Jamieson Ward

Jamieson Ward asked for clarification on the Leaf River fourth cavern expansion to 55 BCF, specifically regarding the level of commercial interest, expected capital intensity relative to existing expansion, and the timing of associated earnings contribution into 2029-2030.

Answer

Stephen D. Westhoven, President and CEO, confirmed constructive open seasons for the fourth cavern but no contracts yet. He noted that brownfield expansion is more cost-effective than greenfield and that current pricing supports the fourth cavern. He reiterated doubling earnings by 2027, existing cavern expansion by 2028, and the fourth cavern expansion potentially starting construction for a 2029 timeframe, driven by market demand.

Jamieson Ward asked for more details on the fourth cavern expansion at Leaf River to 55 BCF, including the level of commercial interest, the expected capital intensity relative to existing expansions, and the timing of associated earnings contributions into 2029 and 2030.

Answer

Stephen D. Westhoven, President and CEO, confirmed constructive open seasons for the fourth cavern but noted the need to convert interest into firm agreements. He explained that brownfield expansion is more cost-effective than greenfield. He outlined the timing: earnings doubling by 2027, existing cavern expansion and capacity coming online in 2028, and the fourth cavern expansion potentially starting construction for a 2029 timeframe, driven by market demand for storage.

Jamieson Ward inquired about the realistic deployment timeline and earnings cadence for Clean Energy Ventures (CEV) given favorable Treasury guidelines and safe harbored investments. He also asked about the weighted average contract life for SREC/TREC and the company's long-term view of these assets, and finally, about New Jersey Resources' affordability efforts in New Jersey, particularly concerning the next rate case.

Answer

Steve Westhoven (President and CEO, New Jersey Resources) stated that the capital plan provides the most accurate picture for CEV deployment, noting that safe harbored projects offer potential for acceleration. Regarding SREC/TREC, Mr. Westhoven emphasized the long-term value of solar facilities, highlighting opportunities for repowering, battery integration, and leveraging existing interconnects, viewing them as long-term assets supportive of growing energy needs. On affordability, he reiterated that natural gas is the cheapest heating option and highlighted energy efficiency programs like Save Green, expressing readiness to collaborate with the new administration.

Jamieson Ward asked for a realistic deployment timeline for Clean Energy Ventures (CEV) projects, considering favorable Treasury guidelines and safe-harbored investments, and how to model the earnings cadence from this pipeline. He also inquired about the weighted average contract life for SREC/TREC within CEV and the company's affordability efforts in New Jersey, particularly in anticipation of the next rate case.

Answer

Steve Westhoven, President and CEO, stated that the capital plan provides the most accurate picture for CEV deployment, noting that safe-harbored projects exceed current capital plan needs, offering potential for acceleration based on policy. He emphasized the long-term value of CEV assets, highlighting opportunities for repowering, battery integration, and organic improvements, viewing it as a long-term business supportive of growing energy needs. Regarding affordability, Westhoven reiterated natural gas as the cheapest heating option and highlighted Save Green energy efficiency programs, expressing readiness to collaborate with the new administration to maintain affordability.

Jamieson Ward of Jefferies asked for a comparison of the expected economics for the Leaf River expansion versus existing caverns and current market dynamics. He also questioned the outlook for New Jersey's regulatory environment over the next 12-24 months, considering affordability concerns, and asked about any new mechanisms being pursued to reduce regulatory lag.

Answer

President and CEO Stephen D. Westhoven stated that the Leaf River expansion would only proceed if it achieves appropriate returns, requiring locked-in contracts and clear cost visibility, making it a different risk profile than the initial acquisition. On the regulatory front, Westhoven expressed confidence, noting the company is in a good position following its recent rate case and energy efficiency filings. He affirmed NJR's focus on affordability, highlighting that natural gas remains the most cost-effective heating source in the state.

Jamieson Ward, on for Julien Dumoulin-Smith, asked about the potential for new long-term transmission project announcements and how the company's future construction profile aligns with its strategy to seek a higher equity layer in its next rate application.

Answer

President and CEO David Lebeter said he anticipates the province's upcoming integrated energy plan will identify new transmission lines. CFO Harry Taylor added that the OEB's cost of capital ruling was generic and that Hydro One intends to make a specific case for a higher equity thickness for its transmission business in its next application, citing its large-scale projects as a precedent.

Jamieson Ward of BofA Securities asked about the interplay between the newly increased EPS CAGR guidance through 2027 and the upcoming JRAP reset, which will return accumulated OM&A benefits. He also inquired about the expected timing for the next guidance update and the JRAP filing.

Answer

Chief Financial and Regulatory Officer Henry Taylor explained that Hydro One has significant momentum from nine new transmission lines that will create tailwinds into the next rate period, offsetting the regulatory reset. He clarified that new guidance will not be issued until the next JRAP is approved, which is planned for filing in the fall of 2026 for a January 1, 2028 effective date.

Jamieson Ward of Guggenheim Securities inquired about the development timeline for data center-related opportunities and how they might fit into capital plans, as well as the outlook for O&M expenses in 2025 compared to the long-term plan.

Answer

President and CEO Robert McAnnally highlighted the diverse economic development opportunities in their service territories. SVP and COO Curtis Dinan added that project timelines vary, with some being faster than the typical three years by leveraging the existing system. Regarding O&M, Mr. Dinan confirmed that while Q4 2024 performance was strong due to accelerated initiatives, the company is not changing its guidance for 2025 or its five-year plan.

Jamieson Ward of Jefferies questioned how potential future interest rate cuts might impact ONE Gas's financial guidance, noting that the recent 50 basis point cut was not in the original plan.

Answer

SVP and CFO Christopher Sighinolfi confirmed that the original 2024 guidance assumed no rate cuts, so the September cut provided a benefit. He reiterated that their plan had already included 100 basis points of cuts for 2025 and that their long-term rate normalization view is tied to the Federal Reserve's balance sheet normalization.

Jamieson Ward of Jefferies asked for clarification on AEP's 2025 equity needs, questioning if recent ATM issuance and pending asset sale proceeds would be sufficient for the year. He also sought a rule of thumb for financing the $10 billion of incremental CapEx.

Answer

EVP and CFO Trevor Mihalik confirmed that the combination of the $2.8 billion in proceeds, the ATM, the DRIP program, and potential securitizations puts the company in a 'good shape' for its current plan, and acknowledged that equity-like instruments are being considered. Regarding the incremental $10 billion, he stated that the company will finance it efficiently, with a formal update to be provided during the third-quarter call.