NorthWestern Corporation (NWE) Q4 2022 Earnings Call Transcript

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NorthWestern Corporation (NASDAQ:NWE) Q4 2022 Earnings Conference Call February 17, 2023 3:30 AM ET

Company Participants

Travis Meyer - Director of Corporate Finance and IR Officer

Brian Bird - President and CEO

Crystal Lail - VP and CFO

Conference Call Participants

Jamieson Ward - Guggenheim

Anthony Crowdell - Mizuho

Sophie Karp - KeyBanc

Travis Meyer

Good Friday afternoon, and convey you for joining NorthWestern Corporation's financial results and webcast for nan twelvemonth ending December 31, 2022. My sanction is Travis Meyer. I'm nan Director of Corporate Finance and Investor Relations Officer for NorthWestern.

Joining america connected nan telephone coming to locomotion you done nan results are Brian Bird, President and Chief Executive Officer; and Crystal Lail, Vice President and Chief Financial Officer. [Operator Instructions]

NorthWestern's results person been released and nan merchandise is disposable connected our website astatine We besides released our 10-K premarket this morning. Please statement that nan company's property release, this presentation, comments by presenters and responses to your questions whitethorn incorporate forward-looking statements. As such, I'll nonstop you to nan disclosures contained successful our SEC filings and nan safe harbor provisions included connected nan 2nd descent successful this presentation. Please besides statement this position includes non-GAAP financial measures. Please spot nan non-GAAP disclosures, definitions and reconciliations besides included successful nan position today.

The webcast is being recorded. The archived replay of today's webcast will beryllium disposable for 1 twelvemonth opening astatine 6:00 p.m. Eastern coming and tin beryllium recovered successful nan financial results conception of our website.

With that, I'll manus nan microphone complete to NorthWestern's President and CEO, Brian Bird.

Brian Bird

Thanks, Travis.

I deliberation galore of america would agree, 2022 was a challenging twelvemonth successful galore fronts, but we besides had immoderate very bully outcomes successful '22. From an operational capacity standpoint, we maintained a safe and reliable work while reaching caller all-time strategy peaks for some our electrical and state businesses successful 2022.

We besides had important large wind response, some successful South Dakota pinch 2 that occurred during May and pinch important flooding successful some Montana and Yellowstone National Park. Our labor did specified a awesome occupation responding to that. We were acknowledged by EEI for our consequence there.

We are besides 1 of nan very fewer utilities pinch improved JD Power Customer Satisfaction scores successful 2022 and astir improved for some electrical and state among nan West Midsized peers. We were recognized by Newsweek arsenic 1 of America's astir responsible companies, 1 of nan 13 of nan EEI companies acknowledged by Newsweek there. We besides had very bully regulatory execution. The complaint lawsuit continues to advancement good successful Montana, and we received interim rates successful October.

We besides had our largest superior finance twelvemonth ever astatine $580 cardinal invested successful 2022, and astir importantly, we did that safely. We announced our Net Zero by 2050 astatine nan opening of 2022 and person since published our TCFD and SASB aligned Sustainability Report. And lastly, from a reliability and affordability standpoint, and I'd reason sustainability standpoint, we negotiated an statement pinch Avista to transportation our Colstrip ownership to america of 222 megawatts effective December 31, 2025, for a zero acquisition price.

And regarding Colstrip, why Colstrip? When I deliberation astir that, again, I would opportunity reliability, affordability and sustainability was an highly important acquisition, aliases I'd say, transportation of ownership. Reliable, it's a known plus to us. We've been successful Colstrip for decades. It's been a hugely reliable assets for Montana customers successful nan past. It's going to thief america debar lengthy planning, permitting and building of immoderate caller installation that's going to trim our reliance connected imported powerfulness and vulnerability to volatile markets.

It's an in-state and on-system asset, mitigating immoderate transmission constraints to import powerfulness and adds captious long-duration 24/7 on-demand procreation erstwhile we request it most. It's affordable. 222 megawatts of capacity for zero, nary upfront costs, and we cognize it has unchangeable operating costs. We had to build connected an balanced caller build coming of 222 megawatts, to beryllium astir $500 million. This is simply a important triumph for our customers. And connected operating costs that we are known and reasonable and surely person been a discount to marketplace prices we've seen arsenic of late.

And lastly, sustainable. We are surely committed to our Net Zero extremity by 2050. And 1 could reason pinch america that you're procuring much ember here. But from our perspective, pinch nan summation of nan Yellowstone County works and this incremental Colstrip ownership, we person really closed that capacity shortage done nan extremity of this decade, and that will thief america deliberation done from a longer-term perspective, what tin we do successful nan early astatine nan Colstrip tract aliases adjacent from a noncarbon long-duration alternatives. And truthful we and our partners that are moving guardant pinch Colstrip are already speaking astir those imaginable opportunities.

And different caller Colstrip, obviously, our transmission assets are there. And we person a highly skilled labour unit successful Colstrip. So not only it's a sustainable successful principle from a cleanable -- transitioning to a cleanable assets astatine immoderate constituent successful nan future, it besides is very sustainable for nan organization of Colstrip. And lastly, I'd opportunity conscionable nan action itself of taking connected incremental ownership successful Colstrip protects our existing 222 megawatts successful Colstrip, that's highly important to us.

When I speak astir Colstrip connected nan adjacent slide, Slide 5, I want to show nan worth to you of our existing Colstrip. This chart, which you tin find connected our web page, will show you our procreation portfolio. On a play basis, you tin spot that connected our web page. This is for nan Christmas week successful Montana. The grey bars astatine nan apical represents our thermal, ember and earthy gas. The blues are hydro, and you tin spot betwixt those 2 types of resources, very accordant passim nan week. The greenish represents wind.

And you tin spot successful nan backmost half of nan wind, that greenish was higher than nan achromatic line, which is our load. So it wins great. When nan upwind is blowing, we'll person excess energy, we tin waste successful nan marketplace and trim our costs to our customers. But earlier successful that week, peculiarly during precocious unit systems, we had nary triumph whatsoever. And truthful we are solely successful nan request of a capacity assets to capable successful that clip period. We do not person that today.

But arsenic you tin see, it's each -- it's perfectly proviso and demand, that reddish dotted line, which is simply a small much difficult to spot connected this chart. When we had nary triumph during that clip period, we had to procure 41% of our powerfulness successful nan market. And connected nan 22nd, we saw powerfulness prices arsenic precocious arsenic $900 a megawatt hour.

The bottommost of this floor plan shows conscionable nan worth of our existing 222 megawatts connected nan week of December 20 to 26. The adaptable and fixed operating costs to tally Colstrip, our existing ownership, astir $2 million.

To get that magnitude of extremity marketplace purchases that we request to do successful that week, aforesaid amount, 222 megawatts, $12 cardinal connected nan market. So our existing ownership successful Colstrip prevention customers $10 million. So it's rather clear why we'd emotion to person much of Colstrip to capable successful days for illustration this and tin supply continued worth to our customers.

And pinch that, I'll walk it complete to Crystal.

Crystal Lail

Thanks, Brian.

And earlier I locomotion you done nan '22 financial results, we admit it is simply a Friday day earlier a vacation weekend. So we admit your liking successful joining america this afternoon, and we'll support our comments not excessively lengthy.

The different point I will mention is Brian conscionable covered nan cardinal things that we executed upon successful '22 is really important that '22 was from a guidelines and instauration for america of laying nan groundwork for a beardown complaint lawsuit that we're moving pinch unit and nan committee and interveners connected and proceed connected regulatory execution, but besides importantly, from a in installments metrics perspective, resolving our antagonistic outlook pinch Moody's and continuing to alteration a beardown instauration for maturation arsenic we spell forward.

So pinch that, I'll speak to our results for '22 connected Slide 6, opening pinch our 4th fourth results, which we closed retired nan Q4 of '22 astatine $1.16 connected a GAAP ground and connected a non-GAAP basis, that's $1.13. In comparison to 2021 connected a GAAP basis, that's a $0.20 summation and connected a non-GAAP basis, $0.09.

From a afloat twelvemonth perspective, however, we did travel successful conscionable somewhat to nan debased extremity aliases extracurricular of our guidance range. Our guidance scope was $3.20 to $3.40 initially. We did little that arsenic we went into closing retired nan year, but concluded connected a GAAP ground astatine $3.25 arsenic compared -- connected a GAAP ground and $3.18 connected a non-GAAP basis.

So pinch that, connected Slide 7, I'll springiness you a spot of really we deliberation astir nan important drivers for nan twelvemonth and what we expected and what we didn't expect, you'll spot our guidance scope connected nan left-hand broadside of this. And to nan right, nan things that importantly impacted america for nan year.

So what was it that drove america extracurricular of our expectations and importantly, towards nan second portion of nan year, and I'll speak to nan large wind that Brian conscionable laid retired nan criticality of proviso for us, nan criticality of that to our customers and nan activity that we do, but besides really that impacts us, is while we did expect to spot immoderate higher O&M, and if you'll callback successful our bridge, we had $0.04 to $0.06 from a afloat twelvemonth basis, that was a $0.20 headwind to us. And you spot higher liking expense, america and our different mid-cap peers and others are seeing impacts of that. But importantly, nan things that happened to america erstwhile you spot volatility successful nan marketplace is things for illustration PCCAM from a 22 ground that $7.2 cardinal of detriment to us, aliases $0.10.

And I would show you that's sharing 90% of those costs to spell to customers. But Importantly, nan volatility, nan effect connected measure headroom, they effect our equilibrium expanse and what we spot successful those mini moments wherever we person utmost weather, and you conscionable heard what Brian mentioned arsenic to nan value of powerfulness during those times has important impacts to our results. And importantly, nan latest of which occurred correct earlier Christmas and astatine year-end erstwhile we don't person room to set from a results perspective.

As you besides cognize and person followed complete time, we person adjusted weather, a non-GAAP trim retired to springiness you an denotation of our net powerfulness what basal net do beneath that. So we set our revenues to normal to region upwind impacts. However, we don't set nan broader impacts to our results.

Importantly, I conscionable mentioned $0.10 of PCCAM for nan twelvemonth that impacted our results. But nan further detriment to that is erstwhile we spot terrible upwind for illustration that, we not only spot marketplace prices are high, but nan strain connected our strategy and nan wide operating costs astatine some transmission, distribution and nan proviso side, each spell up. And I would conscionable punctual you again, we return retired nan favorable, which would beryllium nan gross broadside of that, but we don't set retired each nan things I conscionable mentioned that besides thrust an effect to our results.

Slide 8 gives you a look astatine 4th fourth financial results from a nett income basis, $66.7 cardinal compared to $51.3 cardinal successful nan anterior period, an betterment of $15.4 cardinal aliases 30%.

Slide 9 gives you a spot much item into that look from Q4 again, a coagulated position -- aliases coagulated capacity for nan quarter. We did spot October, November really offset themselves and being neutral from a broader upwind effect and outsized effect of upwind successful December, arsenic I conscionable alluded to. And we talked astir cardinal captious days that we saw there. So you did spot higher volumes driving improved margins.

The different point successful nan descent earlier we show that, and we included successful our guidance this year, but nan outsized effect of interim rates. That's very coagulated for america and backmost to nan regulatory execution of nan expertise to really gain our returns and activity pinch nan commission. That's surely a cardinal portion location and you spot nan affirmative broadside of that and margin.

And you spot nan offsets present of operating costs driving up and besides liking disbursal and spot taxes, nan wide things that we've discussed arsenic headwinds for america and a spot of favorable income taxation from a 4th perspective, closing that retired astatine $1.16 connected a GAAP ground and again, $1.13 connected an adjusted non-GAAP basis.

Slide 10 gives you a look astatine really we attack that non-GAAP adjustment. And again, arsenic you deliberation astir our capacity year-over-year, this year, we are adjusting retired favorable weather. So you spot nan left-hand broadside of this. To nan right-hand side, past year, we had unfavorable weather, truthful we had an add-back connected a GAAP-adjusted basis. For non-GAAP, $65 cardinal compared to $55.6 cardinal successful nan anterior quarter.

With that, I'll move to afloat twelvemonth results pinch Slide 11. From a nett income basis, closing retired nan twelvemonth pinch $183 cardinal of nett income arsenic compared pinch $186.8 million, which is simply a alteration of $3.8 cardinal aliases 2% connected a GAAP basis, that's $3.25 compared to $3.60 for nan anterior year.

And again, arsenic a reminder, that was our anticipation of having a down twelvemonth based connected nan equity that we had transacted upon precocious successful '21 and nan dilutive effect of that and successful addition, mounting a coagulated guidelines for our complaint lawsuit filing that we made successful 2022.

So pinch that, connected Slide 12, you spot a span again of nan cardinal drivers there. Margin being an betterment that includes some interim rates, but besides immoderate beardown results from our electrical and state business, continued customer maturation and usage trends connected that connected apical of weather, offset by higher operating and wide expenses.

And again, nan things that impacted america successful '22 nary different than astir of our peers, but things for illustration substance expenses, worldly expenses, security each of those things seeing inflationary impacts that are flowing done to america and yet to our customers. Also, you spot nan higher depreciation.

And past ultimately, higher liking expense, I deliberation I commented astatine Q3 that our PCCAM is nan gift that keeps connected giving because not only do we not retrieve those costs fully, they effect our equilibrium expanse by carrying higher mean revolving balances for those undercollected proviso costs that we don't person a carrying complaint for. So costs of superior is nary longer free arsenic we saw nan unprecedented summation successful liking disbursal aliases liking complaint past year, driving unit to america yet astatine nan liking disbursal line, you spot $0.09 of headwinds successful our span here.

And past again, our spot taxes, we don't retrieve our afloat magnitude of spot taxes until we travel successful from a complaint case, which you each cognize we're successful nan mediate of. So we still proceed to spot resistance there, and that resistance was moreover higher than we expected initially for nan year. All of that resulting successful a $3.25 GAAP ground results for nan year, again adjusted astatine $3.18.

Slide 13 speaks to nan separator impacts. I would punctual you aliases item conscionable a mates of things here. I mentioned coagulated income and volumes crossed our customer classes. The different point being interim rates, which are important to america and closing retired '22 and offsetting immoderate of nan detrimental effect that we saw successful those different areas, but evidently not capable fixed nan magnitude of headwinds we saw versus nan effect of those interim rates.

The different point I would conscionable item present is that little electrical transmission revenue. If you recall, past year, we had an point of a deferral merchandise there. And absent that, we were astir neutral connected nan electrical transition. That's been a cardinal portion of our businesses. I would item that our rates really decreased their but request really went up.

So coagulated results location too. And past nan PCCAM effect past year, $5.4 cardinal of detriment to us. This year, $7.2 million, and that would beryllium year-over-year $1.8 cardinal impact. I would besides punctual you that successful 2021, we person revenge and requested to reset nan guidelines early aliases extracurricular of a complaint case. The committee has denied that request.

So of course, we didn't spot that guidelines reset until October 1. The different point that I would item from a Q4 position that I didn't mention supra is moreover pinch that guidelines reset of interim rates, nan exertion of PCCAM to america successful Q4 was a important detriment.

With that, closing retired nan twelvemonth connected a inferior separator pinch an wide improvement, but again, adjusting retired immoderate of nan things pinch interim rates and spot taxes connected nan descent to springiness you further detail.

Slide 14, again, shows you our GAAP to non-GAAP adjustments. Same communicative for nan year-to-date arsenic it is for nan 4th successful nan consciousness of favorable upwind that we're adjusting retired besides adjusting retired nan correct punishment that we had talked astir successful Q2 and successful nan anterior year, that was unfavorable weather. So an add-back pinch that $178.9 cardinal aliases $3.18 for 2022 arsenic compared pinch nett income of $182.4 cardinal aliases $3.51 successful 2021.

From a rate travel perspective, nan different point that we stay focused connected is moving to amended our in installments metrics successful our FFO. And I would show you, we've had a really beardown twelvemonth from a rate travel perspective, and you tin spot that successful nan numbers connected this page of important betterment of rate from operating activities versus nan anterior twelvemonth and deliberation astir that arsenic selecting immoderate of those deferred costs from nan anterior period.

The situation is we proceed to beryllium -- person important deferred costs arsenic it relates to mostly chiefly our Montana PCCAM. So you spot an betterment there, but still an under-collected position that we're moving to retrieve from customers.

With that, nan different point I would conscionable mention, and that takes you correct to nan guidance slide. But arsenic you each know, and we talked astir astatine EEI successful Q3, we are not giving '23 net guidance until we reason our complaint lawsuit and person an result from that and from our commissioners arsenic we're moving that, that has outsized effect arsenic to really we deliberation astir our maturation going forward.

We expect coming retired of that to refresh some our semipermanent guidance complaint and besides our financing plans. But successful nan adjacent term, we do expect -- astir of you callback we person $75 cardinal remaining connected our ATM equity program. We do expect to rumor that during 2023.

We besides person manageable indebtedness issuances, but 1 portion that we request to refinance of $144 cardinal precocious successful nan year, but each that accordant pinch our semipermanent guidance that we've fixed before, we besides person a continued important superior program. Brian talked astir nan execution successful 2022.

And I would commend our teams successful what was a challenging twelvemonth of proviso concatenation challenges and nan expertise to get their activity done to proceed to execute upon what we deliberation is captious for nan strategy and besides to proceed to execute connected nan Yellowstone development. So each of that, a important magnitude of superior successful '22 closed retired and a continued scheme for '23, successful statement pinch what you've seen from america before.

And pinch that, I will move it complete to Brian.

Brian Bird

From a superior finance perspective, I deliberation from nan past 5 years, we invested astir $2.1 cardinal complete those 5 years and obviously, heavy weighted successful nan backmost years arsenic we embarked connected building Yellowstone County plant. We're still going up astir different 15%, astir 15% going now to $2.4 cardinal successful nan adjacent 5 years from a forecast perspective.

Obviously, that finance is going to reside a procreation and transmission capacity constraints. We person transmission constraints connected some nan electrical and state broadside and peculiarly successful Montana arsenic Montana continues to grow.

On nan distribution side, surely grid modernization is important. And from a procreation standpoint, renewable power integration and conscionable proceed to woody pinch nan capacity constraints that we person arsenic a company. This $2.4 billion, it does see nan Yellowstone County Generating Station, and it does see immoderate hydro upgrades that we scheme to do and immoderate attraction of our generation, but it does not see immoderate caller plants.

And pinch that, I return you to nan adjacent descent from a looking guardant perspective. Yellowstone County surely successful those numbers we conscionable said about, but I'll talk astir successful a infinitesimal immoderate plans for South Dakota. Speaking Yellowstone County, we began building early successful '22, we're already successful awesome advancement location complete from a walk position complete halfway.

And nan existent schedule anticipates a commercialized cognition during nan first half of 2024. And truthful we're excited astir nan continued advancement connected nan Yellowstone County plant. We really return nan Board for a circuit of nan building astatine our April gathering successful billings.

From an electrical proviso assets plan, we did record our South Dakota works successful precocious '22 successful September, and we're already talking astir -- to nan committee astir a discontinue and switch campaigner up successful Aberdeen, location successful that 30 to 40-ish megawatts, proceed to person a speech successful position of due size there. So nan thoughts astir moving guardant building nan works location is breathtaking for us. And again, those numbers are not successful nan superior we conscionable shared.

Lastly, arsenic a consequence of definite changes participating successful wrap, reasoning astir IIJA and IRA, we decided to clasp of filing our integrated assets scheme successful Montana until nan extremity of March. We're still connected way to do that astatine nan extremity of nan March. And we've also, of course, incorporated our news regarding Colstrip into that plan. So we consciousness bully astir advancement we're making there, and we'll look guardant to sharing that pinch you and speaking pinch you during nan April net call.

And pinch that, we'll conclude, and I'll manus it backmost complete To Mr. Meyer.

Question-and-Answer Session

A - Travis Meyer

Thank you, Brian and Crystal. [Operator Instructions] With that we will return our first telephone from Jamieson Ward from Guggenheim. Jamieson, your statement should beryllium unmuted.

Jamieson Ward

Perfect. Yes, it is. You sewage a small popular up location now that really says enactment muted aliases unmute. That's rather helpful. I deliberation that should make nan telephone spell smooth. Thank you for taking our mobility here. Appreciate it. Just sewage a mates for you. Understanding that, of course, you're not going to beryllium issuing '23 guidance until aft nan complaint lawsuit modular procedures you've done successful anterior years. You did, though, spell to aliases opt to put retired not conscionable '23 but a afloat five-year superior plan, which was great. It's adjuvant for modeling.

Some questions astir some of those and past conscionable immoderate differences successful nan slides. So you reiterated nan 3% to 6% semipermanent EPS maturation today. But looking backmost astatine nan 3rd 4th platform and past year's 4Q deck, nan guidelines twelvemonth of 2020 is missing. So I'm conscionable wondering, is that benignant of soft signaling that you're benignant of reevaluating what an due guidelines would be, and that mightiness beryllium 1 of nan things that gets unveiled aft nan complaint lawsuit erstwhile you rotation guardant and put retired your charismatic guidance. Or was it conscionable missing successful nan descent platform successful 2020 stands?

Crystal Lail

Jamieson, you person awesome attraction to detail. That's my first comment. An fantabulous occupation of figuring retired really to unmute yourself. I cognize we make that challenging for a Friday afternoon. But your remark is simply a bully drawback and correct. We will measure what is our guidelines year. Obviously, 2020 is beautiful dated astatine this point. And truthful erstwhile we do travel retired pinch updated guidance, I would expect to spot a caller guidelines from us.

Jamieson Ward

Got you. Totally makes sense. Just want to cheque and tally it by you. The 2nd 1 is connected complaint base. And nan first portion of it, you've answered there. It conscionable had to do pinch nan $4 cardinal successful 2020 arsenic a base. The 2nd portion of it, though, truthful I deliberation that's dealt with. The 2nd portion was erstwhile I looked astatine CapEx year-by-year, summed them up and pulled retired nan Yellowstone constituent from past year's '22 to '26 scheme and past this year's '23 to '27 plan, it still benignant of looked beautiful comparable from a dollar standpoint.

So I'm conscionable wondering if possibly I should beryllium looking astatine it differently. But essentially, 2.2 times Yellowstone for nan '22 to '26 scheme and 2.240 times Yellowstone successful nan existent plan, really do you get complaint guidelines maturation of 4% to 5% if nan dollars magnitude -- nan dollar magnitude being invested stays nan same, but of course, person depreciation and truthful on? Or is it much that it's a CAGR alternatively than an yearly maturation complaint and it's benignant of much back-end loaded, weighted towards much transmission opportunities? Just trying to get immoderate colour connected really to champion benignant of understand nan way you guys mightiness spot going guardant since you've opted to springiness CapEx guidance and rotation nan five-year scheme today?

Crystal Lail

Great questions, Jamieson. We did opt to springiness CapEx guidance because we knew if we didn't, you would each person nan questions. So we mightiness arsenic well, right. And really we deliberation astir that? And arsenic nan CFO sitting here, managing our in installments metrics versus nan CEO complete location saying, we request to get aft capacity, there's plentifulness of superior to beryllium done.

So what I would opportunity this rotation guardant represents is, one, you are rolling disconnected Yellowstone. There are immoderate slides successful nan exhibit. It sounds for illustration you've already been location that really springiness you that nonstop mathematics of Yellowstone is incremental to what we would opportunity arsenic a normal tally of nan mill superior spend. And past secondly, nan cardinal portion present is we're focused connected our FFO metrics.

So plentifulness of superior will beryllium done. But really tin we do that and support our ethical metrics and importantly, thrust affordability? Again, there's -- I would telephone it almost an unlimited magnitude of capital, if you tin get nan folks to get nan activity done. The mobility is, what tin we do and support affordability to customers? How do we deliberation astir that? And past really do we deliberation astir our FFO metric? So nan superior roll-forward you would spot present arsenic dependable arsenic she goes. It is so a CAGR. And truthful I would deliberation astir it successful that respect arsenic well.

Brian Bird

One point I'd adhd to that, that I deliberation nan rumor pinch Colstrip, I deliberation group person been concerned astir our superior needs arsenic a consequence of procuring thing for zero and an opportunity you whitethorn miss, if you will, from a procreation finance perspective. One of nan reasons we're surely comfortable, obviously, we reside that rumor because we're concerned for our customers.

We're going to do this successful principle to trim consequence for america connected our extremity successful position of owning Colstrip besides for our customers and support capable measure headroom truthful we tin person this precocious level of superior and announcement that this slope is not nan upward hockey-stick type slope that we've seen historically for our superior plans. It's beautiful comparatively level crossed nan clip period. It conscionable demonstrates nan magnitude of capacity finance we request to make arsenic an statement for our increasing communities.

Jamieson Ward

Got you. That's very adjuvant color. And it makes a batch of consciousness why you opted to spell to nan roadworthy that you did there. It decidedly seems for illustration that was nan correct attack to take. Last mobility for me, and past I'll walk it disconnected to others successful nan queue. On FFO, anterior metric target had been 14% to 15%. Now it's greater than 14%. Just wanted to get a consciousness of, a, is that for a definite play of time, and past it's backmost to nan 14% to 15%? Is 14% conscionable nan caller normal going forward? Is it limited connected whether you get things for illustration nan capital, right? Like really should we deliberation astir what moved you from nan 14% to 15% down to nan 14% and decided to support it location arsenic nan caller modular azygous level location successful guidance?

Crystal Lail

Again, awesome attraction to detail. I don't cognize that I overbought changing it from 14% to 15% to conscionable being complete 14%. I would show you that's wherever we're targeting arsenic being -- and to your point, it's improbable that we would target to beryllium good supra that number. So 14% to 15% is astir apt adjacent to deliberation astir that, but we proceed to beryllium focused connected making judge that we're maintaining.

Moving our in installments metric expect for that, we'll admit that this twelvemonth pulls retired a small little FFO than we were anticipating because of nan pressures we saw astatine year-end, again, proviso costs and really that affects our indebtedness level. But nary intent of alteration successful reside aliases wherever we're headed betwixt saying supra 14% versus saying 14% to 15%.

Jamieson Ward

Got it. Thank you. Very helpful.

Crystal Lail

Thanks, Jamieson.

Travis Meyer

Okay. We'll return our adjacent telephone from nan statement of Anthony Crowdell astatine Mizuho. Anthony?

Anthony Crowdell

Hi. Good afternoon. Can you perceive me?

Travis Meyer

We tin perceive you, Anthony.

Brian Bird

Hi, Anthony, we could.

Anthony Crowdell

I don't cognize what's -- a container keeps popping up. A container keeps popping up to unmute aggregate times, but dissimilar Jamieson, I'll effort to support it brief. Just quickly, thoughts you're acquiring Colstrip for zero, I'm conscionable curious, does that travel into rates aliases [technical difficulty]?

Brian Bird

Well, nan rumor is we're acquiring Colstrip for zero, obviously, there's nary upfront superior cost. So that is effective successful 01/01/26. It's our intent. Of course, by nan clip we get to 01/01/26, we want to make judge that we get betterment of our operating costs that will commencement connected 01/01/26. And if there's immoderate incremental superior from a attraction perspective, we want to person certainty of that connected a going-forward basis.

I deliberation nan feedback we've seen successful Montana from nan governor, nan U.S. -- our U.S. representatives and full delegation, nan authorities legislature and moreover a erstwhile commissioner, astatine least, a tremendous support for Colstrip. And truthful we consciousness bully astir wherever we beryllium connected this peculiar issue. And past ultimately, immoderate costs we subordinate pinch Colstrip connected a going-forward basis, precocious chance of recovery.

Anthony Crowdell

Do you person nan action of utilizing Colstrip arsenic a merchant installation to thief offset immoderate of nan volatility that you're seeing successful nan PCCAM, arsenic for illustration a earthy hedge that is...

Brian Bird

Well, Anthony, I'd opportunity this. We don't person to run arsenic a merchant to offset nan volatility successful PCCAM. We tin run it arsenic a regulated assets to do that, right? Because we tin usage that. We benignant of calling connected nan marketplace, we tin run our existing asset. And my biggest title astir this Colstrip acquisition is we person to hold till 01/01/26 to get.

I deliberation different point I'd conscionable opportunity connected PCCAM, I deliberation what Crystal's done successful position of trying to set what's a due measurement to dainty nan PCCAM and really we should get due betterment and hopefully, that gets captured successful this complaint case, that's going to surely thief us, too.

Anthony Crowdell

Great. And nan past one, connected nan FFO to debt, erstwhile do you get to 14%?

Crystal Lail

That's a awesome question. And arsenic I said, we're not giving semipermanent guidance, but we decidedly -- nan cardinal determinant of driving our FFO betterment is this complaint lawsuit outcome.

Anthony Crowdell

If nan complaint lawsuit result is wrong expectations, do we deed 14% by year-end?

Crystal Lail


Anthony Crowdell

Okay. Thanks truthful much. I'll time off it there.

Brian Bird

All right. Thanks, Anthony.

Travis Meyer

Thanks, Anthony. We'll return our adjacent telephone from nan statement of Sophie Karp astatine KeyBanc.

Sophie Karp


Travis Meyer

Hi, Sophie. We tin perceive you.

Sophie Karp

Hi. Good afternoon. Thanks for taking my questions. So my first mobility is connected nan IRP, which you, I guess, somewhat delayed nan filing of it, and you alluded successful your prepared remarks that you're evaluating options fixed nan IRA and nan Colstrip. Just was funny to benignant of possibly if you could talk what those caller options are that you're seeing fixed nan caller reality nether nan IRA model and your acquisition aliases transportation of ownership of Colstrip?

Brian Bird

I deliberation really, nan 3 things that travel to mind connected location is, there's caller capacity legalization associated pinch RAP we person to return into consideration. Obviously, having Colstrip successful nan operation impacts nan magnitude of capacity that we request and nan type of resources potentially. And past lastly, conscionable reasoning astir what nan costs resources would be, IRA is 1 factor, but obviously, we've seen accrued ostentation and different things, proviso concatenation issues effect costs successful different way.

So conscionable trying to see those things into nan mix. And it's requiring america to do rather a spot of activity to alteration and update this. And Sophie, it's excessively soon for america to show you what we expect to spot from a alteration perspective, nan assets scheme will beryllium retired present successful astir a period and half.

Sophie Karp

Okay. All right. We'll wait. And past my different mobility was, would you attraction to remark astir nan broadview decision? And I guess, nan broader mobility I person is what benignant of an effect would interconnect and specified accommodation person connected your already challenged, I guess, powerfulness proviso costs and I conjecture nan calculation of nan avoided cost, is that going to alteration successful your favor, possibly pinch nan summation of Colstrip, different resources? How should we deliberation astir this moving forward?

Brian Bird

I deliberation Colstrip surely helps arsenic we closed that spread and person reduced capacity requirements. Obviously, nan broadview determination we're disappointed in. From our perspective, astatine nan extremity of nan day, this -- from an power position pinch immoderate of these resources, we believe, is customers -- it's energy, our customers don't needfully request and surely astatine nan prices that they yet person to salary complete nan life of these contracts. And it surely gives america little elasticity arsenic a institution to run our portfolio of resources erstwhile much and much of these contracts are portion of nan mix.

Sophie Karp

All right. Thank you. That's each from me.

Crystal Lail

Thanks, Sophie.

Travis Meyer

Thanks, Sophie. And I deliberation pinch that, we've exhausted our queue of questions. I manus it backmost to Brian for immoderate closing remarks you mightiness have.

Brian Bird

It's my first clip of closing remarks. I should person been prepared to opportunity something. Actually, I would conscionable opportunity this. I deliberation we're very excited astir benignant of from a tailwind perspective. I cognize arsenic an manufacture we've sewage tremendous magnitude of headwinds successful beforehand of us, higher inflation, higher liking costs, higher commodity costs.

But arsenic an individual company, I deliberation from nan complaint case, from really we're handling our capacity rumor pinch Yellowstone County and Colstrip, and I deliberation nan reception we've received from nan authorities successful position of immoderate of these decisions we made, I consciousness arsenic an individual company, we've sewage a batch of tailwinds arsenic well. So highly excited astir 2023 and wherever this institution tin go.

Travis Meyer

Thanks, again, for joining america connected a Friday day earlier vacation call. Please consciousness free to scope retired to maine personally if you person immoderate questions pursuing nan call. And pinch that, you whitethorn now disconnect.

Editor: Naga

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