Q2 2019 Earnings Call
Good day, ladies and gentlemen, and welcome to the Black Hills Corporation second quarter 2000, <unk> earnings Conference call.
My name is Daniel and I will be your coordinator for today.
At this time all participants are in listen only mode. Following the prepared remarks, there will be a question and answer session.
If you would like to participate in this portion of the call. Please press star followed by one at any time during the conference.
If assistance is needed any time during the call. Please press star followed by zero and a coordinator will be happy to assist you.
Under this conference is being recorded for replay purposes.
I would now like to turn the presentation over to Mr. Jerome Nichols.
Director of Investor Relations of Black Hills Corporation. Please proceed sir.
Thank you Daniel Good morning, everyone Welcome to Black Hills Corporation second quarter 2019 earnings Conference call.
Leading our quarterly earnings discussion today are Glenn Evans, President and Chief Executive Officer.
And rich Kinzley, senior Vice President and Chief Financial Officer.
During our earnings discussion today some of the comments, we make may can change the forward looking statements as defined by the Securities and Exchange Commission.
And there are a number of uncertainties inherent in such comments.
Although we believe that our expectations and beliefs are based on reasonable assumptions actual results may differ materially.
We direct you to our earnings release slide two of the Investor presentation on our website.
And our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission well those to some of the factors that could cause future results to differ materially from our expectations.
I will now turn the call over to mine Evans.
Thank you Jerome good morning, everyone and thank you for joining us this morning.
The agenda for today appears on slide three I will cover highlights of the quarter.
Rich Kinzley will provide a financial update and then I'll finish with a discussion around our strategy.
Before we dive into the quarter's results I want to start this meeting as we do with all meetings with wins within Black Hills with a with a safety focus.
And the thing I want to pause and both thank and congratulate our team for their incredible and they're safe response to our customers during the second quarter.
Our team worked with focus sensitivity and determination as they helped our customers respond to record rainfall and flooding across much of our territory.
Many of our team are listening and I. Thank each year for what you accomplished and especially how you did it safely.
Moving to slide four.
We are confident in our strategy.
During the second quarter.
We continue to execute on our plan for long term success.
We deliver safe and reliable service to our customers. We produced financial results are on track to achieve our full year earnings guidance.
And we continue to execute our capital investment plan.
On slide five you'll see an overview of our strategy in action during this quarter.
Our service territories experienced difficult weather conditions for a second consecutive quarter that our team stepped up once again with strong operational performance you may recall that in the first quarter extreme cold severe winter storms.
Dangerous wins and flooding impacted much of the Midwest.
This quarter many of our customers experienced record breaking persists precipitation and flooding.
Mainly in parts of Iowa, and Nebraska, and then cooler than normal temperatures.
These relatively poor conditions combined with trade tariffs that impact farmers and ranchers within our territories.
Dampened overall economy economic activity in our Midwest service territory beyond what is otherwise measurable in degree days.
Our electric and natural gas utilities experienced low sales volumes across nearly every customer class during the second quarter, which we view as temporary in nature.
Despite these difficult weather conditions, we managed our business is to stay on track to meet our full year earnings expectations and execute on $777 million capital investment forecast for 2019.
As I've already stated, we prioritize safety and I'm proud of our team for achieving zero reportable injuries in June .
While we continue to have room to enhance safety. This is an encouraging milestone to demonstrate the zero is truly possible as we strive for our goal to be an industry leader in safety.
As I mentioned last quarter, we are transforming the customer experience.
Well just last week, we launched an enhanced website.
What's more efficiently and effectively serves our customers. Our team worked very hard to know our customers and what they need and this is an example of our efforts to continually improve our service enhance customer value and simply make it easier to do business with us.
As we focus on being ready for our customers, we expect our strategy to deliver strong long term earnings growth.
We received key regulatory approvals related to our jurisdiction simplification efforts and customer focused initiatives and as I already mentioned, we are on track for our capital investment plan.
Moving to slide six which lists some recent notable accomplishments and I'll start with the electric utilities.
We were pleased that our South Dakota electric and our Wyoming Electric utilities received approval of the renewable ready service tariffs and the joint application for a CPCN to construct and operate the Corey Dale Wind energy project.
This is a voluntary program that provides our larger commercial and industrial customers in the government agencies that we serve a cost effective option to purchase utility scale renewable energy.
The 57 million dollar 40 megawatt wind project will be constructed in Wyoming.
To be in service in 2020.
And is already included of course in our capital investment forecast.
[noise] at South Dakota Electric we are entering the home stretch to complete our 175 mile transmission line.
That's a rapid city, South Dakota Steagall, Nebraska.
Well that project remains on schedule to place the third and what we've got and the final 94 miles segment in service later this fall.
And Wyoming Electric we received approval in April .
For a tariff that will help recruit block chain technology companies to the Cheyenne region.
Now this tariff is complimentary to new legislation recently enacted in Wyoming and supports the development of block chain technology, what's in Wyoming.
I should note that in contrast to the lower energy demand in most of our customer classes. During the second quarter in July both Colorado Electric and Wyoming electric posed to post a new all time record peak loads.
Colorado Electric set a new peak of 422 megawatts that surpass the previous peak of 413 megawatts, which was set in July of last year.
In Wyoming, Wyoming electric Similarly set a new peak of 265 megawatts.
That's surpassed the prior peak of 254 megawatts also set in July of last year.
We think these new peaks demonstrate the continued overall customer growth and demand growth, we are experiencing in Colorado and Wyoming.
Moving to the natural gas utilities, that's on the right side of slide six.
On May 10 oil and gas commenced construction of the 54 million dollar 35 mile Natural bridge pipeline project.
This pipeline enhances supply reliability and capacity for customers located in central Wyoming.
And it's also on schedule to be completed and placed in service. This fall.
During the quarter, Wyoming gas received approval to consolidate for natural gas distribution companies, which we have completed.
On June 3rd it consolidated rate review was submitted to combine the rates the tariff and services.
And requested $16 million and new revenue related to safety reliability and system integrity investments, we've made on behalf of customers.
At Nebraska gas, we filed an application at the end of March to consolidate two natural gas distribution distribution companies within that state.
Now we plan to file a consolidated rate review and 2020 .
Something that's not specifically mentioned on slide six but appears in our earnings release is our own ongoing rate review for Colorado gas that rate review request, two and a half a million dollars a new revenue and also six a new rider mechanism to recover safety and integrity investments.
Our team is participating in a hearing before the LG. This week with respect to those requests.
Moving to our power generation segment on slide seven.
On August 2nd we submitted a request to FERC seeking approval of a new power purchase agreement between Black Hills, Wyoming and its affiliate Wyoming electric.
At the power purchase agreement is approved Black Hills, Wyoming will then deliver 60 megawatts of energy from its watching one power plant to Wyoming electric starting on January 120, 23, and then continuing for 20 years.
This new power purchase agreement will replace the existing agreement between Black Hills, Wyoming in Wyoming electric thus that expires on December 31st.
2020 two.
[noise], our $71 million 60 megawatt Busch Ranch to wind project located near Pueblo, Colorado is currently under construction.
When placed in service. This fall the wind project will deliver all of its renewable energy to Colorado electric.
Under a 25 year power purchase agreement.
This will fulfill the state's renewable portfolio standard requirement for Colorado electric to deliver 30% of its energy as renewable energy to customers by the year 2020.
At our corporate segment, our board recently declared a quarterly dividend of 51.5 cents per share.
Which represents an annualized rate of $2.02.
For 2019 this annual rate represents our 49th consecutive annual dividend increase which is one of the longest track records in the utility industry.
And of course, a record we're extremely proud of.
During the second quarter, we issued approximately 659000 shares of Black Hills common stock.
Under our at the market equity offering program for net proceeds of approximately $49 million.
Year to date, we've issued a total of $70 million in new equity under the ATM.
On the debt side, we amended and extended our term loan due in 2022 June of 2021.
And increase the amount of the loan from two $400 million from $300 million.
Finally, our team is truly engaged in serving our customers.
We survey our team through a third party service every two years or so to assess the employee engagement.
And obtain open feedback from our team to help us continually improve and our endeavor.
To serve our customers with excellence, while creating a great workplace.
We are pleased to announce that our recent engagement scores, 75% not only improved upon our 2017 score.
But it is also above the U.S. utility average and is also above the engagement enjoyed by high performing companies within the U.S.
Now I'll turn it over to rich for our financial update rich.
Very good thanks, Lynn and good morning, everyone.
I'll start on slide nine.
As Lynn noted other than weather related challenges, we delivered second quarter financial performance that met our expectations.
Our quarterly EPS as adjusted was 24 cents compared to 45 cents in Q2 2018.
We estimate that weather negatively impacted Q2 results by six cents compared to last years second quarter.
By four cents compared to normal weather.
Beyond this direct weather impact.
Excuse me.
We believe economic activity and demand for energy in our service territories was reduced during the second quarter due to record precipitation.
And resulting flooding as reflected by reduced demand across nearly all customer classes.
Aside from weather results for the second quarter were positively driven by returns on investments made to benefit customers that are gas utilities.
Lower purchased capacity costs in a lower effective tax rate negatively impacted by planned and unplanned generation outages and higher operating expenses related to our long term customer focused strategy.
Results also reflect an 11% increase share count related primarily to the equity unit conversion in November of last year.
While many of these items are part of our business looking forward a few of these items are nonrecurring in nature.
We believe approximately 10 cents of EPS impact in Q2, 2019 can be attributed to the combination of direct and indirect weather.
Generation outages and certain nonrecurring expenses.
I'll also remind everyone that the second quarter is a shoulder period for our utilities outside the heating season at our gas utilities and the primary cooling season at our electric utilities.
More importantly, and as Glenn noted we remain on track to achieve our earnings guidance for 2019, and we have reaffirmed earnings guidance for 2019 and 2020.
The assumptions for our earnings guidance are detailed on slides 45, and 46 in the appendix.
On slide 10, we reconcile GAAP earnings to earnings as adjusted a non-GAAP measure we do this to isolate special items and communicate earnings that better represent our ongoing performance.
This slide displays the last five quarters and trailing 12 months as of June Thirtyth 2018, and 2019.
For the first half of 2019, we had no special items, we experienced special items in 2018, not reflective of our ongoing performance all of which were income tax related.
The first item reflected the impact of the tax cuts in jobs Act during 2018.
And the second and larger item related to tax benefits of legal restructuring is completed in 2018.
These items are not indicative of our ongoing performance and accordingly, we reflect them as on an as adjusted basis.
Slide 11 is a slide we added to our investor materials last year to improve transparency for year over year comparisons. The waterfall chart illustrates the primary drivers of our earnings results from Q2 2018 to Q2 2019.
All amounts on this chart are net of income taxes.
Add more detail by segment on the next slide but overall, our utilities delivered lower gross margins with a decrease of 2% in Q2 2019 compared to Q2 2018, driven largely by weather impacts.
Nonregulated margins were 23% lower due to planned and unplanned generation outages, which drove a revenue decrease at our mining segment.
Total AUM increased by 4.4 million after tax driven largely by planned spending associated with our customer focus capital expenditure program.
Approximately half the owning them increase in the second quarter related to nonrecurring items.
Depreciation increased as a result of increased plant in service.
And we experienced favorability in our effective income tax rate in Q2 2019 compared to the prior year.
Our effective tax rate. This year is expected to be approximately 14% compared to approximately 18% last year when excluding the prior year special items. This reduced tax rate is driven by forecasted federal renewable energy production tax credits and state investment tax credits for the Busch Ranch to wind project, which is expected to be placed in service in the fall of 2019.
Under generally accepted accounting principles related to interim tax accounting, we're required to recognize a large portion of our annual forecasted 2019 tax credits during the first half of the year.
Slide 12 is a slide we added this year to our presentation combining the operating income results for our operating segments onto one slide.
I'll make a few high level comments here and you can find additional details on Q2 year over year changes in gross margin and operating expenses in our earnings release.
At the electric utilities operating income for Q2 2019 decreased by 7.7 million compared to Q2 2018 gross margins decreased by 3.5 million, primarily from cooler early summer weather and lower residential and commercial demand.
Partially offset by lower purchase power capacity charges.
Operating increase operating expenses increased 4.1 million over Q2 last year, primarily due to higher outside services and employee costs.
At the gas utilities operating income for Q2, 2019 decreased 7.9 million compared to Q2 2018.
Gross margins decreased 1.1 million, we experienced unfavorable weather.
Yeah, but benefited from returns on investments for customers and customer growth in our service territories.
Operating expenses increased by 6.8 million, primarily from higher outside services employee costs and depreciation.
As I mentioned earlier, approximately 3 million of the pre tax on M. incurred during the quarter is non recurring in nature related primarily to outside services.
On the bottom half of slide 12, you see our power generation segment delivered strong year over year Q2 results continuing to operate efficiently.
And providing excellent returns.
Operating income in our mining segment decreased by 2.2 million due to the planned and unplanned generation outages, we mentioned.
These negatively impacted sales for the quarter at the mine.
Slide 13 shows our financial position through the lens of capital structure credit ratings and financial flexibility.
Our credit ratings remain at Triple B, plus at both Fitch and S&P and be doubly two at Moody's with a stable outlook at all three agencies.
We remain committed to maintaining our strong investment grade credit ratings.
At June Thirtyth, our net debt capitalization ratio was 57.6%.
A decrease of 130 basis points from year end.
With our substantial 2019 capital spending forecast, we expect debt to total cap to increase slightly as 2019 progresses.
You'll note in our guidance assumptions on slides 45, and 46 in the appendix that we expect to use our aftermarket equity offering program tissue, a total of $80 million to $100 million in new equity this year.
In $40 million to $80 million next year to help fund, our Capex program, which lane will speak to shortly.
And as Glenn noted, we completed 70 million of this year's issuance through the first half of the year.
While debt to total capitalization will likely remain in the 58% to 59% range into 2020, we continue to target a debt to total cap ratio in the mid fiftys over the longer term.
Slide 14 illustrates our dividend track record, we've grown the dividend at a faster rate the past few years, demonstrating our confidence in our future earnings growth.
As we've stated in the past our intent is to not reduce the amount of the annual dividend increase and we were we maintain our stated dividend payout ratio range of 50% to 60% of Vps and I'll turn it back to Lynn now for a strategic overview.
Thank you rich I'm moving to slide 16.
We group our strategic goals into four major categories.
Profitable growth.
Valued service better every day and great workplace.
We plan to drive future earnings growth as we invest in our customers' needs centered on safety reliability and growth.
Based on our capital forecast, we expect to deliver long term earnings per share growth above the utility average. In addition, we fully expect incremental growth opportunities from generation another larger projects.
Slide 17 helps us illustrate how we think about strategic execution.
We are aligning our people our processes and the use of technology and analytics around our customers needs.
In addition to our investment for customers to deliver safe and reliable service, we are transforming our customer experience working hard to know our customers well and make us easier to do business with.
We're driving growth through a greater penetration, adding renewable energy in bringing forth innovative tariffs to recruit new businesses.
In particular, we are enabling the growth of data centers, which fit the unique attributes of our service territory.
And we are investing in the safety and reliability of our electric and natural gas infrastructure systems utilize utilizing a disciplined.
Program grab Programatic integrity program.
Slide 18 illustrates the strategic diversity of our business structure.
And the seasonality of our earnings.
We have a mix of complimentary gas and electric utilities across stable and growing mid western states.
Slide 19 illustrates our large electric and natural gas infrastructure systems. These systems spend across eight states and provide more diverse opportunities for investment.
More interconnections for reliability and growth in greater overall efficiency of operations for our customers.
Moving to slide 20, our systems require significant long term investment to meet our customers needs.
Forecasted capital investment is focused largely on safety reliability and supporting our customers growth.
This capital for forecast far exceeds depreciation.
Which will translate to future earnings growth.
We plan to invest $777 million in 2019 and $2.8 billion over the five year period.
Both of these are all time high capital forecast for us and are consistent with our first quarter disclosures.
Our capital forecast includes opportunities we are relatively certain to occur and then we add capital, especially in the outer years, as we gain more clarity and comfort around specific projects.
As discussed last quarter, we expect to update our five year capital forecast when we report our third quarter earnings that will be in early November .
We will also refresh our earnings guidance at that time.
Slide 21 illustrates the breakdown of our five year capital forecast.
You'll note that over 90% of our forecasted investment is within our utilities.
In those utility investments over 70% of recovered in a timely and efficient manner.
Slide 22 shows a time line around or multi state jurisdictions simplification efforts.
We have three states those are Colorado, Nebraska in Wyoming, and which are now officially underway for simplification.
In Colorado, and Wyoming, We received approval and then we completed the legal consolidation.
And we're currently working through the regulatory process for consolidated rate reviews with the decisions expected in both states by year end.
In Nebraska, we filed a legal consolidation request at the end of March.
And we plan to file a consolidated rate review and 2020 .
Slide 23 is a new slide illustrating our commitment to managing our environmental and social impacts.
While maintaining strong governance, ensuring we continue to deliver a sustainable and strong future for all of our stakeholders.
Responsibly, serving customers and managing our environmental impact is nothing new for US we have one of the most modern generation fleets in the country with the latest emissions control technologies.
We've also been transforming our generation mix investing in low carbon emission generation at a more natural gas or renewable energy, thereby reducing our carbon impact by approximately 16% since 2005.
As shown on the chart on the left hand part of the slide.
Our shareholders, our successful when our customers and our communities thrive.
Our employees live and they work alongside our customers.
Positively impacting our communities.
We take great pride and donating to a variety of local charities and programs.
Our employee team generously donated financially and volunteers their time in a variety of ways across our service territory.
In 2018, our company combined with our employee team.
Donated more than $4.1 million in the communities that we serve.
Finally, we continue to build on a legacy of diversity as evidenced by our board composition and their experience.
Slide 24 illustrates our focus on operational excellence.
Our safety performance continued to be excellent and is on track for 2019.
We continued to report much better performance in the utility industry average and it's worth mentioning again that we had zero reportable injuries during the month of June .
Also our communication team received an award from southern gas associated.
In recognition of our teams work on our natural gas crisis communication plan.
Slide 25 illustrates the results of executing our customer focused strategy.
Delivering strong long term shareholder returns.
And then slide 26 is our 2019 scorecard to hold ourselves accountable to you our shareholders. We publish our major initiatives scorecard each year, we made strong progress during the quarter.
Checking off several items that include the approval of our renewable ready program and the receipt of a CPCN for the associated Corey deal Wind project.
Completion of the Wyoming gas legal consolidation and filing our consolidated rate review in Wyoming.
We filed for FERC approval for the Y O Y Gen. One power purchase agreement.
Between Black Hills, Wyoming in Wyoming electric.
We also completed major plant maintenance that box appears under better every day.
And we also completed our employee engagement survey, which box appears under the great workplace.
Now to quickly recap the quarter, we met our Q2 earnings expectations aside from the impacts of weather. We're on track to achieve our capital investment program and we remain confident achieving our 2019 earnings guidance.
That concludes my remarks and were happy to entertain questions.
Ladies and gentlemen, we are ready to open the lines for your questions. If you wish to ask a question. Please press star followed by one on your Touchtone telephone. If your question has been answered or you wish to withdraw your question. Please press the pound key again press star one to ask a question. Please standby for your first question.
And our first question comes from Michael Weinstein with Credit Suisse. Your line is now open.
Hi, good morning, guys.
Good morning, Mike.
Hey, a couple of questions about why Jan.
And the new contracts so.
The FERC filing suggests that the new pricing is about $22 less than the old pricing on 60 megawatts that would.
I would suggest you know somewhere in the neighborhood of around 15 to 18 cents.
Per share hit to earnings unless there's mitigating factors I'm just wondering if there's any other.
Any other mitigating factors, we should be considering.
Yes to that would reduce that.
That impact and then.
Weighted question to that is there is a new contract in there for Gillette small one for about five megawatts is that incremental.
I totally incremental situation that adds that would add new revenues or is that simply a reassignment of five megawatts that had been previously contract it somewhere else before and it's just continuing into this new pricing.
Yes, I think you get the math about right on the PPA Michael This is rich.
The one of the mitigating factors is the coal contract.
Right now the Y. Gen. One plant is on a kind of a fixed with escalators coal contract with the White Act mine.
With this contract it would move to our statement our pricing and so that's a.
Better price on the coal.
And then the five megawatts.
That right now is being sold on the open market so that contract locks down.
That component of the plant, which is helpful. As well I think it's been characterized by you and others is kind of a high single digit net and that's about where we expect the land from 2022 to 2023 as a reminder, the existing contract runs through the end of 2022.
Got you so I mean in other words the high single digit net impact is after the after 2022 when the contract correct correct got it got it and then second question is about the why Adec coal contract can you characterize what that flipped on July 1st what's the economic impact there.
Mike. This is Lynn we continue to negotiate that contract with Pacific work for Rocky Mountain power.
We have extended the current contract during those negotiations, we anticipate an impact to the coal price of probably between a dollar to dollar 50 overall, that's kind of what we're thinking at the moment.
And is that.
So that's one and a half million tons or half of that.
Probably less than that they.
They've been taking slightly less than a million and a half now for a while because of the availability of wind resources in Wyoming.
Gotcha, Okay and.
Can you make any comment about long term earnings growth.
Based on all these resets that have been happening.
Does this have any impact on your.
Your expectation for above average growth.
No it doesn't we still anticipate that Mike.
Above average growth next quarter early November as I said in my remarks will be providing an updated capital forecast extending out another year and then updating what we see in the in the current forecast and we still believe that we can deliver above average earnings compared to utility average.
Great. Okay. Thank you very much.
Thank you.
And our next question comes from Julien Dumoulin Smith with Bank of America. Your line is now open Hey, guys. Good morning, Thanks for the time.
Fred just to clarify the question real quickly with Mike.
I know, we talked about the net impact can we clarify the timing of each of those mitigating offsets just to be sure.
The every positive traffic.
Also on the end of <unk>.
Sorry.
I'm, sorry, I didn't mean to interrupt you. There you are talking about Y. Gen. One right.
Yeah.
That's all it all starts January 1st 2023, everything stays the way it is until then yes.
And then speaking of mitigating offsets you talk about sort of the consistent above average growth trajectory anything else that we should be thinking about through that period that we've been moving up or down.
The kind of enable a more smooth trajectory or anything else sort of big items that period.
Well, we'll have the next four years Julian to consider at least the end or 2020 to look for and strategies and continue to develop strategies that help us ease that.
That pain, if you will that high single digit loss and earnings so something we're very focused on.
Got it all right excellent and then just if I can switch to a slightly different topic here on on the data center focus of your there's certainly been ongoing for a few quarters here any updates with respect to new contracts continued tear sign ups et cetera, I just sort of curious.
Did you originally others continue to talk about it.
Any acceleration.
Yes, a couple of updates we've received a number of contacts for block chain in Wyoming, and we've been responding to those we don't have anything we can announce but we've been responding to those as two data centers. We have had it approved tariff and an approved contract by the Colorado Commission to serve and 50 megawatt load in Colorado Electric.
I think we're under a confidentiality agreement with respect to the details of that but we are excited to be bringing 50 megawatt data center to to Pablo.
Alright, great well, thank you very much guys.
Thanks Julien.
Thank you and as a reminder, ladies and gentlemen that Star then one to ask a question. Our next question comes from Andrew Weisel with Scotia, Howard Weil. Your line is now open.
Hey, good morning, everybody.
My first question is on equity you raised 70 million in the first half that's obviously the better part of the full year guidance can you share any thoughts on why its a bit more front end loaded.
You know market conditions were good during the second quarter and.
We just took advantage of that pretty simple.
All right simple enough.
All right next question you talked a lot about the regulatory strategy to three gas subsidiaries, how about on the electric side can you. Please share your latest thoughts on the outlook for rate case filing for the electric utilities.
Yes. Good question, we don't anticipate any rate case filing and our current plan over the next which is the next five years now that can be that change with respect to integrated resource plans.
That we will be working on and be filing a sentence couple of our states.
For example, we have some capacity, we believe will need to replace the South Dakota electric et cetera, working through those considerations.
But as indicated.
We don't have any plans for rate case over the next five years.
Ill make electric we do have to file one there in a couple of years. You know thinks that reminder, we will we have an agreement through our last IR P to file a rate case by 2021 in Wyoming electric will be filing that.
Great. That's helpful. And then just one last one if I may you mentioned 10 cents of onetime expenses in the quarter will you remind us of any noteworthy onetime item to either in the second half of 18 or that you are aware of for the second half of 19 just for comparisons.
Yeah, Let me, let me clarify it I didn't say 10 cents, a one time expenses as I said 10 cents.
During the second quarter that could be attributed to the impacts of weather, which if you think about.
I said four cents compared to normal.
And then the outage the generation outages, we estimate those were about a two cents net impact and then certain nonrecurring expenses, which were roughly four cents. So that's the 10 cents.
Relative to yes.
You know future onetime and so forth I mean.
I have nothing to point out, particularly there this second quarter had some unusual items in it.
Okay, great. Thank you.
Great. Thanks, Andrew.
Thank you and once again, ladies and gentlemen, if you would like to ask a question at this time. Please press Star then one.
Our next question comes from the dual Marty with Avon Capital. Your line is now.
Good morning.
Good morning would do that.
Well clarify on polling upon.
Mike Weinstein questions.
Personally.
Technology 15 to 18 cents, that's solely tied to the repricing become 2023.
Then you referenced.
A favorable adjustment on the coal supply I want to make sure I understood that that coal supply is from a third party and not from not from your mine Crown. Its tomorrow, it's from our mine all or coal plants that honor coal mine, including Y. Gen. One so all that calls coming from our mine. So, but then you know where I'm going with this 10 isn't and the mine earnings.
Negatively affected as they get lower prices.
No it will be a positive impact for dual starting in 2023, because they'll move to our standard regulatory arrangement, which we call statement are from the current price which is lower.
Okay. So the coal contract price actually goes up.
Yes, that's part that's how you get the offset to.
End up it.
High single digit.
Correct correct.
Okay, and we were referencing earlier about the current negotiation on.
Coal supply.
Hi, Jason.
Why deck.
My recollection is also they say it couldn't be a full reopener I think and the 2022 2023 timeframe.
Is that correct.
Yes, the Conrad contract expires in mid 2022.
Okay.
And.
But.
If I can just clarify little bit.
The last.
Rocky Mountain power IR P. indicates that that plan is going to continue to run well into at least another decade beyond that.
And we don't expect that to change, but we're waiting for more information from them.
Oh that was pretty much going to be my next question. So when would you expect to.
Can get an update to either from.
The previous high RP or.
Have any or disclose any changes.
Good question, but we don't know exactly when us other states will approve their IR P. But what we do know through public presentations and documents that currently.
Rocky Mountain power intends to to operate to why ADAC operation through 2039.
So we would expect renegotiating that contract at some point between now and 2020 two.
And in fact, I would say that's part of our negotiations now with Rocky Mountain power as we negotiate as price is there opportunity for us to extend that contract.
I mean, I guess, maybe one last thing Kevin.
Yes.
Some of the young.
Environmental that no.
Movement in both Oregon and Washington.
How does that play into being able to scale.
Transmit.
Coal generation from another state into.
Those states.
It appears that that's going to be it could become a challenging.
We tend to agree with you we are watching that closely.
When you might find of interest some of the legislation or the Wyoming is passed late lead to try to keep plants opened in that state of Wyoming, but you're absolutely right, we'll be watching it very closely over the next couple of years and determine.
The longevity of coal, especially for Rocky Mountain power.
Okay. Thank you very much.
Thanks for the Q.
Thank you.
With no further questions I will return the call back.
Over to win Evans for closing remarks go ahead Sir.
Thank you everyone for your time. This morning, we thank you for your continued interest in Black Hills.
And hope that you enjoy a safe and great rest of your day. Thank you.
Thank you for your participation in today's conference. This concludes today's presentation. You may now disconnect good day.