Q4 2024 Fortis Inc Earnings Call
Yeah.
Betsy: Thank you for standing by this is Betsy the conference operator.
Speaker Change: Welcome to the Fortis, Inc, fourth quarter, and annual 2024 earnings conference call and webcast.
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Speaker Change: I would now like to turn the conference over to Stephanie Mimo, Vice President Investor Relations.
Speaker Change: Please go ahead Mr Lino.
Thanks, Betsy and good morning, everyone and welcome to afford US this fourth quarter and annual 2024 results Conference call I'm joined by David Hutchens, President and CEO, Jocelyn Perry Executive VP and CFO. Other members of the senior management team as well as Ceos from certain subsidiaries before we begin today's call I want to remind you that the discussion will incur.
Speaker Change: <unk> forward looking information, which is subject to the cautionary statement contained in the supporting slide show.
Speaker Change: Actual results can differ materially from the forecast projections included in the forward looking information presented today are non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U S. GAAP financial measures in our 2024 M. DNA also unless otherwise specified all financial information referenced is in Canadian dollars with that I will turn the call over.
Speaker Change: David.
David: Thank you and good morning, everyone 2024 was a great year across the board for Florida's operationally, we continued our history of delivering reliable and safe service to our customers across North America financially. We are pleased to report another strong year supported by our regulated growth strategy and consistent execution.
David: Notably we invested a record $5 2 billion in capital and grew our 2024 adjusted EPS by approximately 6%.
David: And once again, we increased our dividend in the fourth quarter, marking 51 consecutive years of increases in dividends paid.
David: Our governance track record was extended as well.
David: In December the Globe and mail released as ranking of candidates corporate governance for 2020 for Florida was ranked number one among 215 companies in the S&P <unk> composite index underscoring our best in class governance practices.
David: We remain focused on reducing climate impacts and risks through 2024, we've reduced scope one emissions by 34% compared to 2019 levels. Additionally, we enhance our operational practices to improve situational awareness and ensure we have real time insight into local conditions that influenced wild.
David: Fire risk.
Ensuring safe reliable and affordable service remains at the heart of what we do each day in 2024, our teams achieved top quartile safety and reliability performance benefiting our employees our customers and the communities we serve custom.
David: Customer affordability remains a top priority as shown on the slide controllable operating costs per customer increased approximately two 8% annually over the past five years below inflation during this period.
Our utilities continue to identify efficiencies and implement innovative practices to reduce costs. In addition, we worked with our customers to help them manage their bills through budget had payment plans and energy efficiency programs.
David: For 2024, we delivered a one year total shareholder return of approximately 14%.
David: Over a 20 year timeframe or has delivered average annual total shareholder returns of approximately 10% well above the benchmark indices shown on this slide.
David: We expect to continue to deliver stable and compelling returns over the long run.
David: Our five year capital plan of $26 billion remains on track as we highlighted last quarter. Our capital plan is low risk and highly executable with virtually all regulated investments and only 23% of our spend relating to major capital projects.
David: The five year plan is focused on transmission investments at ITC, including the long range transmission plan, the resource transition in Arizona, as well as enhancing and strengthening our infrastructure and supporting customer growth across all of our utilities over.
Over the five year horizon rate base is expected to increase by approximately $14 billion to $53 billion by 2029 supporting average annual rate base growth of six 5%.
David: In December the MISO Board approved the tranche two one LRT P projects with 24 projects totaling $21 8 billion U S dollars.
David: Upon finalization and approval of the portfolio ITC has revised the estimate for their portion of tranche $2. One upward to a range of three seven to $4 2 billion in U S. Dollars. The revised estimate includes portions of two projects in southern Minnesota and three projects in Ms.
David: Again that were assigned to ITC based on the rights of first refusal are ropers that are in effect in those states. It also includes approximately $300 million for system upgrades in Iowa that are not subject to competitive bidding a majority of the tranche $2. One investments are expected beyond 2029.
David: It's also worth noting that while ITC continues to advocate advocate for Roper in Iowa. They are also evaluating and preparing to competitively bid as needed.
David: To put itc's projected $2 one.
David: Our tranche $2 one investments into perspective. This is equivalent to 40% of Itc's current rate base and ITC is eager to execute these projects to ensure the long term reliability of the grid and the MISO Midwest sub region.
David: And Arizona TEP is busy working through a potential service through potential service request totaling over 10000 megawatts from datacenter manufacturing and mining customers, which May result in new energy infrastructure investments given this interest we wanted to provide a snapshot of the pipeline in front of us.
David: For example negotiations are proceeding for over 300 megawatts of new customer load using existing and planned capacity with load starting to ramp in the 2027 timeframe as part of an initial phase.
David: Directionally at full production of 300 megawatt load factor customer would increase TPS retail sales in Arizona by approximately 20%.
David: These potential impacts remain contingent on final investment decisions from the from the prospective customers.
David: Further negotiations are ongoing and anticipated to progress throughout 2025 to serve up to another 600 megawatts of new load in the 2030 timeframe. If negotiations are successful incremental generation and transmission investments by TEP will be required.
David: <unk> system is well positioned to support these larger growth opportunities through Cid.
Through strategic generation and transmission expansion as.
David: As we progress towards our greenhouse gas reduction goals, we still expect to be coal free by 2032.
David: However, interim shut down coal dates may be impacted by a variety of factors, including the availability and timing of new natural gas generation and renewable resources natural gas supply infrastructure and demand growth.
David: We will continue to update the market as negotiations progress and new information becomes available.
David: In addition to the MISO, while our GP projects and potential new retail load growth in Arizona, We continue to expect additional load interconnections at ITC, such as big Cedar load expansion project, which is expected to interconnect 1600 megawatts.
David: Beyond that project Itc's sees the possibility of approximately 5000 megawatts of additional load growth. If a number of proposed datacenter and economic development projects that are currently in preliminary stages move forward.
David: In Arizona, We also estimate two five to 5 billion U S dollars of investments associated with U S. E&S Energy's integrated resource plans.
David: Other opportunities include liquefied natural gas infrastructure, renewable gases and customer and demand growth in British Columbia, as well as regional transmission in New York.
David: Our regulated growth platform is stronger than ever as we work to build the infrastructure needed to support load growth improve grid resiliency and facilitate the interconnection of cleaner energy.
David: Turning to the next slide we increased our dividends paid per common share to $2 39 in 2024 up approximately 4% from 2023 marketing 51 consecutive years of increases in dividends paid.
David: We look to extend this record with annual dividend growth guidance of 4% to 6% through 2029 supported by our regulated growth strategy.
David: Now I will turn the call over to Jocelyn for an update on our fourth quarter and annual financial results.
Jocelyn: Thank you David and good morning, everyone.
Jocelyn: I'll quickly touch on the fourth quarter before I get into the annual results.
Jocelyn: Reported earnings per common share for the fourth quarter of 2024 was 79, one cents higher than reported in the fourth quarter of the prior year.
Jocelyn: Fourth quarter results included the recognition of a refund liability at ITC associated with the reduction in the MISO base early as approved by FERC in October 2020 for the.
Jocelyn: E. P. S impact was approximately four cents and largely related to prior periods.
Jocelyn: Adjusted EPS for the fourth quarter was 80 311 cents higher than the fourth quarter of 2023.
Jocelyn: Regulated rate base growth across our utilities and new customer rates at central Hudson were the drivers of growth in the quarter.
Jocelyn: New rates at Central Hudson that went into effect July 1st included an increase in the allowed ROE from 9% to nine 5% and shifted timing of quarterly rate recovery compared to related costs.
Jocelyn: Adjusted results for the fourth quarter were also favorably impacted by five cents associated with the timing of the sale of Aitken Creek in November 2023.
Jocelyn: In the fourth quarter was tempered by unrealized losses on foreign exchange derivatives, and total return swaps and higher O&M at T. P.
Jocelyn: As David highlighted we delivered strong EPS growth in 2024 reported EPS was $3.24 14 cents higher than the prior year.
Jocelyn: Adjusted EPS was $3 28, 19 cents higher than 2023.
Jocelyn: <unk> approximately 6% adjusted EPS growth.
Jocelyn: The waterfall chart on slide 13 breaks down the annual 2024 EPS drivers by segment.
Jocelyn: Our largest utility ITC delivered strong adjusted earnings growth of 7% over 2023.
Jocelyn: Seven Cert E. P. S increase from ITC was mainly driven by capital investments of $1 5 billion in 2020 for their largest annual capital plan to date.
Jocelyn: Our U S electric and gas utilities increased EPS by 12 cents Unf's energy contributed eight cents of this increase drivers of growth included new customer rates at T. P. Effective September one 2023 higher production tax credits and favorable margins on wholesale sales.
Jocelyn: E P did incur higher operating costs, reflecting labor cost as well as increased planned generation maintenance in 2024.
Jocelyn: Central Hudson contributed four cents of the increase reflecting rate base growth as well as a higher allowed ROE effective July one.
Jocelyn: Our western Canadian utilities, EPS increased nine cents, largely driven by rate base growth to serve customers.
Jocelyn: Higher earnings at borders Alberta was also due to a higher allowed ROE in 2024, as well as higher demand charges and customer growth.
Jocelyn: At our other electric segment EPS increased <unk>, <unk>, mainly driven by rate base growth and higher electricity sales.
Jocelyn: The corporate and other segment reflects an eight cent EPS decrease mainly driven by higher holding company finance costs and unrealized losses on derivative contracts.
Jocelyn: A higher average U S to Canadian dollar foreign exchange rate of 1.37 compared to 1.35 in 2023 contributed a one cent EPS increase for the year.
Jocelyn: And finally higher weighted average shares lowered EPS by five cents driven by shares issued under our dividend reinvestment plan.
Jocelyn: Overall earnings for 2024 were in line with our expectations and reflect another solid year for Fortis.
Jocelyn: Looking back Florida has extended its growth track records, 6% rate base and adjusted EPS growth in 2024 aligns with our performance over the past three years, demonstrating the value of our regulated growth strategy.
Jocelyn: And over this three year timeframe, we have successfully reduced our adjusted dividend payout ratio to below 73%.
Jocelyn: In 2024, we issued over $3 billion of debt to repay borrowings and to fund our capital program as you'll recall our funding program is primarily comprised of cash from operations and regulated debt as well as equity proceeds from our dividend reinvestment plan in.
Jocelyn: In 2020 for the dividend reinvestment plan contributed approximately $430 million in equity.
Jocelyn: <unk> $500 million ATM program has not been used and remains available for funding flexibility as required.
Jocelyn: I also wanted to take a moment to touch on the implications of the strengthening of the U S. Dollar in late 2024.
Jocelyn: We recently modified our hedging program for forecasted U S. Cash flows distributed up to afford us hedging up to 100% two years out and up to 50% three years out our capital plan assumes a foreign exchange rate of 1.3 every five cent change in the U S dollar to Canadian dollar exchange rate would result in a.
Jocelyn: Approximately $600 million change in our five year capital plan.
Jocelyn: From an earnings perspective, a five cent change in the exchange rate impacts annual EPS by about five cents, which is inclusive of our hedging activities.
Jocelyn: We do not expect the recent change in foreign exchange rate will impact our five year funding plan.
Jocelyn: For 2020 for our Moody's cash flow to debt ratio was 11% in our S&P F. O that ratio was 11 six on an adjusted foreign exchange basis our.
Jocelyn: Our cash flow metrics were in line with our expectations, you'll see there was a decrease in the Moody's metric from 'twenty to 'twenty. Three this was mainly driven by ITC and Fortis BC energy, reflecting timing of cash flows associated with regulatory deferrals.
Jocelyn: As mentioned last quarter, we continue to engage with S&P and met with them. This past fall before they affirmed our a minus issuer rating, while maintaining a negative outlook or.
Jocelyn: Our discussions continue to center around Fortas's, physical and climate risk over the next year, we will continue to outline our mitigation plans. While also executing on our funding plan, which supports average cash flow to debt metrics up over 12% through 2029.
Jocelyn: Overall for this continues to benefit from a strong business risk profile underscore by stable and predictable cash flows from our regulated utilities.
Jocelyn: These key credit strength, coupled with our funding plan support our investment grade credit ratings.
Jocelyn: Turning now to recent regulatory activity.
Jocelyn: In December we were pleased to see the Arizona Corporation Commission approve a policy statement, which allows utility to propose formula rates.
Jocelyn: N F gas filed supplemental testimony to its general rate application proposing an annual rate adjustment mechanism as a result of the Acc's formula rate policy statement.
Jocelyn: At T. P. Their next rate case is expected to be filed later this summer with an annual rate adjustment mechanism included in the application.
Jocelyn: With approximately 500 million of rate base, not yet reflected in rates at the end of 'twenty 'twenty four we will explore the use of a formula rates that will reduce the number of existing adjuster mechanisms promote rate stability for customers, while concurrently reducing regulatory lag.
Jocelyn: And before closing I would like to touch on the implications of potential tariffs on our utilities.
David: We don't see any immediate material direct impacts from the tariffs we fully appreciate the impact it could have on the economy and the customers. We serve we will continue to assess the impact on our customers as more information is known and with that I'll now turn the call back to David.
David: Thank you Jocelyn so lets summarize 2024 operational and safety results were top quartile, we invested $5 2 billion of capital in our utilities, our financial results reflect strong earnings and approximately 6% adjusted EPS growth for the last three years and on governance, we were.
Ranked number one in Canada, having checked all the right boxes in 2024, we remain focused on extending this track record as we execute our five year capital plan that supports our annual dividend growth guidance of 4% to 6% through 2029.
David: And we will do this by tapping into our key strength the dedication and hard work of our people. We appreciate their efforts to make 2020 for another successful year and count on them for our future success. This concludes my remarks, I will now turn the call back over to Stephanie.
Stephanie Mimo: Thank you David This concludes the presentation at this time I'd like to open the call to address questions from the investment community.
Speaker Change: We will now begin the question and answer session.
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Speaker Change: Okay.
Speaker Change: The first question today comes from Rob Hope with Scotiabank. Please go ahead.
Rob Hope: Good morning, everyone.
Speaker Change: First the Robinson.
Speaker Change: Thank you first question, Don Arizona seems like Theres, a lot going on there with the potential for significant increases in demand that could require some investment as well as the gas utility looking for formulaic rates.
Speaker Change: When you think about the electric side of the utility what is the game plan for new rates as well as ensuring that any new investment in generation.
Speaker Change: On a timely return when you look too.
Potentially increased clarity on formulaic rates or have riders.
Rob Hope: Oh, yes definitely Rob.
That's exactly what we're planning so as Jonathan mentioned in her prepared remarks.
Rob Hope: <unk> is expecting to file a.
Rob Hope: Our next rate case sometime this summer and with that we will for sure be looking at the different ways of filing for a formula rate to make sure that we have.
Rob Hope: As good a recovery.
Rob Hope: As shorter lag as we possibly can for future investments I'll also say that when we're looking at big projects associated with large customers will have to work some of that recovery into.
Rob Hope: Basically the contractual recovery for for assets that we invest on their behalf. So that's going to be part of those longer term negotiations for the large investments that we would make for the much larger data center in manufacturing type customers.
Rob Hope: I appreciate that and then maybe moving up to B C.
Rob Hope: He has been vocal and wanting.
Rob Hope: To expediate some permits for some projects.
Speaker Change: If we take a look at a more favorable permitting environment up in BC.
Rob Hope: Is there potential that some of your projects can be accelerated or.
Speaker Change: Could you bring some new projects to the table that.
Rob Hope: Could add to the growth profile there.
Rob Hope: That's a great question Robin I'm going to turn that over to Roger to answer because there is a lot of good information and I think a little bit of tailwind on some of these conversations up there Roger.
Roger: Alright, Thanks, David Good morning, Rob Yeah, I think yeah.
Rob Hope: The attempts by the BC government.
Roger: To address.
Permitting delays is is very timely of course and not just for the response to the tariffs but.
Roger: Backlog in infrastructure approaches have the province needs.
Roger: See I don't think it.
Roger: It creates a new projects for us are projects are really driven by demand.
Roger: Load growth or.
Roger: Resiliency and reliability investments, but what it does do.
Roger: I think it gives us.
Roger: Bit more clarity.
Roger: On timelines once we get into the project approval process really the.
Focus on efficiency has been around the provincial permitting process. We're in BC, there can be multiple layers.
Roger: Permit grantors. So this is similar to what they did on housing which is a one window.
Roger: Coach as a regulated utility we still will have to go through the <unk> UC.
Roger: On for approval processes, and depending on the size and scope of certain projects will still have to go through environmental assessments, but on certain projects, especially on the energy electricity side. They are looking to streamline the number of approvals you need which will hopefully give us an opportunity to bring project.
Roger: <unk> online sooner rather than later.
Roger: And happy Valentine's day.
Roger: Alright, I appreciate that thanks for all that.
Roger: The weekend everyone.
Rob Hope: Thank you Rob.
Speaker Change: The next question comes from Maurice Choy with RBC capital markets. Please go ahead.
Speaker Change: Thanks, and good morning, everyone.
Speaker Change: I can start with.
Speaker Change: First obviously, you've got a new chair in place what do you have you been hearing in terms of the fall said he may prioritize.
Just thinking about also the composition of FERC.
Speaker Change: Being a Democrat leaving.
Speaker Change: Panel, we're not those false even if it's prioritized will actually be completed.
Speaker Change: Yes, it's kind of early days to really figure out exactly what some of his priorities are he has I think.
Speaker Change: Definitely showed an.
Speaker Change: And interest in getting some of these co location conversations moving.
Speaker Change: That's a I think a positive generally for growth in this sector. It is where we are proponents of getting getting load.
Speaker Change: Done and put out there and being able to serve it we just have to make sure that when we do that we're looking at.
Speaker Change: That all the impacts in making and making sure people pay their fair share for upgrades et cetera, because no matter, where you put a load or resource for that matter. It does change the flows on the grid and you have to make sure that you know.
Speaker Change: The additional investments that are needed to support that while it might seem like it doesn't matter much when you put a load right next to a generator it does change.
Speaker Change: What was needed from a transmission perspective, so we just want to make sure all of that stuff is done right and it doesn't impact service and reliability to to other customers, but other than that where.
Speaker Change: We don't see necessarily a very clear line of priorities.
Speaker Change: And it's early days in his chairmanship, but we'll obviously, we're paying close attention to that.
Speaker Change: Understood and if I could just finish off also in the U S, but now turning to Arizona.
Speaker Change: Let's see the giant proposal of cuts to new nuclear and the state obviously the timing here is quite far off and it seems like it's just more exploited right now.
Speaker Change: Could you speak about you know what what prompted this obviously the power demand outlook here. It seems positive given the retail low cost you mentioned today.
Speaker Change: And how the utilities in Florida as a whole but.
Speaker Change: Managed some of the known risks relating to constructing a new pit.
Oh, Yeah, Yeah, you're right first off more of these very very early days right. This is just really preliminary look at site selection and maybe possibly an early site permit.
Speaker Change: This is the ability for us to partner with the government the federal government to look at these sites for <unk> or large nuclear plants.
Speaker Change: It's really a great opportunity for one for us to focus on putting generation.
Speaker Change: In the areas, where we're shutting down coal plants, where there's water and land in transmission in workforce and other infrastructure that's needed for big generation plants like that but also I mean, this is really being driven by load growth conversations as well right.
Speaker Change: We know that we have to.
Speaker Change: We'll have to build additional generation and transmission assets to serve big load customers like the ones that I mentioned in the in the preamble and we want to do that with its cleaner energy as we possibly can whether in the front years, that's a mix of gas and renewables and battery storage and that kind of stuff.
Speaker Change: Longer term it is it.
Speaker Change: As a nuclear and we want them, we want to basically you would start that exploration because if you don't start now then you know we're just going to be kicking that can down. The road. There is a lot that has to be done between now and like.
Speaker Change: Our commitment to invest and develop a nuclear power plant.
Speaker Change: This is the three big utilities in the state.
Speaker Change: That are focused on this we got a great positive letter from the from.
Speaker Change: From two of the Arizona Corporation Commission Commissioners.
Speaker Change: Yesterday that was opening a formal inquiry and the potential nuclear and in la and the benefit or the the efforts of the utilities for looking at us.
But at the end of the day, you've got to you've got a derisk. This you got to make sure that <unk> got the funding the risk pulled out of the.
Speaker Change: The power plant development et cetera, so lots to be done between here and there. There is there are zero commitment to build or participate in building at this time, but we sure want to make sure. If there is a possibility.
Speaker Change: We're along for the ride.
Speaker Change: Perfect that makes a lot of sense. Thank you very much for the color.
Speaker Change: Thanks Morris.
Speaker Change: The next question comes from Mark Jarvi with CIBC. Please go ahead.
Speaker Change: Okay.
Speaker Change: Thanks, everyone.
Speaker Change: Staying with Arizona, just curious in terms of the early days and our progress in the U S.
Speaker Change: Gas rate case, how are you sort of figuring out the process around a formulaic rates what learnings can you get from that preceding to take on to Tucson Electric's plans to file later this year.
Speaker Change: Yes Super Super early days on that Mark. So we just had filed the rate case in December and filed an update to add in.
Speaker Change: Basically what we call an annual gas rate adjustment mechanism that follows the.
The guidelines of the Formula rate policy statement that the Arizona Corporation Commissioners put out so we haven't even got rebuttal testimony.
Speaker Change: Well from our.
Speaker Change: And intervenors, so where we're in very early days.
Speaker Change: The the one thing that we're looking at obviously is how do we develop the right.
Speaker Change: <unk> formula rate for TEP, which is a much bigger company for us and very different from a from a resource in addition capacity than the than the gas company. So we will get some learnings on.
Speaker Change: On the gas case, but it may we may be looking at slightly or even significantly different type.
Speaker Change: <unk> mechanisms for the power side, because they're much bigger in Lumpier investments when we look at like generation in Trenton, while generation investments transmission is already covered under our former formula rates in Arizona that we have with FERC. So if we want to make sure that we're.
Speaker Change: <unk>.
Speaker Change: We're looking at what gives us the best Us and our customers. The best result of a formula rate. So early days, but we'll keep you posted as we move along that that docket.
Speaker Change: Is there any expectation that the T.
Speaker Change: Tucson electric rate case, this time will be more drawn out a bit more complicated just given.
Speaker Change: The evolution there in terms of its formula rate.
Speaker Change: No I don't think so.
Speaker Change: I wouldn't say that that would be any any cause of a delay I mean, we always every rate case is something new.
Speaker Change: So and actually frankly running running first with U S gas is going to get folks very familiar with the conversations around them. So.
Speaker Change: I wouldn't expect that solely to to create a longer timeline and frankly I think we've seen.
Speaker Change: Quite a bit quicker timelines and getting rate cases approve.
Speaker Change: Approved by the Arizona Corporation Commission over the last couple of years, we have seen a much more much more timely.
Speaker Change: <unk>.
Speaker Change: Proceedings.
Speaker Change: Okay, and then coming back to the new load or the emerging loaded you talked a bit about sort of two tranches. If you will the 300, plus which could come online in 2027 months I can rent then and then the longer term up 600 megawatts can you talk through in terms of capital needs for the first and maybe the second half.
Speaker Change: Are those sort of phases of low growth and then maybe your earnings but there's not a lot of capital in the first one is is there much of an earnings impact of this change the rate structure, how you recover on the existing assets.
Speaker Change: The first one there isn't a lot of investments because we're trying to figure out how to fill that with the existing and planned resources that are already in our five year capital plan.
Speaker Change: So that ends up being depend.
Speaker Change: Depending on where we are in the rate cycle. It can be some additional revenue.
Speaker Change: On the on the short term and then longer term. It's a it's a bunch of additional sales that go in that will help reduce our customer rates, which will allow us to then invest in additional infrastructure thats needed for the.
Speaker Change: The follow on loan additions and general load growth and economic development in Arizona.
Speaker Change: That's behind that behind the scenes and stuff that we never talk about because we had the big shiny bauble of data centers and things like that I mean, we rarely talk about it you know over 100 megawatt.
Copper mine that's on the on the edge of getting approved here because it seems small compared to datacenter that used to be like the biggest biggest thing that we've talked about.
Speaker Change: But as far as additional investments.
It's too early to say I mean, if you I mean, you can use probably some thumb rules on getting to the point of every 100 megawatts is so much money on a using an estimate of $1 per kw, but your estimate right now is as good as ours.
Speaker Change: Okay, and then just as you think through though David are you in that sort of rate base CAGR at six 7% now just given the conversations you're having right now economic activity expectation that that continues to climb higher as you go through the next rate period.
David: Yes, Directionally, it's higher I was expecting you to try to get a number out of me, which you weren't going to but yes, directionally is definitely higher and remember to that.
David: These are these are lumpier type of investments. So it turns into a lumpier types of lumpier load growth as well as investments along the way.
Jonathan: Okay, and then maybe Jonathan as you.
Speaker Change: He said the change in the FX doesn't really change the funding plan, but is there anything on the margin whether it's non core dispositions to augment the balance sheet or anything else that starts to come into the picture a bit more now.
Speaker Change: Yeah, Mike you're right I don't see the current five year capital plan changes and FX really change in our funding plan I mean, we're really just talking about it impacting how we see cash flows distributions over across the border for us and so it will have some impact just not a material impact on our funding plans. So I think as we.
Speaker Change: I mean, we don't know where this is going with respect to FX, but as we look to firm up our new capital program will take a deeper look at.
Speaker Change: FX look at all the variables that are impacting what needs to be funded and including FX.
Speaker Change: As I I think I say this every quarter right, we'll put it all back on the table and we will be couple will come out in the fall likely with them with an understanding of our new outlook and whether or not there are any changes to our funding plan then.
Speaker Change: At this moment in time, no need to use the ATM in 2020 five.
Speaker Change: That's right.
Speaker Change: Thanks, everyone.
Speaker Change: The next question comes from Julien Dumoulin.
Speaker Change: Kathy Please go ahead.
Speaker Change:
Hi, good morning, Thanks for the time, Tim can you hear me.
Tim: Yeah, Julien we can hear you fine. Thanks, Thanks for joining us and welcome a backer board.
Speaker Change: [laughter], so guidance I'd be valid, but there you go.
Tim: Yeah.
Tim: Yeah.
Tim: Thank you so much again, hey look yeah and by the way nicely done altogether here Wow Oh, it's some of these numbers in fact, maybe that's that's what we should start the conversation here.
Tim: You know as you think about that MISO piece, you know, obviously I always stands out a little bit right as in.
Tim: Other geographies that your reserves are so substantive that when you look at I always hear I'm just curious on the art of possible. You know I know you you kind of dabbling here and this is broker dynamic that that isn't quite comparable do you want to elaborate especially as these processes get underway of of what that piece of it could be especially.
Tim: But I always thought as if it's lacking for meaningful potential data center load growth as well right. So it's sort of a multifaceted and what could happen on the ITC side of the business there and that was the geography with the least update here so really stood out.
Tim: Yeah. So so.
Tim: So we did mention that that new update the updated four seven to $5 $2 billion U S of investments that we see does include $300 million U S of additional investments into Iowa Thats the stuff that we think is.
Tim: That will get allocated to us.
Tim: Because it's not subject to competitive bid the big piece that subject to competitive bid. The reason, we're not really talking about it is it subject to competitive bid. So it's hard to say what portion.
Tim: We could possibly get we're still obviously working on a rover.
Tim: As well that get that can can change the outcome of this as well so they're just there's too many variables as we sit here.
Tim: It's a big part I mean, this is all public information of whats subject to bid in the <unk>.
Tim: If im thinking right if I'm remembering the number right I think it is.
Tim: $3 billion of additional.
Tim: Transmission investment in Iowa, We just don't know how much of that will come our way. So early days, we're making progress on the ROFO side.
Tim: But.
Tim: We'll keep you posted as we go.
Tim: I know, you're not saying that.
Speaker Change: Four seven to $5 2 billion isn't much sorry.
Tim: I added to I added $1 billion.
Tim: Yes.
Tim: <unk> three <unk> seven to the boardwalk in Dubai.
Tim: Yes, three blades I don't know if you wanted to say that.
Tim: Sorry did I say before I think I might've said <unk> seven to $5 two on the first one so.
Tim: Stand corrected are always listening to the call all the way through.
Tim: Alright.
Speaker Change: It just and substantively I clearly sense, it's a materially higher number so I appreciate that and then maybe subsequently like as you think about this flowing through the your Friday as the program. Maybe you know what are the dynamics with your peers certainly EPS CAGR is going higher you guys being at a slightly different.
Speaker Change: Paradigm, you know, we're seeing your peers notched down their payout ratios in the current environment given the potential acceleration how do you guys thinking about that you know a with the spike so opportunity is explicitly disclosed and be with some of these low growth opportunities I mean could we be looking at a little bit of a paradigm shift or just look at the end of the day.
Speaker Change: And girls.
Speaker Change: Closer to the bottom end of the Dps trajectory.
Speaker Change: Just leave it at that.
Speaker Change: Yes, yes, we're not a we're not considering even know every year. We obviously look at the forward projection of what we're going to put out for dividend.
Speaker Change: Dividend growth guidance.
Speaker Change: Nothing as we sit here today, that's triggering any change in in our mind I mean, frankly, what we've been doing for the past four years, three or four years since we changed that that dividend guidance as we've been telling folks that were.
Speaker Change: We're.
Having that 4% to 6% dividend growth guidance, but we're pushing down our payout ratio in the process. So when we have done that so that we want and we want to keep continue to do that to tap down the payout ratio. So we're already sort of on that mode.
Speaker Change: As we look longer term on the additional investments we will.
Speaker Change: Evaluate that but nothing.
Speaker Change: Nothing that we see.
Speaker Change: In any way imminent.
Speaker Change: Remember these are these are these.
Speaker Change: These are longer term investments that we're looking at they are big numbers, but they're in the tail end of the five year.
Speaker Change: Forecast, where they start showing up but really are more in the.
Speaker Change: The next five years investment so the things that pop in earlier that the potential for that are things like some of the data center investments et cetera that everybody's in a hurry to get done.
Speaker Change: And can be done a little bit quicker.
Speaker Change: Not in the next couple of years, but again in the tail end of the five year forecast, but we'll keep you all updated on.
Speaker Change: Funding in plans and all of those things as we go forward.
Dave: Excellent thanks, Dave speak to it.
Dave: Thanks Julien.
Speaker Change: Once again, if you have a question. Please press Star then one to join the question queue.
Speaker Change: The next question comes from Michael Sullivan with Wolfe Research. Please go ahead.
Michael Sullivan: Hey, good morning.
Speaker Change: Hello, Michael.
Speaker Change: Hey, Dave.
Speaker Change: Wanted to start back on.
Speaker Change: On Arizona and the T. P. Any sense you can give us in terms of just how much the lag can improve with formula rates.
Speaker Change: Relative to where you stand today.
Speaker Change: Yeah, I'll pass that over to Jocelyn.
Jocelyn: Yeah Michael.
Michael Sullivan: So we're in the early stages of developing the formula for T. P. We have one that we've applied for U S gas, but it doesn't necessarily go like for like for TEP. So the aim of the formula that we're gonna put in play well reduce lag no doubt, but it should actually set us up to give us a read.
Michael Sullivan: While the opportunity to earn a reasonable return consistently every year right that would be the aim of the formula.
Michael Sullivan: So to go yet because we have to create one we have to file one and it has to be deliberated with the commission. So it can take many turns but ultimately we're trying to set up the future knowing that we have significant capital in front of us to reduce the lag and give us a good chance to earn a return each and every year.
Speaker Change: Okay. That's very helpful. Thank you.
Michael Sullivan: And then just.
Michael Sullivan: <unk> over to two <unk>.
Speaker Change: I know you all have been part of the broader co located load discussion across the country.
Speaker Change: I think we saw for next Thursday agenda meeting that that's kind of the top of the list.
Speaker Change: Technical.
Speaker Change: The conference that I think you all were a part of any any thoughts on what could come of that or was the commissions looking to do in the near term.
Speaker Change: Yeah on the prior question I think I gave everything I know about it but.
Speaker Change: Toss that over to Linda to see if she has any additional color because she's a cheeses a step closer to that deny.
Speaker Change: Okay, great. Thanks, Dave and good morning, Michael I think as Dave indicated ethically, Yeah, we thought outstanding agenda for FERC meeting next week I don't know that we have any more specific insight as to what the outcome is I I tend to believe.
Speaker Change: That chairman Christy He has indicated through comments that this is a priority for him in order to ensure that this issue gets resolved.
Speaker Change: That we if we need different or appropriate her mechanisms in place.
Speaker Change: To facilitate or address.
Speaker Change: It cost.
Speaker Change: Issues for the transmission grid.
Speaker Change: I see it as a positive I think there's a.
Speaker Change: Our commitment to try to address and resolve.
Speaker Change: Issues or at least provide clarity.
Speaker Change: Going forward I think there's a recognition that we want to be able to accommodate these large load.
Speaker Change: Figure out how we're going to do it and resolve the issues I think they are standing in the way.
Speaker Change: Okay. That's great color really appreciate it thank you.
Speaker Change: Welcome.
Speaker Change: Okay.
Speaker Change: This concludes the question answer session I would like to turn the conference back over to MS Almond milk or closing remark.
Speaker Change: Thank you Betsy.
Speaker Change: Okay.
Perfect.
Speaker Change: And our fourth quarter and 2024 results conference call.
Speaker Change: Okay.
Speaker Change: Are there and have a great day.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thanks for the call today's conference call you May now disconnect your lines.
Speaker Change: For participating and have a pleasant day.
Speaker Change: Okay.
Speaker Change: [music].