Q3 2024 Emera Inc Earnings Call
conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, November 10.
Speaker Change: November 8, 2024. I would now like to turn the conference over to Dave Bezanson, Vice President of Investor Relations. Please go ahead.
Dave Bezanson: Thank you, John. And thank you all for joining us for this afternoon's, for EMIRA's Q3 2024 conference call and live webcast.
Dave Bezanson: Amira's third quarter earnings release was distributed this afternoon by Newswire and the financial statements, management's discussion and analysis, and the presentation being referenced on this call are available on our website at Amira.com.
Dave Bezanson: Joining me for this afternoon's call are Scott Balfour, EMIRA's President and Chief Executive Officer, Greg Blunden, EMIRA's Chief Financial Officer, and other members of EMIRA's management team.
Dave Bezanson: This evening's discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slide.
Speaker Change: Today's discussion and presentation will also include reference to non-GAAP financial measures. Please refer to the appendix for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. And now I will turn things over to Scott.
Scott Balfour: Thank you, Dave, and good afternoon, everyone. We appreciate you joining us on an earnings call at 5 o'clock Eastern Time on a Friday.
Schedules conspired against us to make this a necessity.
Scott Balfour: With the Edison Electric Institute's financial conference beginning this weekend, we wanted to be sure that you had our most recent quarterly results in your hands before we meet with many of you over the coming days.
Scott Balfour: With that, thank you for making the time and we hope to make this an efficient call to allow you to get to your weekend as soon as possible.
Scott Balfour: Before turning to our financial results, I want to touch on the record-breaking storms that impacted our customers, communities, and teams in Florida over the last few weeks.
Scott Balfour: I want to express my gratitude to our teams for their tireless efforts and many long hours spent restoring energy to our customers.
It was a massive effort.
Scott Balfour: Hurricane Milton was the most powerful storm to hit Tampa Bay in the last 100 years, and the restoration effort by the team was the largest in Tampa Electric's history.
Scott Balfour: As soon as it was safe to do so, a team of more than 6,000 powerline technicians, damage assessors and forestry technicians worked around the clock to safely restore power to all impacted customers.
Scott Balfour: In addition to the local Tampa teams, crews came in from across North America, a testament to the spirit, collaboration, and support that exists across our industry.
Scott Balfour: We even had crews on the ground from Nova Scotia Power who traveled in to support their Tampa colleagues.
Scott Balfour: Hurricane Milton brought a one-in-1,000-year rainfall event to parts of the Tampa Bay area. This came on the heels of Hurricane Helene, which had already saturated the ground with its record storm surge.
Scott Balfour: This meant that the damage was more significant as trees were more easily uprooted by the heavy winds.
Scott Balfour: This enormous restoration effort involved more than 900,000 work hours in incredibly challenging conditions.
And this work was completed with no serious safety incidents.
Scott Balfour: We're all very proud of the entire team for their efforts and what they accomplished for customers.
Scott Balfour: Overall, Tampa Electric's system held up to these storms very well, and it's clear that the extent of the damage would have been worse, and restoration times much longer if not for the investments made over the past few years to harden the grid through Tampa Electric's storm protection plan.
Scott Balfour: Investment in reliability and storm protection are essential to ensure timely restoration during major storms, but the value for customers from these investments extends beyond mitigating the impacts and restoration times from severe weather events.
Scott Balfour: As a direct result of the nearly 200 million US dollars invested in storm protection every year since 2020, Tampa Electric experienced its best ever reliability in 2023.
Scott Balfour: And despite the significant storms this year, we've seen very strong reliability to date in 2024 as well.
Scott Balfour: This is evidence of the importance of these investments that allow us to deliver the reliable energy our customers expect.
Scott Balfour: On behalf of our team, I also want to thank the thousands of crews from across the U.S. and Canada that came to Florida to help restore power to our customers as quickly and safely as possible.
Scott Balfour: Storms like Milton and Helene underscore the essential work we do, as well as the incredible cooperation that occurs within our industry to serve and collectively restore power to all customers.
Scott Balfour: Of course, restoration efforts of this magnitude come with a cost.
Scott Balfour: Our restoration costs from Hurricane Helene are estimated to be between 45 and 55 million U.S. dollars.
Scott Balfour: And from Hurricane Milton, they will be in the range of 320 to 370 million U.S. dollars.
Scott Balfour: While we continue to finalize these costs, we're also exploring options to balance the need for timely recovery through the well-proven regulatory mechanisms in place in Florida with sensitivity to customer bill impacts.
Scott Balfour: We intend to finalize our plans and make our regulatory application to the Florida Public Service Commission in December.
Scott Balfour: The collection of prudently incurred costs on a timely basis is not unfamiliar territory in Florida.
Speaker Change: Greg will highlight that we recently were able to collect approximately $650 U.S. million of deferred fuel and storm costs at Tampa Electric over a 21-month period beginning April 1st of 2023.
Speaker Change: A different but connected storm-related story was the one we experienced at People's Gas, the largest gas utility in the state of Florida. Overall, our gas system held up very well, with virtually no damage through both historical storm events.
Speaker Change: Throughout and following both storms, the gas system remained operational and available to provide much-needed energy to customers, demonstrating the resiliency, importance, and value of our gas infrastructure in Florida.
Speaker Change: Turning to the quarter, in September, our Board of Directors approved an increase to our dividend, in line with our dividend growth guidance. This marked the 18th consecutive year of dividend increases.
Speaker Change: These dividend increases reflect our fundamental confidence in our premium portfolio of assets and our ability to deliver reliable earnings and cash flow growth.
Speaker Change: Emera shareholders can continue to expect dependable and growing dividends, underpinned by a prudent financial management and disciplined capital allocation.
The End
Speaker Change: This quarter, the team at Nova Scotia Power worked with the Canadian federal government and the province of Nova Scotia to negotiate a $500 million federal loan guarantee to securitize the remaining deferred fuel costs at Nova Scotia Power.
Speaker Change: These costs were incurred for replacement energy that was required during the several years of delay in the Musgrat Falls hydroelectricity project in Newfoundland and Labrador.
Speaker Change: This support provides important relief for customers in Nova Scotia by providing cost-effective longer-term financing with a longer recovery period.
Speaker Change: The securitization is the latest in a series of strategic actions we've taken in 2024 to strengthen our balance sheet and optimize our portfolio to capitalize on the robust growth opportunities that we see ahead.
Speaker Change: We'll share more details about these opportunities at our Investor Day on December 4th.
Speaker Change: Our results for the quarter also reinforce our confidence in the three-year average adjusted EPS growth rate guidance of 5 to 7 percent that we announced in June.
Speaker Change: Quarter after quarter, year after year, we continue to see how the underlying economic and population growth in Florida also drives growth for EMIRA.
Speaker Change: With Florida experiencing strong population and economic growth, the influx of new customers has directly translated into increased demand for both electricity and natural gas across both residential and commercial sectors.
Speaker Change: This growth has yielded strong results at People's Gas, the largest gas distribution company in the state.
Speaker Change: With new rates in 2024, supporting the more than $1 billion invested in infrastructure expansion and ongoing investment and reliability since 2021,
Speaker Change: The meaningful increase in earnings contribution for people's gas reinforces the importance of natural gas to the energy ecosystem and the growth opportunity for the business, especially in a vibrant and growing market like Florida.
Tampa Electric also saw strong earnings growth this quarter.
Speaker Change: While weather has generally been milder in 2024 compared to last year, the impact of electrification, higher demand, and customer growth are helping to offset the impacts of less favorable weather.
Speaker Change: Before turning it over to Greg, I want to briefly highlight a few important regulatory developments.
Speaker Change: Last week, EMIRA, along with New Mexico Gas Company and Bernhard Capital Partners, jointly filed an application with the New Mexico Public Regulation Commission for approval of the sale of New Mexico Gas from EMIRA to BCP.
This transaction was announced in early August of this year.
Speaker Change: We're optimistic about next steps and pleased with a strong partnership between our organizations as we continue down the path of securing regulatory approval. Finally, later this month, we expect to receive the staff recommendation on the TAMP electric rate application.
Speaker Change: While the final hearing has been moved to December 3rd due to an administrative delay, we expect to be able to discuss the outcome and its impact on EMIRA at our Investor Day on December 4th. And with that, I'll turn the call over to Greg.
Greg Blunden: Thank you, Scott, and thank you all for joining us today. This afternoon, we reported third quarter adjusted earnings of $236 million and adjusted earnings per share of $0.81, compared to $204 million and $0.75 in Q3 2023.
Greg Blunden: Our third quarter reported earnings of $4 million were impacted by the recognition of a goodwill impairment loss related to the sale of New Mexico gas.
Speaker Change: If I could just take a moment to provide some context on that, and I'll try and avoid getting into the technical details of how purchase price accounting works.
Speaker Change: But at a high level, the way to think about it is that when we acquired TECO, there was goodwill on the TECO balance sheet related to their original acquisition of New Mexico Gas. Our purchase price allocation and acquisition effectively carried that over to our consolidated balance sheet. And that's how you should really think about what we're revaluing today.
Speaker Change: Year-to-date adjusted earnings were $603 million and adjusted earnings per share was $2.10 compared to $634 million and $2.33 for the same period in 2023. We saw continued growth in operating cash flow before changes in working capital in the third quarter.
Speaker Change: Excluding the impact of fuel and storm regulatory deferrals at Tampa Electric and Nova Scotia Power, the business generated operating cash flow of $1.5 billion in the first three quarters of this year.
Speaker Change: When discussing our cash flow for the past two years, we've been presenting a normalized view of cash flow excluding fuel and storm cost deferrals at Tampa Electric and Nova Scotia Power.
Speaker Change: This is because we have confidence in the regulatory mechanisms for deferral recovery that in essence represents short-term timing difference between when costs were incurred and when they are recovered, therefore normalizing for them best reflects our underlying operations.
Speaker Change: At Tampa Electric, there are clear, well-established regulatory processes to address regulatory deferrals. And over the past 21 months, the Tampa Electric team has managed
Speaker Change: through recovering approximately $650 million U.S. dollars in fuel and storm costs. And while 21 months is longer than a typical recovery period in Florida, we were thoughtful and deliberate about the pace of recovery to best manage the cost impacts for customers.
Speaker Change: To put this into context, we exited 2022 with $650 million U.S. of fuel and storm costs under recoveries. And now, less than two years later, all of those amounts have been collected.
Speaker Change: Scott referenced the storm costs incurred with Hurricanes Helene and Nolan.
Speaker Change: Those storm costs combined with the current expected over-recovery of fuel costs this year means that we are expecting to end 2024 with a total storm and fuel costs to recover of approximately half of what it would have been at the end of 2022.
Speaker Change: At Nova Scotia Power, the path forward looked differently, but ultimately led to the same outcome. By working collaboratively with both the provincial and federal government, the team at Nova Scotia Power was able to identify and implement solutions that were both in the best interest of customers, and that would allow us to maintain the financial health of the utility.
Speaker Change: In doing so, the team effectively securitized over $600 million in current and future fuel balances.
Speaker Change: The strategic actions we've taken so far this year to strengthen our balance sheet with our two asset sale announcements, our U.S. dollar hybrid issuance, and the securitizations just mentioned, we've delivered continued improvement in our credit metrics on a normalized trailing 12-month basis since the end of 2023.
Speaker Change: And we remain solidly on track to achieve our credit metrics on a sustainable basis in 2025 and beyond.
Speaker Change: Now turning to the quarterly results, Tampa Electric delivered strong results this quarter with growth of 16 million U.S. dollars in earnings, or 9% over the third quarter of last year.
Speaker Change: This was driven by continued customer growth, new base rates, lower operating costs, and lower tax expense due to higher ITCs related to solar investments.
Speaker Change: Corporate costs decreased by $21 million, or $0.07 this quarter, a result of a net gain on long-term compensation expense and hedges driven by changes in our share price.
Speaker Change: This was expected and is largely a reversal from what we experienced in the first two quarters of this year.
Speaker Change: Absent of net gain on long-term compensation expense and hedges, corporate costs were higher as a result of higher interest expense and lower income tax recovery.
Speaker Change: Contributions from our gas utilities increased 11 million US dollars or approximately 50% for the quarter, driven by continued robust performance from People's Gas. The increase reflects the incredible customer growth that People's Gas has experienced over the last two years, which is reflected in the new base rates that went into effect in January.
Speaker Change: The weakening Canadian dollar modestly increased the earnings contribution from U.S. operations by $4 million for the quarter.
Speaker Change: Earnings from our Canadian electric utilities were $12 million or $0.05 lower quarter over quarter driven by the sale of the Labrador Island Link which reduced contributions from our Canadian equity investments by $15 million or $0.06. This was partially offset by higher contributions from Nova Scotia Power primarily due to lower storm costs.
Speaker Change: Our higher share count decreased adjusted earnings per share by five cents in the quarter because of our drip in ATM activity over the past year.
Speaker Change: Contributions from Mirror Energy decreased by $8 million or three cents for the quarter driven by less favorable market conditions and investment tax credits recognized at Bear Swamp in 2023.
Speaker Change: Year-to-date contributions from our gas utilities increased $18 million U.S. dollars, or 9 cents, driven by new base rates reflecting the robust customer growth of people's gas. This was partially offset by lower contributions from New Mexico gas, primarily due to AMA revenues recognized in 2023.
Speaker Change: The weakening Canadian dollar increased the earnings contribution from our U.S. operations by $7 million for the year. From a total impact on earnings perspective, though, this is largely offset by losses in foreign exchange hedges, which contributed to higher corporate costs.
Speaker Change: At Tampa Electric, strong performance in the second and third quarter has offset the challenges from less favorable weather and higher operating costs, increasing our united earnings by two cents.
Speaker Change: This highlights the importance of the economic backdrop in the state with economic and population growth driving customer growth and higher demand, which is helping offset the impact of less favorable weather compared to 2023.
Speaker Change: Your data mirror energy's results were solid but did not compare to the strength of 2023 that benefits from a much stronger natural gas market. Mirror energy is down 21 million dollars or eight cents. However, we continue to expect annual earnings within their guidance range of 15 to 30 million U.S. dollars.
Speaker Change: Higher share count, decreased adjusted year-to-date earnings per share by $0.12 compared with 2023.
Speaker Change: For the year, lower contributions for Canadian utilities was primarily due to the sale of the Labrador Island Link, as I previously noted, as well as higher operating costs at Nova Scotia Power driven by increased investments in reliability initiatives and in support of customer growth.
Speaker Change: And while there's been some volatility on our long-term compensation expense and related hedges, both on a quarterly basis and on a period-over-period basis, our year-to-date expense is in line with what you should expect for nine months of the year.
Speaker Change: And with that, I'll turn the call back over to Scott.
Thank you, Greg.
Scott Balfour: This year, we've embarked on a strategic plan focused on strengthening our balance sheet and optimizing our portfolio.
Scott Balfour: We've made great progress with the business now better primed for growth.
Scott Balfour: We're at the threshold of a transformational shift in the utility industry, making it a pivotal time to invest in our portfolio to meet the needs of our customers.
Scott Balfour: With a stronger balance sheet, a disciplined capital investment plan, and a premium portfolio of assets located in high-quality jurisdictions across North America, Emira is well-positioned to capitalize on this moment to deliver for our customers and, in turn, deliver growth and value for our shareholders.
Scott Balfour: We look forward to meeting with our capital markets community at our Investor Day on December 4th in Toronto.
Scott Balfour: There, we will unveil our new five-year capital investment and funding plan, share the outcome of the Tampa Electric Rate Case, and showcase the growth opportunities we see in front of us.
Scott Balfour: The event will feature not only the leaders from our operating companies, but also subject matter experts from across the business who will discuss the transformation underway to build the electricity grid of the future.
Scott Balfour: A transformation that will be meaningful and durable growth driver for Amera.
Scott Balfour: We expect it will be a compelling day, and we hope to see you there. And now, I'd like to open the call for questions.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question, please press star followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised.
Speaker Change: Should you wish to decline from the polling process, please press star followed by the number 2.
Speaker Change: If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question.
Dr.
Speaker Change: Your first question comes from the line of Robert Hope from Scotiabank. Your line is now open.
Evening, everyone.
Speaker Change: I want to start off on the storm costs. So can you maybe add a little bit of color about how you're thinking about the recovery on a timely basis versus customer rates, especially given the fact that
Speaker Change: I guess that gas pricing is much lower here, as well as, can you add a little color as well on any early discussions with the rating agencies on how they will treat the storm recoveries?
Speaker Change: So why don't I know Archie's on the line. Archie, do you want to share a little more perspective on on thinking around recovery and then Greg can address the rating agency perspective.
Sure, I can do that. Good afternoon, Rob.
The
Speaker Change: I think your question was, you know, what are we, what are we looking at as far as the regulatory process? What I would say is you heard the numbers that were shared by
Speaker Change: by both Greg and Scott that for us, you know, Helene is somewhere in the neighborhood of 45 to 55 million.
Speaker Change: We're still tabulating the cost for Milton, but we think it's $320,000 to $370,000. If you put it all together, it's probably the question that's really on your mind. We think we're looking at a number that's a total number, which would include the replenishment of the storm reserve.
That's probably in the 400, 425 million dollar range.
Speaker Change: You know, we have no doubt that these were prudently incurred expenses. Quite frankly, we're really proud of the speed with which the restoration was executed and done safely.
Speaker Change: As far as the, I think our plan is to file the application with the FPSC in December.
Speaker Change: The period over which we will seek to recover those costs is still sort of moving around. We don't see it being drawn out.
Scott Bezanson, Scott Balfour, Gregory Blunden, Unknown Executive
Speaker Change: that is working in our favor, which will serve at least in the near term to offset the storm costs. So we're still working through the numbers.
Speaker Change: We're not prepared at this 10 seconds to say exactly what the restoration recovery period will be that we request. We want to see where the numbers land, and we're very mindful of trying to find that balance between timely recovery of these prudently incurred costs.
and about also managing the impact on customer rates.
Speaker Change: If I just add into that a little bit, Rob, before Greg, Greg speaks from the
Speaker Change: But, as Greg mentioned, when we had extraordinary fuel costs back in 2022, we looked at a slightly longer recovery period in order to be sensitive to rate impacts for customers, and that's really the thought process that the team is going through before we formalize the filing in December.
Speaker Change: Greg and Rob, not surprisingly, we've had lots of conversations leading up to and subsequent to the hurricane's landing.
Speaker Change: Interestingly enough, the majority of the costs incurred won't actually flow out the door, meaning the money won't flow out the door until 2025.
Speaker Change: When most of the invoices will be collected and paid, so it will have zero impact or next to zero impact on our credit metrics in 2024. And of course, with the money going out in 2025 and collections starting from customers at some point in 2025 over the periods that both Scott and Archie referred to, it again won't have any kind of meaningful impact on our 2025 credit metrics either.
Speaker Change: I appreciate that. Moving north of the border, Nova Scotia, you know, we have a number of moving parts here with an election here in the coming weeks as well as, you know, two fuel securitizations.
Speaker Change: How do you think about when the optimal time is to file for new rates there to improve the ROE back into the band?
Speaker Change: Hi Rob, it's Peter. That's an active discussion now. I don't have a date for you, but obviously we're thinking about what the optimum time it would be for our next
Speaker Change: Next general rate application, but I don't have a date Targeted right now that I could tell you so we're looking at it And as soon as we do know that we will let you know
Speaker Change: Your next question comes from the line of Maurice Choi from RBC Capital Markets. Your line is now open.
Maurice Choi: Good evening everyone. Maybe I'll just stick with Nova Scotia here and be a little bit more pointed as to what just came out from the Progressive Conservatives about
Maurice Choi: You know, potentially capping rate increases to the average Canadian average thoughts on on that. Do you think that this cap is more specific to.
Maurice Choi: Non-FEO rate increases or inclusive of FEO as well, even big picture, does this even change how you approach your rate-based growth and earnings at an NSPI?
The End
Thanks for watching!
Maurice Choi: Hi, Maurice. Again, it's Peter, so I'll take that one. You know, obviously, we are in an election period, and I don't think it's appropriate really to discuss individual platforms, but I will say this.
Maurice Choi: I think I've said several times, we have a much improved relationship with the provincial government. We work with senior officials and staff on a daily basis on many files that we have in common. Both Scott and Greg talked about the work we did on the federal loan guarantee, hand-in-hand with the provincial government.
Maurice Choi: We also know that governments, you know, are struggling with issues like affordability in a high inflationary environment.
Maurice Choi: And we understand that that would be raised during an election. And we also share the commitment to affordability for our customers. So we have that in common.
Maurice Choi: Our focus is being the best utility partner that we can be and work on the issues that matter most to our customers and they continue to tell us that's affordability and reliability.
and we leave the policy making.
Maurice Choi: to government. We're looking forward to after the election, getting back to work with the government on the issues that relate to energy in Nova Scotia, and also working with them to assist with policy implementation.
Maurice Choi: that is affordable for customers. So I guess to answer the question at the end, I don't believe it really does change our approach. I think there's a path forward here with a constructive relationship.
Maurice Choi: to do what we need to do to serve our customers and deliver on policy requirements from governments.
Speaker Change: I could just finish off with a question on a balanced as well. Greg you mentioned that
Speaker Change: You're not expecting a meaningful impact from this hurricane cost for 2025. Is that pretty much on the basis that if you recover beginning April?
Speaker Change: and the 12 month period, you were covered nine out of the 12 months. Is that the thought process there? And could you just confirm that you're still on track to hit 11 up to 12% by the end of this year?
Speaker Change: Yeah, so I can confirm that Maurice. And yeah, one of the, I can't remember, was Archie or Scott, allude to the fact that we will, are planning to file at the FPSC for the Stormrider in December. And there's a 60 month period for them to rule on that. So 60 days, sorry, thank you. 60 days, which would potentially start collection as early as March 1st.
Understood. Thank you.
You're welcome.
Speaker Change: Your next question comes from the line of Ben Pham from BMO Capital Markets. Your line is now open.
Thank you.
Speaker Change: I just wanted to go back to the storm costs and your rate case ahead and TEP and I'm wondering
Speaker Change: Do you think that there's a situation here where you can get a good outcome on DP?
Greg Blunden: I'm not sure, and it's Greg, I'm not so sure I understood the first part of the question, but nothing from...
Greg Blunden: Nothing from what we've experienced in storm costs, the regulatory processes and mechanisms in place in Florida.
Greg Blunden: or our views on what we think will be a reasonable outcome in a rate case decision. Nothing has caused us to change our confidence or views on meeting and exceeding our threshold credit metrics in 2025.
Speaker Change: So you don't get the sense that the Florida Commission, like knowing that they have this big red case around the corner, your first year, revenues are quite high relative to the second and third, and then, you know, the storm filing is ahead, that it's not tied in together.
Archie, do you want to?
Answer that.
Speaker Change: I would simply say that I am very confident that the rape case is assessed on its own merits and that the Commissioner's judgment is not clouded by some external factors like what's happening with
Speaker Change: You know, change in the White House or what's happening with interest rates or what's happening with gas prices or what's happening with storm cost recovery.
Speaker Change: I'm very confident that the rate case will be assessed on its own merits and what's happening here with an unprecedented storm season in Florida in 2024 is not going to have a bearing on that outcome.
Speaker Change: Okay, that's really useful. And you had a comment around the storms reinforcing the storm powering investments and
Speaker Change: case ahead. As you think about the industry and all the costs that have been disclosed by the utilities business.
Speaker Change: Creator incent some sort of regulatory review where you can a source from hardening costs or
Speaker Change: Look to push up higher capex within that bucket of the tapas side of things.
Speaker Change: I'm happy to take that. Yeah, I'm happy to take that question as well. That's, you know, as we as we reflect on what happened, what the impact was to to our customers and to our infrastructure from both.
Speaker Change: Helene and Milton, both of those, you know, Helene was a storm surge event.
Milton was
Speaker Change: You know, the biggest hurricane to hit Tampa Bay in 100 years and.
Speaker Change: As was already alluded to, a 1 in 1000 year rainfall, so a lot of inland flooding.
Speaker Change: that affected our customers. But both of those hurricanes really were very modest capital. They're not capital hurricanes. They really are operating cost hurricanes as you try to put the assets back together. And for us,
Speaker Change: That tells us that, you know, our grid is a very strong grid, very well designed, and it has, and it's stood up to, to the winds, to the rain, to the surge associated with these, with these hurricanes. Unfortunately, it's.
Speaker Change: It was the trees in West Central Florida that were, that were no match for the, for the winds of Milton. So.
Speaker Change: For us, you know, we go through a storm season like that, and then we will reflect on the programs that are embedded within the storm protection plan. And and I think it's fair to assume that we will be. Recommending some.
New programs.
Speaker Change: or some acceleration to some existing programs to really try to improve the resiliency of the grid more quickly. We've got a grid here at Tampa Electric that is our distribution grid is 52% underground today.
Speaker Change: You know we're going to have to learn to live with the beautiful tree canopy that we have in in West Central Florida and so for us that means
Speaker Change: We're going to have to move a bit more quickly on putting some of our assets underground. So, I think that what we've experienced...
is a testament to the value of SPP.
Speaker Change: We're going to be now reassessing whether there are new programs that we would like to recommend be considered for inclusion in SPP. And we'll be once we've done that analysis, we'll be we'll be presenting our thoughts to the to the Commission for consideration.
Okay, thank you. That's useful.
Speaker Change: As a reminder, if you have any questions, please press star 1 on your telephone keypad.
Speaker Change: Your next question comes from the line of Patrick Kenny from National Bank Financial. Your line is now open.
Patrick Kenny: Oh, thank you. Good evening. I'm just wondering on the back of
This week's election here and
And the last time around the 2017 corporate tax cut
Patrick Kenny: really caused a lot, quite a bit of noise around, you know, revenues and the impact on FFO and credit ratios.
Speaker Change: Wondering any thoughts on how you might be able to perhaps get ahead of that and mitigate that risk this time around?
Speaker Change: Yeah, thanks for the question, Patrick. Obviously, it's early days and the direction that the administration takes in Washington and Texas is...
Speaker Change: is a little bit unknown right now, but if you take a look at
Speaker Change: face value, you know, some of the tax cuts, corporate tax cuts that the newly elected president has talked about, that would be a fraction of what those tax cuts were.
Speaker Change: in, you know, whatever year that was, 2017, 2018 type of frame. So it wouldn't have anywhere near the impact that we would have seen then. The other thing to note, too, the reason we had a little bit of noise and, you know, had to adjust customer rates, that was because we had a clause in the settlement agreement.
Speaker Change: that required us to make those adjustments for a change in tax rate. That settlement agreement and that particular clause expires at the end of this year. So we're continually monitoring it, but to the extent that it unfolded similar to what it did a few years ago, the impact would be much, much less than what we experienced.
Okay, thanks for that.
Speaker Change: And then also, I guess, I know it's early days just in terms of policies and whatnot, but
Speaker Change: I just wanted to confirm, and I know a lot of this is at the state level, but no change to decarbonization targets or emission intensity reduction targets over the medium to long term.
Scott Balfour: Patrick, it's Scott. So, no, largely because, of course, there really aren't any of those in place right now in Florida, the investments that are being made.
Scott Balfour: In Florida in in solar and in the coal to gas conversion that was recently done and investments in
Scott Balfour: in batteries are all being done on an economic value basis for customers. They're cost effective for customers. They're not being driven by...
Scott Balfour: by emission target requirements or renewable energy standards or some of the things that we certainly need to comply with here in Canada. So wouldn't, you know, wouldn't really expect any impact from any of that, truthfully. And so, you know, continued execution.
Scott Balfour: and Investment Capital on behalf of customers in Tampa, proving to be cost-effective. And part of that journey has been...
Scott Balfour: has been some element of decarbonization there is an added benefit, but principally really is being driven by making economic decisions for benefit of customers. Archie, anything you'd want to add to that?
No, I think that you got that, Scott.
Speaker Change: Okay, no, that's great, Scott, and I look forward to seeing everybody in December. Thanks.
Thanks Patrick.
Speaker Change: Your next question comes from the line of Mark Jarvie from CIBC. Your line is now open.
Mark Jarvie: Yeah, good evening, Owen. I'm just coming back to Rob's question about discussion of the credit rating. Just wondering if you guys have had a conversation since you've been able to.
Scott Bezanson, Scott Balfour, Gregory Blunden, Unknown Executive
Mark Jarvie: Sorry, just the last part of that, you just broke up, just.
Mark Jarvie: Yeah, just whether or not you've had any conversation with S&P and Moody's in recent weeks or last couple of months and see how their perspective on these different events that have transpired have looked at their view on your outlook right now.
Speaker Change: Yeah, I mean, obviously we have ongoing conversations with with both S&P and Moody's and we'll continue to do so.
Speaker Change: I mean, all the steps that we've taken, whether it's the asset sales.
The Utilization of the ATM
Speaker Change: The fuel securitization, you know, the U.S. hybrids, all very much credit positive.
Speaker Change: I think from a storm cost perspective, as I indicated earlier, it's a very manageable number. You know, we've been in situations where it's been significantly higher in recent years.
Speaker Change: So there's been no negative overreaction to that. So I think both A's and C's are quite pleased with the progress.
Speaker Change: Obviously, focused now on for us and obviously for them a little bit is waiting to see the outcome of the Tampa electric rate case and ultimately continue to advance the closing of the sale of New Mexico gas.
Yes.
Okay.
Speaker Change: Last question for me is just since the application has been filed into Mexico any initial views in terms of response from stakeholders?
Speaker Change: In terms of what was put forth in the application from a net benefit perspective and get anything sort of that's come up to those discussions last week or so.
Speaker Change: I just say that the process is advancing as we would expect, and there will be a
Pre-hearing no, I've forgotten that I've forgotten the term Greg
Speaker Change: But a pre-hearing in the next month that will start to set schedule.
Speaker Change: for the process from here, but, you know, from our perspective, you know, a robust application has been put forward and
Speaker Change: process has begun and we continue to believe that we'll see closing in the latter half of 2025, you know, sort of targeting that October timeframe.
Sounds good. Okay. Thanks, everyone.
Thanks, Mark.
Speaker Change: Once again, if you have any questions, please press star 1 on your telephone keypad.
Speaker Change: There are no further questions at this time. I will now turn the call back to Dave Bezanson. Please continue.
Dave Bezanson: Thank you all for joining us this evening and have a great long weekend.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.