Q3 2024 Unitil Corp Earnings Call
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Speaker Change: Good day, thank you for standing by. Welcome to the Q3 20204 Unitill earnings conference call. At this time, all participants are an Elisanoi mode.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: After the Speaker's presentation, there will be a question and answer session.
to ask a question, please press star-1-1 on your telephone and wait for your name to be announced.
Speaker Change: to withdraw your question. Please press star one one again. I would not like to end a conference over to your speaker today. Todd Diggins, Chief Accounting Officer and Controller.
Todd Diggins: Good morning and thank you for joining us to discuss Units of Corporations 3rd quarter 2024 financial results.
Todd Diggins: Speaking on the call today, we'll be Tom Meissner, Chairman and Chief Executive Officer and Dan Hurstak, Senior Vice President Chief Financial Officer and Treasurer. Also with us today's Bob Havard President and Chief Administrative Officer.
Todd Diggins: We will discuss financial and other information on this call. As you mentioned in the press release and now seems to be called we have posted information including presentation to the investor section of our website at unitil.com. We will refer to that information during this call.
Todd Diggins: Moving to slide to the comments made today about future operating results for events are forward-looking statements under the state harbor provisions of the private security litigation reform act of 1995.
Todd Diggins: Ford-looking statements and, certainly, involve risks and uncertainties, then cost actual results to differ materially from those predicted.
Todd Diggins: Statimus Meissner, Thomas Calls, should be considered together with cautionary statements and other information. Container and most recent anal report on form 10K and other documents we have filed with, or furnished to, the Sturgeon of the James Commission.
Todd Diggins: Ford-looking statements speak only as of today and we assume no obligation to update them.
Todd Diggins: This presentation contains non-gap financial measures, the accompanying supplemental information more fully describes these non-gap financial measures, and includes the reconciliation to the nearest gap financial measures.
Todd Diggins: The company believes that non-gap financial measures are useful in evaluating its performance.
Todd Diggins: with that allowed trying to call our call over to chairman of CEO Tom Meissner.
Tom Meissner: Thanks, Todd, and good morning everyone. Thank you for joining us today.
Todd Diggins: is on the 3rd quarter.
Todd Diggins: Through the first nine months of the year, Ned Incum was 31.5 million, or $1.96 per share, representing an increase of 11 cents per share over the same period in 2023.
Todd Diggins: Our results for the quarter were consistent with our expectations and we remain confident that our full-year earnings will be within our long-term guidance range.
Todd Diggins: I'll also mention that we provided graph of the expected distribution of our quarterly earnings in the call supplement each quarter. In our quarterly results have been generally consistent with that guidance.
Todd Diggins: Looking beyond 2024, we reaffirm our long-term earnings growth that 5 to 7% supported by rate-based growth in the range of 6.5 to 8.5%. And a dividend payout ratio between 55 and 65%.
Todd Diggins: As discussed on our previous earnings call in July we entered into an agreement with hope utilities to acquire Bangor natural gas.
Todd Diggins: The beginning of this quarter, we've disclosed the just-adnet income and earnings per share in our third quarter, Form 10Q, to reflect the company's baseline operating performance, excluding transaction costs.
Todd Diggins: To the first nine months of the year, adjusted netting can with 32.1 million or $2 per share.
Todd Diggins: We're pleased with the strong results of the first nine months and believe they reflect strong operational performance, discipline, cost management and the successful execution of our regulatory agenda.
Todd Diggins: On the regulatory front Grandnastate Gas Transmission, our Interstate Gas Transmission subsidiary recently filed an uncontested Re-case settlement with FERC.
Todd Diggins: Later in the presentation, Daniel will provide more detail about the settlement, as well as an update on the regulatory proceeding for our BANGOR Natural Gas acquisition.
Todd Diggins: Moving now to slide four, I'm pleased to announce that we recently published our 2024 corporate sustainability and responsibility report.
Todd Diggins: As we have emphasized in the past, sustainability is fundamental to our strategy, and I believe this rapport comprehensively addresses our accomplishments, initiatives, and commitments related to sustainability.
Todd Diggins: We have created a robust sustainability framework that we believe will allow us to navigate the uncertainty to head and attain our goal of reducing greenhouse gas emissions by 50% by 2030 and achieve net zero emissions by 2050.
Todd Diggins: We continue to make steady progress towards that goal and to this point we have achieved an 18% reduction in emissions compared to 2019 levels.
Todd Diggins: I'd like to take a minute to highlight our advanced mobile leak detection program, which uses best-in-class, precarrow leak detection technology to more accurately measure methane emissions from our distribution systems.
Todd Diggins: We initially focused on our Massachusetts distribution system and the results there showed significantly lower fugitive emissions than what we've been reporting using EPA and Massachusetts Department of Environmental Protection Amission Factors.
Todd Diggins: We also found that approximately half of our fugitive emissions came from a relatively small number of leaks, which allows us to quickly address and eliminate those sources of methane leakage.
Todd Diggins: on our success in Massachusetts. This year we implemented the Caros Advancement of the League Detection Technology across all of our natural gas systems to measure, investigate, and mitigate future dimensions.
Todd Diggins: This initiative is expected to drive significant reductions in scope on emissions.
Todd Diggins: I'm also pleased to report that we have once again been recognized as one of the best companies to work for in New Hampshire.
Todd Diggins: Employees are our great-of-staff set and we strive for diverse and inclusive workplace where everyone feels valued and engaged and proud to be part of Unitill.
Todd Diggins: We hope to build on this success as we remain a top employer in this choice in the region.
Todd Diggins: The corporate sustainability report contains a wealth of information and I encourage everyone to read the report and learn more about our ongoing initiatives.
Todd Diggins: Turning now to slide 5, I'd also like to highlight our advanced metering infrastructure upgrade or AMI project which is now underway.
Todd Diggins: This project will replace a legacy AMI system that has been in service for over 15 years now in which relied on power-lying carrier communication to transmit met-metering information over the power lines.
Todd Diggins: The new system uses wireless radio frequency and cellular communication to allow for media reading intervals as frequent as every 15 minutes.
Todd Diggins: is part of this project. We will replace all the electric meters in our service areas with new state-of-the-art advanced meters.
Todd Diggins: This new functionality will provide transparency to customers regarding their usage and provides opportunities for new rate structures such as time-dairy rates.
Todd Diggins: We expect this project will cost approximately $4 million over the next three years.
Todd Diggins: In Massachusetts, the cost associated with this project are eligible for accelerated recovery. We believe this initiative will provide a wide range of benefits to our customers and supports the Clean Energy Transmission Transition.
Speaker Change: With that I'll now pass it over to Dan who will provide greater detail on accordingly in year-to-date results.
Speaker Change: Thank you Tom, good morning everyone. I'll be getting on slide six.
Dan Hurstak: As Tom mentioned, today we announced breaking results for the first for the three months and did September 30, 2024.
Todd Diggins: for the first nine months of the year, net income was $31.5 million, or $1.96 per share, an increase of 11 cents per share compared to the corresponding period in 2023.
Todd Diggins: Ernst Gould reflects higher adjusted electric and gas margin, partially offset by higher operating expenses.
Todd Diggins: We have also reported adjusted net income in EPS amounts, which exclude the effect of certain bang or transaction costs, recognizing an operation and maintenance expats.
Todd Diggins: and his Tom Meissner do not reflect ongoing operating performance.
Todd Diggins: A just-it earnings per share was two cents per share in the third quarter and two dollars per share for the first nine months of the year.
Todd Diggins: Trying to slide seven, I will discuss our electric gas adjusted gross margins.
Todd Diggins: I'll begin with our electric operations.
Todd Diggins: A electric adjusted gross margin was $81.7 million for the nine months and its September 30, 2024. An increase of $1.6 million as compared to the same period of 2023.
Todd Diggins: The increase in electric adjusted gross margin reflects higher distribution rates in customer growth.
Todd Diggins: The company added approximately 1100 new electric customers compared to the same period in 2023.
Todd Diggins: and is noted during prior calls, electric distribution revenues are substantially decoupled, which eliminates the dependency of distribution revenue on the volume of electricity sales.
Todd Diggins: Moving to gas operations.
Todd Diggins: gas adjusted gross margin was $115.6 million for the 9 months and did September 30, 2024. An increase of $9.2 million compared to the same period in 2023.
Todd Diggins: The increasing gas adjusts the gross margin reflects higher distribution rates in customer growth.
Todd Diggins: The company added approximately 720 new gas customers compared to the same period in 2023.
Todd Diggins: Approximately 60% of the company's gas customers are under decoupled rates, and through the first nine months of the year, we estimate that decoupling supported gas margin by approximately 20 cents per share.
Todd Diggins: Moving to slide 8, we provide an earnings bridge comparing year to date 2024 results to 2023.
Todd Diggins: As I just mentioned, adjusted gross margin for the first nine months of the year increased by $10.8 million, primarily driven by higher distribution rates in customer growth.
Todd Diggins: Operation Emitting Expenses increased $1.1 million, reflecting higher labor costs and higher utility operating costs, as well as transaction costs associated with the Bangor National Gas Acquisition.
Todd Diggins: has increased of approximately 2% in operation in maintenance expenses, is below the increase in inflation of approximately 2.4% over the same period.
Todd Diggins: The appreciation and amazesation increased $5.1 million reflecting higher levels of utility point in service.
Todd Diggins: Higher Depreciation rates approve and recent Maine and Massachusetts RAID orders at higher immunization of storm costs and other deferred costs.
Todd Diggins: Taxes of an income taxes increased $1.5 million, reflecting higher local property taxes on higher utility plant and service as well as higher payroll taxes.
Todd Diggins: Interest Expansion increased $1 million reflecting higher interest expansions short-term borrowings and higher levels of long-term debt, partially offset by higher interest income on regulatory assets.
Todd Diggins: Other expense increased by zero point two million dollars largely due to higher retirement benefit costs.
Todd Diggins: and lastly, income taxes increased your $11 million for flexing higher pre-tax earnings.
Speaker Change: Turning to slide 9, as Tom previously noted, we recently filed an uncontested settlement with FERC for Green State Gas Transmission, our Interstate Gas Pipeline, requesting approval by November 25th, 2024 for rates effective November 1st, 2024.
Todd Diggins: The settlement agreement includes an annual revenue increase of $3 million, which represents an increase of approximately 30% to grant current revenues.
Todd Diggins: The settlement includes three limited section four step filings over the next three years, totaling approximately $30 million to recover eligible capital costs.
Todd Diggins: This multi-year rake land will increase rates each September for the next three years, beginning in 2025.
Todd Diggins: We are pleased with the welcome of this segment which has provided Grand Estate Gas Transmission with the opportunity to earn a reasonable return for the next few years.
Todd Diggins: Moving to slide 10.
Todd Diggins: As we discussed last quarter in July, the company agreed to acquire bang-or-natural gas from hope utilities. And we are currently working through the regulatory approval proceeding before the main public utilities commission.
Todd Diggins: The Liberations are currently scheduled for early February and we expect this transaction should close by the end of the first quarter of 2025.
Todd Diggins: Banger Natural Gas is a great compliment to our current natural gas distribution operations in Maine.
Todd Diggins: Bangor National Gas has experienced strong, historical customer growth, and we believe the combination of low penetration rates, cold climate, and constructive regulatory jurisdiction will allow Bangor to continue to deliver affordable national gas to its customers.
Todd Diggins: We will provide additional updates regarding this transaction on our next earnings call.
Todd Diggins: Turn it to slide 11.
Todd Diggins: Our investment outlook remains strong, and our projected capital spending through 2028 total of approximately $910 million.
Todd Diggins: As previously discussed, there remains additional upsides to our capital plan for electric sector modernization projects as we invest in supporting the clean energy transition.
Todd Diggins: Since 2017, our rap base growth has been 7.9%. I'll pacing the midpoint of our long run growth guidance of 6.5% to 8.5%.
Todd Diggins: I'd like to mention the great progress that has been made at our Kingston Solar Facility.
Todd Diggins: In August, site work was completed and facility construction commenced.
Todd Diggins: We expect that the project we placed in service during the second quarter of 2025.
Todd Diggins: We will seek regulatory recovery upon completion and continue to look for opportunities that provide similar benefits to customers.
Todd Diggins: Consistent with prior years, we anticipate providing an update to our investment plan during the fourth quarter earnings call.
Todd Diggins: Moving to slides 12, our balance sheet is strong and we anticipate that operating cash flows, less dividends will fund the majority of our investment plan with additional financing obtained from a mix of debt and equity.
Todd Diggins: Maintaining our strong balance sheet and investment grade credit ratings is TOR funding and some strategy and we believe our low risk cash flow generation compares favorably to our peers.
Todd Diggins: in August, we successfully closed on $135 million of long-term debt at competitive rates across unethical cooperation and all of our utility subsidiaries.
Todd Diggins: These transactions recapitalize our short-term debt balance and reduced interest rate volatility.
Speaker Change: on now turn the call back over to Tom.
Tom Meissner: Great thanks Dan. Wrapping up now on Flight 13 with 9 months behind us, we continue to deliver on our commitments.
Tom Meissner: Our capital plan is progressing as planned, regulatory outcomes remain constructive, and we are earning our authorized returns.
Speaker Change: Looking ahead, we offer long-term earnings growth aligned with our peers while maintaining the lower risk profile.
Speaker Change: We look forward to sharing more information on our strategies, our progress, and our investment outlook on the year end earnings call.
Todd Diggins: With that I'll turn the call back to Todd. Thanks, Tom. That wraps up the prepare material for this call. Thank you for attending. I will now turn the call over to the operator who will coordinate questions.
Speaker Change: Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment, for questions.
Speaker Change: and I'm not showing any further questions at this time. This concludes the conference. One question, one moment.
Speaker Change: Our first question comes from Shelby Tucker with RBC He May Proceed.
Shelby Tucker: Good morning. Thank you. Just a moment maybe break down a bit more of the Capital Spain Program by at the class.
Shelby Tucker: between electric and gas, and then also, as you think about some of the policies that the states are being pursuing in your territories. Where do you see the trend going between those two as a class?
Speaker Change: I can probably take the second part of the question. I'm not sure I have to break down.
Speaker Change: But in terms of state policies, I mean clearly we're seeing a big shift, I think, toward electric from gas. That's especially notable in Massachusetts in particular.
Speaker Change: Grid Modernization continues to be a topic, even in New Hampshire. So we're seeing more of our spend geared towards electric than gas.
Speaker Change: Now it will be especially true as we start to finish up some of our pipeline replacement programs on the gas side So think as you know we completed new hamps or some years ago
Shelby Tucker: and this year we will complete Maine so our system will be entirely modernized and Maine. And realistically, much of our replacement of Massachusetts will be completed during the next five year times period. So I think we do see more of our capital investment outlook shifting over to the electric side.
Speaker Change: So I let Dan provide any color on the breakdown. Yeah, she'll be. I agree with Thomas, I think when you look at the trend that'll probably more, moving more towards the mix of.
Speaker Change: Electric.
Speaker Change: Reload to the current mix. We're probably about two thirds.
Dan Hurstak: Gas one-third electric for rate base so that the current the short-term capital plan probably reflects that a little bit There's probably somewhere in the neighborhood of 15 to 25 percent growth versus maintenance capital
Dan Hurstak: embedded in that plan. And when you think about Massachusetts, we have that natural hedge of gas and electric customer base in that state. So as we support the electric sector modernization plan, which we referenced, that may lend itself to a little bit more investment for the electric side in Massachusetts.
Speaker Change: So if we think about the six and a half to eight and a half percent rate-based growth.
Speaker Change: target. As newer policies come out, is that additive to that number? Or do you anticipate some offsets to keep it in that six and a half to eight and a half?
Speaker Change: That's a portion of the investments that are included in our electric sector modernization plan are included in that nine hundred and ten million dollar
Speaker Change: capital plan through 2028, but a portion or not. So there is definitely upside to the plan for those types of investments.
Shelby Tucker: Probably also worth mentioning that it does not include any upside related to Bangor natural gas.
Speaker Change: Thank you.
Speaker Change: Okay, thank you.
Speaker Change: Great, thank you.
Speaker Change: Corey Duffner, Ian McKellar, Thomas Munzo, Bernie Ford, Steven Peters, Daniel Hulstak Okay, right now it's in... Robot Legends Armageddon Right now, right now, right now Robot Legends Spider Bros Good Swipe
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