Alex Kania

Alex Kania asked for clarification on the earnings profile of the FERC-regulated MX3 project, specifically if NW Natural would receive AFDC during construction, and whether the incremental equity needs for the $300 million CapEx could still be funded through the ATM program. He also sought confirmation on the target date for the notice to proceed.

Answer

President and CEO Justin Palfreyman confirmed that NW Natural would receive AFDC during the MX3 project's construction period and expects to fund any equity requirements through normal issuances under its ATM program. He also confirmed that the target for notice to proceed is by the end of 2027.

Alex Kania from BTIG asked two follow-up questions regarding the MX3 Gas Storage Expansion project: first, whether NW Natural would be able to receive Allowance for Funds Used During Construction (AFDC) during the project's construction phase, and second, if the company's existing ATM program would be sufficient to fund the incremental equity needs for the approximately $300 million CapEx associated with MX3 once notice to proceed is received. He also sought clarification on the target date for notice to proceed.

Answer

Senior Vice President and CFO Ray Kaszuba confirmed that NW Natural would receive AFDC during the construction period for the FERC-regulated MX3 project and that incremental equity needs could be funded through normal issuances under the ATM program. He also confirmed that the target for notice to proceed is by the end of 2027.

Alex Kania asked if the $125 million equity issuance figure is a reasonable ongoing expectation for funding the updated CapEx plan. He also sought confirmation that the 6%-8% long-term EPS growth rate is expected to continue beyond 2030, using 2030 as a new base year. Finally, he inquired about the rate trajectory for Texas post-Quadvest, considering affordability and the impact on average customer bills, especially with higher customer growth in the jurisdiction.

Answer

Ann Kelly, Chief Financial Officer, confirmed that on average, $125 million for equity issuance is likely accurate, though it may vary year-to-year and increase with CapEx. She also affirmed that the 6%-8% EPS growth rate is indeed expected to continue off the 2030 base year. Bruce A. Hauk, Chief Operating Officer, addressed the Texas rate case, stating that the company cannot pre-empt the PUC process but has a duty to recover prudent investments, noting it has been 13 years since the last rate case. He emphasized that affordability remains a priority, and the company will seek ways to assist customers, including proposing a low-income tariff, similar to programs in California, Connecticut, and Maine.

Alex Kania, Managing Director and Senior Research Analyst at BTIG, asked about the ongoing equity issuance, specifically if the $125 million figure is a reasonable annual expectation for funding the updated CapEx plan. He also sought confirmation that the 6%-8% long-term EPS growth rate is sustainable beyond 2030, using 2030 as a new base year. Additionally, he inquired about the expected rate trajectory and impact on average customer bills in Texas following the upcoming rate case post-Quadvest, considering customer growth and affordability.

Answer

Anne P. Kelly, CFO, confirmed that $125 million is a reasonable average annual expectation for ongoing equity, with some year-to-year variances. Andrew Walters, CEO, affirmed that the 6%-8% EPS growth rate is indeed expected to continue off the 2030 base. Bruce A. Hauk, COO, stated that the company cannot pre-empt the PUC process regarding rate outcomes but emphasized the duty to recover prudent investments, noting it's been 13 years since the last Texas rate case. He also highlighted the importance of affordability and the intention to propose a low-income tariff in Texas, similar to other states.

Alex Kania asked about the opportunity presented by refinancing the Florida City Gas acquisition debt, specifically regarding potential help on interest expense and ongoing opportunities in the next couple of years.

Answer

Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Corporate Secretary, explained that the original FCG acquisition debt had a "6-plus" handle. She anticipates a robust refinancing plan over the next several years, blending different tenors to achieve a more favorable rate. She estimated an opportunity to shave 50 to 100 basis points off the coupon rate, assuming current market conditions hold.

Alex Kania inquired about the sustainability of the strong customer growth observed in the Delmarva Peninsula and asked for more details on the financing opportunities related to the Florida City Gas (FCG) acquisition debt.

Answer

Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Corporate Secretary, confirmed that strong customer growth in Delaware is not slowing, citing new developments and the resulting need for additional pipeline capacity. She also discussed the robust refinancing plan for the FCG acquisition debt, aiming to blend different tenors to reduce the coupon rate by 50-100 basis points from the original 6%+ handle.

Alex Kania asked for the rough split of midstream earnings and EBITDA between pipelines and storage. He also inquired if a decision to sell storage assets would alter Spire's long-term balance sheet targets and thresholds. Additionally, he asked about the anticipated alignment among parties regarding the transition to a future test year in Missouri and any potential educational needs or complexities.

Answer

Scott Doyle, President and CEO of Spire, confirmed the midstream split is approximately one-third pipeline and two-thirds storage for both earnings and EBITDA. He stated it's too early to comment on the impact of a potential storage sale on long-term balance sheet targets, pending the conclusion of the evaluation process. Regarding the Missouri future test year, Mr. Doyle acknowledged it as a 'case of first impression' and anticipated all parties would collaborate to understand filing requirements and navigate the new regulatory paradigm.

Alex Kania sought to understand the relationship between the 4.5 GW of incremental power equipment and the projects in MISO's expedited resource addition study (ERAS) queue, specifically asking if the 4.5 GW ties to the four extra incremental projects. He also asked if the ERAS process is functioning as intended to meet forward needs and if the extra turbines in the queue represent nearer-term demand.

Answer

Drew Marsh, Chair and CEO, clarified that the 4.5 GW (representing six additional turbines) is not yet included in the ERAS queue, as these units are targeted for commercial operations in 2031-2032. He stated that projects currently in the ERAS queue are much more near-term. Drew Marsh, Chair and CEO, confirmed that the extra turbines in the queue would indeed represent incremental nearer-term demand if opportunities arise.

Inquired about the evolving voluntary carbon markets, specifically the potential for long-term deals with data centers/hyperscalers to decarbonize their natural gas usage, and asked for more detail on the company's view of the European RNG market opportunity.

Answer

The transportation fuel market remains the highest value offtake for RNG molecules. While they see interest in voluntary markets, the eRIN policy for renewable electricity is seen as a more financially attractive near-term opportunity for serving data center demand. The European export market is seen as a potentially attractive medium-term opportunity, particularly in compliance markets, but is currently paused due to regulatory changes (ISCC certification). They are working with European regulators to reopen these export pathways.

Alexis Kania of Marathon Capital asked about the evolving voluntary carbon markets and the potential for long-term deals with hyperscalers to decarbonize their natural gas streams. He also requested further details on the RNG export opportunity in Europe.

Answer

Co-CEO Adam Comora explained that while the transportation fuel market remains the highest-value offtake for RNG molecules, the company is monitoring opportunities in renewable power for data centers, particularly through the eRIN policy which could be financially attractive. Regarding Europe, Comora noted that regulatory changes are creating a temporary pause in the export market. However, OPAL Fuels is working with European regulators to reopen these pathways, viewing it as a potentially attractive compliance market in the medium term.

Alex Kania of Wolfe Research, LLC asked about the landscape of partially contracted LNG projects, whether many might fail, and if this creates a commercial opportunity for Cheniere. He also inquired about the path to achieving a uniform investment-grade credit rating.

Answer

EVP and CCO Anatol Feygin noted that many contracted projects have yet to be built, creating a mix of committed and opportunistic buyers, which positions Cheniere to capture demand from those needing reliable supply. EVP and CFO Zach Davis expressed high confidence in reaching investment-grade status by H1 2023, citing strong credit metrics, debt paydown, and a robust, long-term contracted cash flow profile.

Alex Kania of Wolfe Research inquired about customer demand for seasonally shaped contracts and whether recent debottlenecking announcements by ConocoPhillips were already factored into Cheniere's updated production guidance.

Answer

EVP & CCO Anatol Feygin confirmed the company has the flexibility to structure seasonally shaped contracts to meet customer needs. President & CEO Jack Fusco clarified that while ConocoPhillips is a key partner, their recent announcements were likely for future projects and Cheniere's own successful debottlenecking efforts are already reflected in guidance.

Alex Kania asked about the company's willingness to engage in third-party marketing deals to capture local spot price opportunities. He also questioned if there was an opportunity to capture demand from other U.S. LNG projects that are struggling.

Answer

EVP & CCO Anatol Feygin confirmed their marketing team is actively taking advantage of volatility in shipping and local indices to optimize their portfolio. President & CEO Jack Fusco added that Cheniere offers a premium product and expects to emerge from the pandemic in a stronger competitive position, which they will seek to capitalize on.