted that you know, our our GDP or our distribution grid plan is really aggressive and ambitious and we accept that challenge and we've demonstrated that we have the execution capability just given our track record over the last couple of years of ramping up our investments.
Joe: You've mentioned some of the key takeaways and yes that could help us prioritize some of our capital plans, but generally that the finding support our overall levels that we'd laid out but there were some noted increases in certain areas like hold top maintenance that we're taking into account, but we're really being mindful of affordability.
Joe: And we've chosen to highlight that in the presentation. When you look on page 13. It just shows that we have been able to stay below the national average in terms of <unk>.
Joe: Overall bills and bill growth. So that's what we are using as you know our governor and we've proven that we've done it in an effective manner.
Speaker Change: Got it perfect and then just lastly on just the funding needs I mean, it sounds like there's some upside bias to that 25 billion.
Speaker Change: And obviously, you've got a very strong balance sheet, you talk about minimal equity needs between zero to $100 billion range do you envision that changes when you roll forward. Your plan do you have the balance sheet capacity to take on the incremental capex or could there be some incremental funding needs.
Speaker Change: Hey, sure at this stage.
Speaker Change: We do plan to update all of that on our fourth quarter call and we will get into that more in our current plan you saw we haven't zero to $100 million of equity through these next three years.
Speaker Change: We don't we don't anticipate that changing through this through that period, but we will update more on the on the out years. So again, we have great cash flow generation. The iras continue to support our capital investment so.
Speaker Change: We're confident we will have the capital plan that can support that too.
Speaker Change: Okay, I think that sort of answered it I appreciate it guys have seen a couple of weeks.
Speaker Change: Thank you.
Speaker Change: Our next question comes from <unk> Chopra from Evercore ISI. Please go ahead. Your line is open.
Speaker Change: Hey, James Good morning, Thank you for taking my question.
James: Hey, good morning, David.
James: David Joyce.
David Joyce: Maybe can you help us year to date. It seems like you are materially ahead of your plan.
David Joyce: Especially when I think about Q3 of last year and do my walk through Q4, I'm, sorry, Q4 of 23 to <unk> 24, maybe just help us think through.
David Joyce: What are the puts and takes in Q4 as you think about hitting midpoint of your guidance are you moving some cross over from 25% going forward just thinking about how much progress you've made year to date versus you're reaffirming the point of your guidance range.
Speaker Change: Yeah sure I'll take that I'll I'll start by saying you're right. It's a good quarter and we're doing we're doing well relative to last year.
Speaker Change: The big driver of that is electric which as you remember last year we.
Speaker Change: Sure.
Speaker Change: You'll have some storms and weather that were impacting us and this year. We have some additional margins. So you can see our electric is doing is doing better.
Speaker Change: Also like <unk> versus expectations.
Speaker Change: The expectations for your expectations trading.
Speaker Change: Is doing well too we're at $61 million year to date versus our guidance of $35 million for the year. So.
Speaker Change: That is providing some favorability.
Speaker Change: I will say, we talked about the timing of taxes. There is timing of taxes at corporate that we know will reversed at the end of the year and there is some a little bit of an electric too so that comes down but overall.
Speaker Change: We are expecting to have a good year and as you mentioned, we are we are using that to make us to position ourselves to make sure. We continue to have a good year in 2025 as well.
Speaker Change: To answer your question, yes. It does that's helpful. Thank you. Thank you David maybe just a quick follow up can you update us on the performance based rulemaking.
Speaker Change: Docket.
Speaker Change: Are the decisions sorry, what are the discussions like that thank you.
Speaker Change: Yes sure Kash.
Speaker Change: <unk>.
Speaker Change: Essentially that the commission has of prepare their final straw dog and includes the seven metrics. We're happy with the metrics. These are metrics that we use to measure ourselves against alright.
Speaker Change: Already we continue to press for our cemetery, and how the incentives and disincentives that will be applied.
Speaker Change: As it stands now we've provided our remarks and there's no official end date to this docket, but we know that it will not be incorporated into the existing rate case. That's currently underway. So we await a response from the commission and we'll continue to work with them on finalizing PBR.
Speaker Change: That's helpful. Thank you for the time.
Speaker Change: Our next question comes from Jeremy Tonet from Jpmorgan. Please go ahead. Your line is open.
Jeremy Tonet: Hi, good morning.
Speaker Change: Good morning, Jeremy.
Jeremy Tonet: I just wanted to start off vantage side, if I could just wondering if you might be able to talk a bit more.
Jeremy Tonet: The R&D custom solutions there.
Jeremy Tonet: Maybe a bit more on the carbon capture side as well I guess, how you see the timeline of that progressing.
Jeremy Tonet: Yeah, we we continue to have a really nice pipeline.
Jeremy Tonet: And all of those areas that we have some projects. We mentioned we have an R&D project coming online. This year, we have some conversion opportunities there that we continue to work.
Jeremy Tonet: The custom energy solutions.
Jeremy Tonet: As supported by the IRA has has given us some good opportunities.
Jeremy Tonet: Opportunities in that business too. So you talked about the Ford project, that's coming online and we see a good pipeline with.
Jeremy Tonet: With other other industrials throughout as well.
Jeremy Tonet: And then Ccs those are as we mentioned those are some smaller projects.
Just continue and to advance them with some.
Jeremy Tonet: If some onsite ccs that we'll be doing and hope to be able to update more throughout next year.
Speaker Change: Got it that's helpful. Thanks, and as you think about you know potential upside to our <unk>.
Speaker Change: Utility capex over time.
Speaker Change: Given some of the items you talked about before how do you think about portfolio rotation in this segment to help fund some of that if needed.
Speaker Change: Yes, we're certainly as we see upside in and utility capital, we'll continue to manage how much we invest in.
Speaker Change: And what earnings we expect from from vantage.
Speaker Change: So we do see greater emphasis on utility capital in the future.
Speaker Change: Got it that makes sense that's it for me thanks.
Speaker Change: Our next question comes from Nick Campanella from Barclays. Please go ahead. Your line is open.
Nick Campanella: Hey, good morning, I hope everyone's doing well.
Nick Campanella: Hey, I wanted to just ask Hey, how are you I just wanted to ask.
Nick Campanella: As we kind of think about the roll forward.
Nick Campanella: How are you kind of thinking about your loan growth I know, it's kind of been.
Nick Campanella: Roughly flattish, but we are seeing a lot of a lot of peers kind of take up their loan ambitions and then maybe you could also kind of talk about the status of the.
Nick Campanella: The data center, Bill and the ability to get that passed this year. Thank you.
Speaker Change: While our plan at this point, Nick forecasts essentially flat demand growth.
Nick Campanella: Our five year plan.
Speaker Change: We havent closed any arrangements with data centers, but we have a lot of interest.
Nick Campanella: And in terms of legislation.
Nick Campanella: What we're seeing is what we did see in the before the summer recess is that the sales and used to actually use tax portion of the bill passed the house as you recall, it's already through the Senate or just waiting for the for the house to finish its work.
Nick Campanella: We do have some commitment that it'll be taken up in the lame duck session here after the election.
Nick Campanella: And the Governor has continues to indicate that if it gets to our desk you'll sign it so.
Nick Campanella: So we feel feel pretty good about that.
Nick Campanella: And thats something that the hyperscale or as needed like the very large data center operators that we're talking to.
Nick Campanella: The Aggregators are already have a sales and use tax exemption and we're also talking to them.
Nick Campanella: So our perspective is that at some point here.
Nick Campanella: We will start to connect data center load.
Nick Campanella: We do have some capacity to offer.
Nick Campanella: And that will be extremely beneficial to our customers and extremely beneficial to affordability.
Nick Campanella: Will help us drive.
Nick Campanella: More affordability into the plan if you will.
Speaker Change: Hey, that's helpful. I appreciate that and then I guess just to check in on the electric case quickly is it still kind of the.
Speaker Change: The base case here that you take this the full distance and we shouldnt be expecting a settlement just wanted to get a quick update there and thats. It from me. Thanks.
Speaker Change: Yes staffs position is constructive it'll put some pressure on our near term capital plans that will work through but just given the sheer number of the intervenors I think we're up to 28 and the intervenors Theres really a low probability of a settlement at this point, but we believe we can still get a constructive outcome and we'll know definitively.
Speaker Change: In January.
Speaker Change: Alright. Thank.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from David Arcaro from Morgan Stanley. Please go ahead. Your line is open.
David Arcaro: Hey, good morning, Thanks for taking my questions. Good morning, good morning.
David Arcaro: Let me see maybe on the gas rate case side of things, reflecting on the ALJ recommendation in that case ROE was lower than we would've thought.
David Arcaro: Just wondering.
David Arcaro: Has there been any change from your perspective, and the backdrop in terms of maybe the commission's perspective on gas rates and affordability and returns.
Speaker Change: Yeah. If you look at the staff's position after the ALJ is testimony there exceptions were right in line with their initial testimony, so we feel and which was constructive so we feel really good about where we stand with the gas rate case, and we all know definitively in the next couple of weeks and I think we mention.
David Arcaro: Before that this was a new ALJ.
David Arcaro: And in the electric rate case, there is no ALJ. So David we'll know in about two weeks, where we stand and staff was very supportive of all of the capital that we have in the gas rate case as well.
Speaker Change: Yeah got you absolutely that makes sense. Thanks, and then maybe just on voluntary renewables.
Speaker Change: How is the momentum in that program where.
Speaker Change: Where could you see that going maybe from the 2500 megawatts that you have currently subscribed.
Speaker Change: We will update that at the yearend call, but certainly it'll be higher than 2500 megawatts.
Speaker Change: I always say that I can't seem to put a high enough target on that team.
Speaker Change: Always exceed expectations. So we had 2500 megawatts forecasted.
Speaker Change: For the next four years in that order book has been full.
Speaker Change: Filled I should say and we still see significant opportunity.
Speaker Change: So more and more to come on that.
Speaker Change: Okay, great it sounds good but wait for that and for Q I appreciate it. Thanks so much.
Speaker Change: Our next question comes from Julien Dumoulin.
Speaker Change: Smith from Jefferies. Please go ahead your line is open.
Speaker Change: Excellent Hey, good morning team Big you guys very much morning, maybe following up on Nick's question Super quickly here.
Julien Dumoulin: In terms of implications here I mean, how much of an inflection do you think.
Julien Dumoulin: Hence, which named Dr success here on the use tax sales of these taxes is successful here would you expect or is that more of a longer dated operating I mean, just to go back to what you said a second ago. Jeremy you have obviously near term capacity availability here just want to understand the timing and the progress you are having those conversations in parallel.
Jeremy Tonet: Sure. So you know available capacity as I mentioned in the past is less than a 1000 megawatts.
Jeremy Tonet: And one hundreds of megawatts and we would look to secure that in the near term near term being over the next.
Jeremy Tonet: 12 months.
Jeremy Tonet: And that some of that will be independent of sales and use tax exemption passing and somewhat with the large hyper scaler will need that sales and use tax exemption, which we expect to be dealt with this fall.
Jeremy Tonet: And by the way that was all very bipartisan, which is also encouraging that that bill passed the Senate Senate, Hi, partisan way and have the bill passed in the hyper partisan way as well. So we expect the other half of this bill in the house to move along before the end of the year, but yes, we expect the hundreds of megawatts to be placed what I would say in a relatively.
Jeremy Tonet: Near term and then there are thousands of megawatts being discussed.
Jeremy Tonet: But I think that'll be a longer dated option in a sense that it will require capacity builds.
Jeremy Tonet: In our generation fleet.
Jeremy Tonet: Okay.
Speaker Change: Excellent and thank you and then maybe pivoting to the IRI I'm here I mean, it's a pretty meaningful chunk of the overall ask here if you think about it.
Speaker Change: How do you think about the cadence of rate cases, and extent to which that you don't get the.
Speaker Change: Full infrastructure recovery ask here, how do you think about that I mean, obviously there is a clear ask in the left hand, given the auto report and the pressure to improve metrics here I mean, just I know, it's a little bit of a rock and hard place, but how do you think about that conversation and the potential for zero cases here.
Speaker Change: Well I think it staff's testimony they they essentially held to the current levels for the IRS I think going forward. They were relying they will rely on the Fiat It results, which we have already said are positive and support our capital plan I think we would have to grow the IRI M. Two significant levels it would have to be.
Speaker Change: Call It $1 billion before we would even be able to stay out of a rate case for a period of time, but thats. What we are campaigning for and I think the audit results kind of help us make the case that.
Speaker Change: And Iran would be helpful for us and helpful for customers.
Speaker Change: Hey, Julien.
Speaker Change: They see.
Speaker Change: Not significant movement in this rate case, but we're getting signals that as they saw it lands and gifts.
Speaker Change: Sort of adopted and finalizing our planning process along with the Commission's understanding of how we should move forward, we do see a willingness to grow the IRI them. So that we can reduce the frequency of rate cases, so I think it will take like we mentioned.
Speaker Change: This past year, it'll take several more rate cases, before we get to a level, where we can put some time between these rate cases, which I think everybody wants.
Yes, indeed, and it's good to hear that you've got some line of sight in conversations there alright excellent guys. Thank you very much we'll see soon.
Speaker Change: Right.
Speaker Change: Our next question comes from Michael Sullivan from Wolfe Research. Please go ahead. Your line is open.
Speaker Change: Hey, Ron good morning.
Michael Sullivan: Hey, just picking up on that last question in terms of rate case cadence and obviously you made the decision to hold off on.
Michael Sullivan: The long term refresh with two cases pending I guess, how should we think about that going forward since you're going to continually be in rate cases or will you.
Michael Sullivan: Ultimately get back to your prior timeline of Q3 as a kind of shift to more Q4 going forward or is this kind of a moving target.
Michael Sullivan: Spending on.
Michael Sullivan: Cases being pending at any given time.
David Joyce: Hey, Michael this is David.
David: We'll see how things play out in the future and kind of decided on that going forward. We do know that we're going to have to keep going in for rate cases, but we remain confident that we're going to get the capital investment that we need from these rate cases to support our growth going forward too, but we'll we'll continue we'll update that as we go forward.
David Joyce: Okay.
David Joyce: And then just shifting over to <unk>.
Speaker Change: The year to date strength in the trading Dave I think you mentioned you're already ahead of the.
Speaker Change: Full year guide is there some reversal that you were expecting in Q4 or is that strength can continue and maybe just looking out into next year. What what are you seeing for that that segment.
David Joyce: Yeah, Youre right, we are off to a really good start this year like I said, we're at $61 million versus our guidance of $35 million.
David Joyce: I will say this performance is based on contracted and hedged positions at our physical gas portfolio and our gas portfolio.
David Joyce: So we don't see a big reversal coming in the fourth quarter or anything that should should change that dramatically.
Speaker Change: Oh, well, we look forward you know we will again as we said a few times on this call update a lot on the fourth quarter call and give you some better looks but yeah.
David Joyce: When we look at some of these power contracts. They are one to three year contracts that we've done through the FRS.
David Joyce: And they have higher margins than we had seen before so.
David Joyce: We do see some some reason for optimism in this business going forward too.
David Joyce: Okay.
Speaker Change: Okay, Great and then last one just quickly I think.
Speaker Change: Someone had mentioned just trying to think about the.
Speaker Change: The drivers upcoming for Q4, so if if trading has kind of remained strong or.
Speaker Change: At least there's no reversal coming can you just remind us in terms of the kind of one time cost cutting that you did a year ago.
Speaker Change: Whether any of that showed up in Q4, and what it would be a potentially reversing this year.
Speaker Change: Yeah, we did.
Speaker Change: You remember last year, we were no holds barred on our O&M and so some of those costs have come back into into this year relative to last year.
Speaker Change: If you take away the storm costs, we had last year. Some of that does come in and then I will say you know gas has been faced with some tough weather. This year youll see in the appendix that it's almost $50 million of whether we've made up some of that but we're working working that to try to but it'll be challenging to have that within the range too so that will play into fourth quarter, but.
Speaker Change: Again, we see it we're seeing a strong year this year and expect it to be a good year and find ways that we can continue to support 2025 through that too.
Speaker Change: Great. Thanks, Thanks, a lot Dave.
Speaker Change: Our next question comes from Paul Fremont from Ladenburg. Please go ahead. Your line is open.
Paul Fremont: Great. Thanks.
Paul Fremont: When I look at.
Paul Fremont: The 45 Z tax credits that are expected next year.
Paul Fremont: Would you expect that that would put your non regulated business contribution above your targeted range.
Paul Fremont: For at least over the course of the next several years.
Paul Fremont: Yes.
Speaker Change: Well I'll probably go back to the same answer I've, given a couple of times, but when we when we when we do give our update on the fourth quarter. We will go into all of this is 45 disease, which are tax credit production tax credit for RMG business.
They are a favorable thing that it will come into come into 25 through 27.
Speaker Change: I'll say when we gave our 28 growth that we knew that wasn't going to be in there and we are still confident or six to eight.
Speaker Change: But its.
Speaker Change: Its favorable give us better confidence and some flexibility and hitting and hitting the.
Speaker Change: Earnings over those few years, hitting our EPS growth over those few years and we will give more updates on that on the fourth quarter call as well Paul.
Speaker Change: And I mean in terms of in terms of those percentage targets I mean would you be willing to sort of allow that to be higher than the targeted range because of the temporary nature of that of the 45 Z contributions.
Speaker Change: Yeah, well we will.
Speaker Change: We will update on all of that in the fourth quarter call. We're trying not to give guidance piecemeal through the year and try to give it all at once when we give our full year guidance across all of our businesses. So yeah, we'll update that fully on the on the fourth quarter call.
Speaker Change: Great and I guess my last question is if you did the same type of number you did in the fourth quarter would put you way above sort of your guidance range. So should we at least should we at least assume that right now youre tracking at least towards the higher end of your guidance range for this year.
Speaker Change: We expect to come in with within our guidance range. We are also looking to support 2025, how we can.
Speaker Change: And again, there is some timing of tax issues not issues, but timing of taxes, it will reverse and our corporate a little bit in electric that that will.
Speaker Change: Kind of bring us within those ranges as well.
Speaker Change: Great. Thank you very much.
Speaker Change: Our next question comes from Bill <unk> from UBS. Please go ahead. Your line is open.
Speaker Change: Hi, good morning.
Speaker Change: Just a couple of questions on the yearend numbers here too.
Speaker Change: Can you quantify the impact of the tax timing items.
Oh, yes, there's a little bit of electric incorporate them together there are about $40 million.
Speaker Change: Okay.
Speaker Change: And then on vantage.
Speaker Change: Year to date, it's at 55 million, let's say, there's implying about an $80 million step up in Q4 is that is that still on track.
Speaker Change: Yes, yes, that's still on track.
Speaker Change: Okay.
Speaker Change: The development of those projects going into service and so forth is theres no no issues there.
Speaker Change: The big one going in is the Ford one that Jerry was talking about on the call.
Speaker Change: Doing the central energy Central energy plant for the Blue Oval city projected for it and they're Tennessee facility.
Speaker Change: There's three large we've some of that already is in service and there's three large systems that it will come into service within the fourth quarter that will drive the.
Speaker Change: Both the income and the.
Speaker Change: Associated investment tax credits in the quarter.
Speaker Change: Okay and then.
Speaker Change: On the potential for increase in large load I mean is there any kind of sensitivity you can provide if we think about you know if you're assuming relatively flat, but there is potential for upside on that it's the legislation comes through or additional economic development.
Speaker Change: Materialise is there a sensitivity we can think about for large C&I.
Speaker Change: From an earnings perspective.
Speaker Change: Well I think what we'll do is we'll use the incremental margin.
Speaker Change: To support our affordability initiatives I think there will be an opportunity as we land has slowed.
Speaker Change: To accelerate our capital plans.
Speaker Change: Putting.
Speaker Change: Bill pressure on our customers. So I think that's how we will use the incremental margin.
Speaker Change: Were probably not in a position to size it yet because it's very early in the.
Speaker Change: Contract discussions with some of the potential.
Speaker Change: Data centers that they're looking at located here in Michigan.
Speaker Change: But that's how it would be deployed it will be deployed as an affordability play.
Speaker Change: And in turn.
Speaker Change: It would create headroom for us to invest against we've got a massive backlog in our distribution business.
Speaker Change: Or looking to invest $9 billion over the next five years.
Speaker Change: But we could easily accelerate that in.
Speaker Change: That type of margin attachment could.
Speaker Change: Enable that acceleration without creating bill pressure growth.
Speaker Change: Okay, and then lastly, I mean do you have an existing tariff structure in place that you think is adequate or would that need to be reviewed.
Speaker Change: Text <unk>.
Speaker Change: And a large load.
Speaker Change: So for the existing capacity, we've got an existing tariff that we think will work quite well.
Speaker Change: For the long dated capacity additions that could come from this opportunity we would have to design a tailored tariff that would look at.
Speaker Change: Ensuring that we brought in enough margin and also for a long enough term that we wouldn't create any type of a stranded asset.
Speaker Change: <unk> for for existing customers.
Speaker Change: Yeah.
Right, Okay, great. That's it for me thank you.
Speaker Change: Our next question comes from Sophie Karp from Keybanc. Please go ahead. Your line is open.
Speaker Change: Hi, Good morning, and thank you for taking my question morning good.
Sophie Karp: Good morning, and a lot of my questions have been answered I just wanted to ask you.
Sophie Karp: On the potential Oh, yes capital that's going to come from.
Sophie Karp: Incorporating the results of.
Sophie Karp: The storm or that into your future capital plan and I think when I. When we are when we read the reports right one of the concerns that the consultants had in that case was.
Sophie Karp:
Sophie Karp: Ambitious ambitiousness of your goals, if you will right and the potential impact on bills.
Sophie Karp: And our customer bills and I was wondering if you see any need for sort.
Sophie Karp: So that's other mechanisms of setting this potential increases to moderate those customer bill increases maybe its the storm securitization costs, that's needed or something else that.
Sophie Karp: That you might need to kind of go ahead with that plan and keep the customer rate growth. So that's slow.
Sophie Karp: Or do you think you can accomplish that within the existing bright structure. Thank you.
Sophie Karp: Kim.
Kim: So I would say that in.
Speaker Change: Our five year capital plan anticipates, the capital that we need to achieve this ambitious plan of reducing the frequency by 30% and the duration by 50%.
Speaker Change: You know obviously, the audit didnt really get deep into how our affordability plans and our financials will work through all of this is more of a physical condition.
Speaker Change: Condition audit and recommendations and inch.
Speaker Change: Interestingly enough if you on the face value the yacht it would put pressure to increase the capital overall into our distribution business, but so we feel very confident in achieving our affordability goals and as George pointed out like on page 13.
Speaker Change: <unk> of our presentation, you'll see that we've had you know even though we've invested over $6 billion over the five last five years.
Speaker Change: We've managed our cost and manage our fuel portfolio and also the renewable assets are putting downward pressure.
Speaker Change: On bills and were extraordinary and how we're performing in that regard. So we continue we remain confident that we can continue to deliver extraordinary performance on affordability.
Speaker Change: Okay, So and no need for any new structure with new mechanisms in your view right now.
We don't anticipate any at this point in time.
Okay, and then maybe if I can ask you on vantage right I don't know if thats.
Speaker Change: Are there opportunities in that business to take advantage of the kind of growth in the.
Speaker Change: Large law of customers I'm not sure if that's going to make the right fit for <unk>.
Speaker Change: That business, but are you seeing any potential strategic opportunities there.
Speaker Change: We are having those conversations I mean, if you think about the business line.
Speaker Change: Where are we in a custom energy solutions business line, where work divide cogeneration assets generation assets as well as.
Speaker Change: Other what I would call central plant energy services, like air and water and cooling and heating there are opportunities for that and we're having those conversations with.
Speaker Change: <unk>.
Speaker Change: Data center.
Speaker Change: Customers.
Speaker Change: Terrific. Thank you.
Speaker Change: Our last question will come from Travis Miller from Morningstar. Please go ahead. Your line is open.
Speaker Change: Good morning, everyone. Thank you good morning.
Speaker Change: And just to wrap up a couple of things on the audit. After you file your final. The response, what do you see as the pathway for this is this something that closes or is this something that is going on perhaps last long maybe even come up with some metrics you have to meet over years.
Speaker Change: What's your view on the pathway.
Speaker Change: Sure.
Speaker Change: Yes, we will file our responses in mid November and we are continuing to have conversations with the staff on the findings and looking at how we incorporate those findings into our plans.
Speaker Change: There really is no formal end to the process I think the docket essentially closes with everyone, providing a comment and then on a go forward basis anything that results are either in discussions with staff I would anticipate will be incorporated in future regulatory proceedings.
Speaker Change: You know the vehicle for that with the staff that works really well for us as the distribution grid plan, which gets updated.
Speaker Change: Joey mentioned I mean, we're meeting multiple times a week right now with staff to Digest.
Speaker Change: The results of the audit and start kind of building it into our distribution good plan, which will be.
Speaker Change: Really really good process supported by the independent audit.
Speaker Change: Formulate.
Speaker Change: Sort of secure our investments for the future, making more secure in terms of predictability.
Speaker Change: So we're excited about the work and the level of engagement that effort up staff and our team is putting into it.
Speaker Change: Fine tuning the plan if you will to achieve the goals and also address some of the opportunities that I.
Speaker Change: I pointed out.
Speaker Change: Sure.
Speaker Change #100: Oh really.
Speaker Change #100: Really collaborative process.
Speaker Change #100: High quality products.
Speaker Change #100: Yeah.
Speaker Change #101: And what did you say you just kind of on that whole idea of the performance based rates, bringing in.
Speaker Change #101: That docket is that something on the metrics youre talking about.
There could be an outcome of the audit.
Speaker Change #101: Tying those together well.
Speaker Change #101: Well there's no.
Speaker Change #102: Pre specification in this docket to address performance base rates and that was not that was not in scope, but as you've heard already from joy.
Speaker Change #102: There is a separate docket that deals are performance based rates that will not be incorporated in this rate case, but there could be some potential there.
Speaker Change #103: Then it gets incorporated into next right, Jason we feel really good about the metrics are in there and were striving for a little more symmetry.
Speaker Change #103: The amount that's in there is also reasonable so.
Speaker Change #103: It feels like it's moving in the right direction that it really does go to the heart of what we should be delivering for our customers and our and I think it's gonna be supported by investment.
Speaker Change #103: So we feel like a P b R.
It would be highly supported by the investments that we're making so we're comfortable with the direction it's heading in.
Speaker Change #104: Okay, Great and then real quick any supply chain issues, you're seeing in the renewable energy growth that you've got.
Speaker Change #104: We're lined up pretty good for the next three years in terms of solar panels, and we've got that nailed down. So we don't we don't see any issues or battery plant project is well underway and those systems are being fabricated as we speak so we feel like we've got a good.
Speaker Change #104: Good runway there from a supply chain perspective.
Speaker Change #105: Okay perfect. That's all I got thanks.
Speaker Change #105: Thank you.
Speaker Change #107: We have no further questions I would like to turn the call back over to Jerry Norcia asked for closing remarks.
Jerry Norcia: Well. Thank you everyone for joining us today I'll, just close by saying, we're feeling really good about 2024 as well as our position for future years look forward to seeing you at U S. E N. A few weeks and have a great morning stay healthy and safe.
Speaker Change #109: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change #110: Please wait the conference will begin shortly.
Speaker Change #110: [music].
Speaker Change #110: Okay.
Speaker Change #110: Yes.
Speaker Change #110: [music].