Sempra (SRE) — Q3 2020 Earnings Call Transcript

Good morning. And welcome to Sempra Energy’s third quarter 2020 earnings call. A live webcast of this teleconference and slide presentation is available on our website under the Investor section. Several members of our management team are on the line with us today, including Jeff Martin, Chairman and Chief Executive Officer; Trevor Mihalik, Executive Vice President and Chief Financial Officer; Justin Bird, Chief Executive Officer of Sempra LNG; Allen Nye, Chief Executive Officer of Oncor; Kevin Sagara, Group President; and Peter Wall, Senior Vice President, Controller and Chief Accounting Officer. Before starting, I’d like to remind everyone that we will be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in any forward-looking statements we make today. The factors that could cause our actual results to differ materially are discussed in the company’s most recent 10-K and 10-Q filed with the SEC. All the earnings per share amounts in our presentation are shown on a diluted basis and we will be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for reconciliation to GAAP measures. I’d also like to mention that the forward-looking statements contained in this presentation speak only as of today, November 5, 2020 and the company does not assume any obligation to update or revise any of these forward-looking statements in the future. With that, please turn to slide 4 and let me hand the call over to Jeff.

Thanks, Nelly, and thank you all for joining us today. Before I start, I'd like to take a moment to recognize the exceptional work of our 18,000 employees who have been working hard to improve the safety and resilience of the communities we serve. We power thousands of hospitals and emergency service providers, the nation's two largest ports, hundreds of clean transit and heavy-duty trucking fleets, and essential electric generation. Millions of people count on our critical energy infrastructure and the work we do is a great credit to the dedication and professionalism of all our employees. Last quarter we successfully concluded a two-year capital rotation program where we divested non-core assets and repositioned our business in what we believe are the best markets in North America, and we continue to see steady improvements in our financial results. Today we're proud to be reporting strong earnings and reaffirming our guidance to the high end of our full year 2020 adjusted EPS guidance range. Additionally, we're reaffirming our full year 2021 EPS guidance range. Now please turn to the next slide. In addition to improving financial performance, our current strategy of focusing on lower-risk T&D investments has the added benefit of producing stable cash flows and improved earnings visibility. In large measure this is a result of the strong growth that we're seeing in our California and Texas Utilities where constructive regulation limits exposure to the price and volume of electricity and/or natural gas sold. Also, when taken together, our U.S. utilities have a blended authorized ROE of right around 10.1%, which is excellent given the current environment. Adding to the growth profile of our utilities, our North American infrastructure businesses also provide attractive economic returns and are supported by our take-or-pay contracts with over 20-year terms on average. As we've demonstrated in Peru and Chile, as well as our renewables business, we built strong franchises that compete locally and globally. When we sold those businesses, investors not only bought the assets but also the franchise value we had built up over decades, which was reflected in the premium multiple that we received. Similarly, we think we've built a strong franchise in our LNG business and to fund its growth needs, we're focused on sourcing the lowest cost of capital to enhance value for our shareholders. At Cameron LNG, we believe cash flows from phase one should cover any required equity for the phase two expansion. Separately, at Port Arthur LNG, we're evaluating efficient financing options with a view towards shifting post-FID equity contributions until much later in the construction phase. And at ECA LNG phase one, we estimate that Sempra and IEnova's equity funding to be approximately $250 million for each company. That's why, with all this growth in front of us, we're actively looking at different financing structures and different forms of infrastructure and strategic capital. In doing so, we think it gives us the opportunity to efficiently fund growth, to highlight the growing value of our LNG franchise and to strengthen Sempra's balance sheet, which is important since we expect to also increase our investments in our utility businesses over the next five years. Beyond highlighting our continued execution and the strong organic growth from our infrastructure platforms, I would also like to update you on the recent recognitions we've received in the area of diversity and inclusion, which I would note is central to how we think about a high performing culture. Please turn now to the next slide. In the last month, we received two awards recognizing Sempra for its industry-leading approach to diversity and inclusion. The first was the National Association of Corporate Directors -- NXT award, which recognizes company boards for their excellence in utilizing diversity and inclusion as a strategy for building long-term value for their companies. And the second was the Forbes JUST 100 list, which recognizes companies doing right by all of their stakeholders. We're proud of the results of our continued focus on people priorities and culture across our management and more broadly our workforce. We compare favorably to industry benchmarks in the representation of both women and people of color. We also have a strong record and commitment to supplier diversity. And I think the key takeaway is that we're focused on advancing our strategy in a way that is increasingly responsive to all stakeholders over time. Now please turn to the next slide, where I'll highlight some of our more notable accomplishments for the year. This slide shows why I couldn't be more proud of our team. I won't discuss everything that's referenced here, but several points are particularly noteworthy. This year we launched a record five-year capital plan, completed the sale of both our Peruvian and Chilean businesses with cash proceeds of approximately $5.8 billion before tax. Guided to the high end of our 2020 adjusted EPS guidance range in May and then raised guidance in June, and now we're guiding to the high end of that increased range. And lastly, we executed a $500 million share buyback. Before turning to the next slide, I wanted to briefly discuss the San Diego franchise agreement. The city charter here in San Diego requires a competitive process to renew the franchise with a view towards getting the best outcome for the residents of the city. And those same residents happen to be our customers as well. So we have a strong alignment of interest here with this city to ensure a great outcome. SDG&E recently submitted a competitive bid and looks forward to concluding the process later this year. But because we are in a quiet period, we need to be respectful of the city's process and accordingly, we'll not be able to comment further. Please turn now to the next slide, and I'll turn the call over to Trevor to review some of the more notable operational and financial developments.

Thanks, Jeff. We had several positive developments this past quarter at all of our infrastructure businesses. SDG&E launched a comprehensive sustainability strategy to advance carbon neutrality. This strategy focuses on aspirational goals in environmental stewardship, clean transportation, grid modernization, and community engagement, all designed to directly support California's clean energy goals. As part of its sustainability commitment, SDG&E announced its plans to place two green hydrogen projects into service by 2022. While these projects are small in relation to our capital plan, we view them as important steps towards a cleaner energy economy and are an acknowledgment that we have an important role to play. At SoCalGas, we announced that the U.S. Department of Energy awarded funding for three projects advancing clean automotive transportation technologies that we're participating in, including fuel cell technology for trucking and transit and near-zero emissions natural gas technology for rail locomotives. This is another demonstration of our commitment to be an integral part of California's clean energy future. In addition, the California utilities received a final decision from the CPUC for approval to recover approximately $935 million related to the pipeline safety enhancement plan. This represents approval for virtually all of the amounts requested in the proceeding. Moving to Texas. Today, Oncor announced its 2021 to 2025 capital plan of $12.2 billion. This is an increase over the previous five-year capital plan and is a testament to continued execution by the Oncor team, growth in its service territory, and resiliency of its business. Additionally, Oncor issued its inaugural sustainable bonds with proceeds to finance or refinance expenditures with minority and women-owned businesses. Now let's shift to our North American infrastructure businesses. We're pleased that Cameron LNG phase 1 reached full commercial operations in August. All three trains are now generating earnings and cash flows. As a reminder, we expect our share of annual earnings to be approximately $400 million to $450 million with no commodity or volume risk. Our exposure in the contracts is supported by A-rated customers who are also equity partners in the facility. Additionally, due to the structure of the tolling agreements, Sempra doesn't expect an earnings impact from the recent outages due to Hurricanes Laura and Delta. We continue to work with our partners to ensure the resiliency of the operations. Moving to ECA LNG phase 1. We're continuing to work closely with local authorities as well as at the highest levels of the Mexican government to advance the export permit process. We're expecting to reach a final investment decision by year-end. As a reminder, ECA LNG phase 1 is fully contracted with long-term take-or-pay contracts. SPAs with Total and Mitsui are each in place for a 20-year term and we have a lump-sum turnkey EPC contract with TechnipFMC. Shifting to Mexico, we've advanced construction of the Gulf of Mexico fuel terminal network. Once completed, the three strategic terminals which are all backed by dollar-denominated take-or-pay contracts with Valero should contribute nearly 3.4 million barrels of combined refined product storage capacity while improving Mexico's energy security. Notably, the Veracruz terminal is situated in the largest Mexican port on the Gulf Coast and is expected to be one of the largest terminals in the country. Please turn to slide 9 where I will discuss more detail about Oncor's capital plan. Texas continues to be one of the premium macro and business environments in the United States and Oncor is well-positioned to take advantage of these strong fundamentals. This is demonstrated by an increase in Oncor's five-year capital plan to $12.2 billion projected for 2021 through 2025, which is primarily attributable to supporting new growth across both the transmission and distribution systems, maintaining the transmission system including investments to enhance the safety and reliability of service, and continuing investments in innovation and technology. Overall, Oncor's five-year capital plan has increased by over 60% since the 2017 regulatory commitment reflecting the continued growth and critical investments needed to support its customers, the state, and the ERCOT market. Please turn to slide 10 where I'll review our financial results. Early this morning, we reported third quarter 2020 GAAP earnings of $351 million or $1.21 per share. This compares to third quarter 2019 GAAP earnings of $813 million or $2.84 per share. On an adjusted basis, third quarter 2020 earnings were $380 million or $1.31 per share. This compares to third quarter 2019 adjusted earnings of $425 million or $1.50 per share. Please turn to the next slide. The variance in the third quarter 2020 adjusted earnings when compared to last year was affected by the following key items: $56 million of lower earnings due to the sales of our Peruvian and Chilean businesses in April and June of 2020 respectively; $32 million of lower income tax benefits from flow-through items due to the timing of the 2019 GRC final decision at SoCalGas; $32 million of unfavorable impacts from foreign currency and inflation effects at Sempra Mexico net of foreign currency derivatives. Third quarter 2019 had approximately a $10 million gain and third quarter 2020 had approximately a $20 million loss; $29 million charge related to an energy efficiency program inquiry at SDG&E; $3 million of lower earnings at Sempra Texas utilities, including $21 million from unfavorable weather. The lower earnings were also due to increased operating costs partially offset by increased revenues from rate updates to reflect invested capital. This was partially offset by $79 million of higher equity earnings from Cameron LNG JV, primarily due to Phase 1 commencing commercial operations, and $21 million impairment of non-utility native gas assets at SoCalGas in 2019. Please turn to the final slide. We're pleased to report a successful quarter both operationally and financially. Benefiting from a more narrowed strategic focus, we're reaffirming and guiding to the high end of our full year 2020 adjusted EPS guidance range and reaffirming our full year 2021 EPS guidance range. We remain committed to creating long-term shareholder value, and I could not be more pleased with our overall year-to-date financial performance even in these challenging market conditions. And with that, this concludes our prepared remarks. And we'll stop to take your questions.

Hey, good morning, guys.

Good morning, Shar.

Just a couple of questions here, Jeff. Can we just first – can we touch on some of the moving pieces on sort of the 2021 earnings drivers as you're thinking about it? Especially, as it sort of sets up to be a cleaner year from a business mix perspective. I guess how do you think about year-over-year growth from your prior revised higher 2020 EPS guidance range, which now actually points to the top end. So what are some of the pushes and takes as you think about 2021 and build off the higher 2020 base?

Well, I appreciate the question, Shahriar. I think I would just start by saying that we feel great about the year we're having in 2021. I want to emphasize the fact that when you think about what the market backdrop is, it is one of the toughest situations that any of us have gone through in terms of COVID and the impact on our economy. But as you think about 2021, you raised a great point, which is it will be a very clean year for us. It will be the first year you will not see contributions from any of our divested businesses. You recall that we've divested roughly $30 billion in enterprise value of assets over the last two and half years. The goal was to make sure that we improved our performance going forward. So as you look to 2021, I think you should continue to expect that the lead driver for our company will be our utilities. Upwards of a $30 billion, five-year capital program is dedicated to our regulated investments. You've got a blended ROE across that platform of about 10.1, which is differential in today's marketplace. To your point, next year will be the first year that you'll see full annual run-rate earnings from Cameron, which we talked about being in that $400 million to $450 million range. I want to mention that, the goal of this whole capital recycling program Shahriar over the last two years was to put this management team in a position where we had a clear field of vision to do one thing, which was improve our financial performance. If you think back to 2019, we began the year with a guidance range of $5.70 to $6.30. Last year on the Q3 call, we raised the entire guidance range to $6.50 of EPS, and then we delivered the year with an actual earnings number adjusted of $6.78. That set us up quite well for 2020. We began this year with $6.70 to $7.50, guided to the high end of that range on the Q1 call. In June, just a month later, we raised the entire range to $7.20 to $7.80. I referenced on our last earnings call, we went back and looked at the five-year guidance we provided back in 2016. In five years in advance, we fore casted an adjusted EPS range of $7.20 to $7.80. So being able to deliver that performance in 2019 and 2020 and now be in a position to guide to the high end of the range gives us a pathway to exceed a 12% earnings CAGR over the last five years. This idea that we will be nimble, keen to compete our capital, and adjust our portfolio to deliver returns has set us up really well for 2021. I would just conclude on this point. We're optimistic about the returns we can produce next year.

Terrific. And then just on ECA, I know clearly the gating factor for Phase 1 is the permits. Any sort of updates, Jeff, at this juncture? And is the perception out there that this process really now relies on a second proposed LNG project. Can you just maybe touch on that? And then what's your sort of stance or threshold in further Mexico investments?

Yes, there's a couple of questions embedded there. But I'll start from the top and say that for the ECA project to go forward, it is 100% disconnected from another project going forward. The most important development that gives us improved confidence is that we completed the successful consultation down in Baja over the last three weeks. We received a positive vote with strong local support around the 60% level. This sends a strong message to the central government where we've developed great relationships. I confess, I have been wrong on this before. We originally thought we would get this permit with the team in Q4 of last year. But the big difference now has been the relationships we've developed and the consultation that occurred down in Baja. The goal here is to get the SENER permit, which we're forecasting to get this month -- that's the authorization to export hydrocarbons off the coast of Mexico. We also think it’s reasonable that we will have a final investment decision with the permit this quarter. Transitioning to the larger picture down in Mexico, I think you've heard us talk about this where we're constructive over a longer-term horizon. In the short term, we envision some headwinds. There have been some dislocations in the market based upon some policies and protections around state-owned enterprises. You saw the IEnova team earlier this year adjust their plans, namely they backed off on just over $200 million of capital for 2020 to free up cash to support an opportunistic share repurchase program. They have bought back roughly 77 million shares, which has increased Sempra's ownership in that public company to the 70% level. They’ve put about $230 million to work in their share repurchase program. Their approach, similar to ours at Sempra, is to be opportunistic when they think the market supports that. I think the final update is I recently cut their dividend. They're doing all the things you expect them to do to preserve the value of the business and be opportunistic about positioning for more value. The dividend cut is really designed to bolster liquidity and shore up the balance sheet. Big picture, the focus of Sempra LNG and IEnova is really about getting the ECA project launch, which is a very big project, and it will be the largest construction project in the history of Baja California. I think we're very well positioned to execute it.

Got it. And then Jeff, just one last one for me. A little bit more of a strategic question for you as Sempra is effectively one of the last hybrid utilities with the scale of the infrastructure investments that you have. It's been a big theme this year by derisking about simplifying. So, I'm kind of curious what are your thoughts on the overall business mix, especially if your stock really never gets the value that it really does deserve? When do you and the Board start to consider options and rethink the current strategy?

Yes, I would say that one of the things embedded in your question is you should assume that we're doing that all the time. Outside perception is that our Board of Directors or management team will have a strategy session once a year. That's not the way it works with Sempra. Over the last 24 months, you can’t find another company in our space that's had the transactional activity we’ve had. We've made commitments on asset value of roughly $30 billion in transactions over two years. Coupled with our earnings performance, we have something special going on in the company in terms of a unique growth and income story. I'm not here to tell you that the market gets it right every day. However, I do believe in efficient markets over time, we certainly think our stock is undervalued. That's why you saw it be proactive this summer in executing the share repurchase program. We're not wedded to any single asset. If there are opportunities or dislocations in the marketplace, you can expect us to look for them. Looking at the LNG space, we see a pretty confident view that we've got a leading franchise in North America that's well-capitalized. We look at the runway of growth in the LNG business, and it’s differential from any other company in North America. Our goal is to efficiently fund growth, highlight value for our shareholders, and strengthen our balance sheet. Looking at some transaction values in the marketplace shows there's a dislocation between the valuation attributed to our portfolio, and that will drive us to be active in seeking value for our shareholders. We will not be standing still.

Terrific. That's very helpful, Jeff. And thank you Justin and Trevor. Hi guys.

Thank you.

Good morning, Steve.

Yes. So sorry my question was actually related to that last question in the comments you made in your remarks about looking at different financing structures and strategic capital for the LNG projects. I guess my question there is, when you make that comment is it more for each individual project, as you're thinking about that, or is it for kind of the business as a whole?

Right. Well, let me start Steve by saying, we appreciate the opportunity to participate in the conference over the last couple of weeks. As we think about the options we're looking at, we're active in both regards. We're looking at financing options and financing structures at the project level and at the portfolio level. Specifically, we're also looking at both infrastructure and strategic capital.

Got it. That's helpful. And the -- I guess there's a balance between value and then, you're actually particularly on Cameron, good earnings out of the business. So when you think about kind of value creation, how are you just thinking about that aspect, in terms of -- I guess, really making some things may be accretive or not, or how are you thinking about that?

I think you can go back and look at our track record. As we look at things that we divest and things that we invest in, we always do it through the lens of accretion. I think the key comments I've made, are we source the lowest cost of capital to fund growth while looking to highlight value. We feel quite constructive about things which are only accretive. Our partners in the LNG space see the unique financial commitment behind that business, giving us a more competitive position relative to our peers in North America. So, it's about funding growth efficiently, highlighting value and accretion to support our balance sheet.

Got it. That's helpful. I’ll let others ask question. Thank you.

Thanks for joining, Steve.

Good morning, Julien.

Hey. Hi. So perhaps just to pick up, Steve. Just to be very clear about your thoughts on buybacks, right? So obviously you did some early this summer. Perhaps less so this quarter, how are you thinking about capital allocation in the near-term sense here? I mean, obviously, I think you're fairly clear last quarter. So I just want to make sure we're hearing you right on the nearer-term priorities for capital?

I think if you go back to the early part of the year, we announced our largest ever five-year capital program of just over $30 billion to $32 billion of capital over five years. That's completely geared towards supporting the growth in our regulated business. As you heard Allen talk about, or at least we talked about with Allen in our script, the growth we're seeing at Oncor represents another $750 million of capital outside of that plan. Our job is to find ways to produce what we think is the differential growth and income story. We're going to support our dividend, manage our balance sheet, and fund the growth in front of us. If there are times when we see a dislocation in the marketplace, we will look for opportunities to be opportunistic around the share repurchase program. You saw us do that earlier this summer. We're always looking at where we think we can produce the most value. The dry powder we have with the $2 billion approval by our Board is helpful. It's something we constantly look at and it's available to us. It's a balancing issue.

Let me give an overview of what’s happened; you talked about upside potentials previously upwards of $1 billion. You raised I think I'm going to call it just $300 million of late. How do you think about feathering in further outside capital and Oncor in this $300 million relative to the larger numbers you guys have talked about?

Yes. Obviously, we own just over 80% of Oncor. We value this investment highly. When you think about our commitment to invest in T&D assets or assets that have T&D level risk, one of the things Allen outlined in our analyst conference was some incremental capital opportunities between $770 million to $1.17 billion. A lot of opportunities exist that are outside of the $12.2 million. We are conservative in our planning but we'll be back with more later if we see growth conditions returning to normal in the oil and gas sector.

You bet, Jeff. Just to reiterate, we're increasing the five-year plan by $300 million and adding another year right at the back end of the plan as well for 2025. Our planning shows that we've seen 2% premise growth for the last few years. Despite the 2020 challenges, we're on track to add new service mirrors close to what we projected last year. Transmission connections are also strong; generation requests are up significantly.

Thank you.

Thanks for taking my questions. I wanted to spend some time on California. I guess, first just talking about the event of moving away from methane. I know you’ve been a thought leader in approaches there. I was just curious, in terms of your dialogue with regulators and legislators et cetera, just sort of generally the feedback you're getting and your sense of potential sort of concrete next steps or is this just a very long gradual process? How do you kind of see that unfolding?

Yes. Thank you for the question. There's a process underway at the PUC to look at a phased approach to how we integrate a natural gas strategy over multiple decades to help decarbonize the state. But I might start just with a little bit of a perspective, nationally. Over the last several decades, the United States has led the world in reducing energy-related emissions. The IEA came out with a study in February that showed emissions globally were flat in 2019, but in the IEA credit the massive buildout of renewables combined with support from natural gas and switching from coal to natural gas. Similarly, we see a clear recognition that LDCs are a big part of the solution by taking exogenous methane in the form of renewable natural gas and putting that into the distribution system. This transition will take place through a collaborative effort with the governor and other energy agencies. Overall, California is committed to increasing renewable energy while recognizing that natural gas plays a critical role.

Thanks, Jeff. The gas company has an important role in the energy transition in California. We've established a voluntary goal of having 5% of our core gas come from renewable natural gas by 2022 and 20% by 2030. Right now, we're flowing 100% California-produced renewable natural gas for all our compressed natural gas refueling stations in our service territory. We will have reduced our fugitive methane emissions by 20% by 2025, and we have acceleration around innovative technologies like renewable natural gas and hydrogen.

The only other thing I would add is that if you look at natural gas penetration rates in Southern California, where you have a 90% penetration rate in one of the largest population centers, we are committed to working together to ensure that the transition takes place effectively.

That's really a thorough answer. Maybe just one follow-up on an element there. Just following up on the blackout that we saw this summer. I saw the root cause assessment that came out. You mentioned this in your response to my first question. Just curious, how is the state thinking through this as a warning sign to address these blackout challenges moving forward?

Yes. The blackouts during the summer have really made us rethink our integrated resource plans. The first of which was, the reliance on imports in the state, which routinely run between 20% and 30%. The second is that the generation in California must increase to ensure that we are not reliant on other states. This has led the state to reassess how we do our planning to ensure that we have a reliable supply.

Thank you.

Good morning, Jeremy.

Good morning. Just wanted to circle back to Oncor for a minute if I could with the capital plan, and if you could talk a little bit more on the specific customer growth you're assuming under your updated plan here? And does this kind of bake in the current trajectory in West Texas as it is? And I guess trying to feel out what type of sensitivity, what type of upside is possible if the commodity price environment does improve there?

Let me make a couple of comments. Allen can fill in behind me. It’s really important to understand that in West Texas, producers are trying to lower their marginal cost of production. A lot of capital deployed by Allen is already locked-in for the next two years. There's still demand for more infrastructure in that region. We usually circle around 70,000 new meter additions a year. We think Texas will be a big part of our nation's economic recovery and Oncor is well-positioned to benefit.

Thank you, Jeff. The direct answer to your question regarding customer growth is we’re assuming continued 2% premise growth at this juncture. We aim for around that number of premises over the next 12 months. If we see things returning to normal in oil and gas activity, that would certainly drive increased capital allocation.

I think, Allen or likely Jeff. One of the things we've talked about is that we had a really major legislative development last year with act of 1938. Can you maybe talk about the overlay of that on top of the market description you just gave?

Sure, just to refresh, 1938 effectively codifies PUCA. This means when you think about generation development, as we're shifting to more renewables, this impacts how we allocate flows and whether we need to make new investments for those. To the extent those require upgrades or additional transmission, those projects will be allocated to the owner of the endpoints. We believe that we'd have strong capacity to capture that growth.

Thank you, Allen. We have confidence in this approach and the opportunities presented.

Hey, guys. Thank you for taking my questions and congrats on progress during what's been a crazy year. Jeff, in your remarks at the beginning, you hit a specific detail to reference potential financing options for both Cameron and Port Arthur. Can you give a little more detail on progress for both in terms of contracting and going to FID? And then just broadly, your perspective on the macro environment for incremental U.S. LNG or U.S. liquefaction?

Sure. Thanks for your questions Michael. Justin Bird is here with us; he could help with the macro perspective first. After that, I’d provide a project-by-project update.

In terms of the market, we're seeing continued growth in U.S. LNG exports this year, clearly dampened a bit by the hurricane season, but LNG exports could set a record in November. It's really underpinned by increasing demand and stronger prices in Asia, which have tripled since summer. The short-term market poses some challenges, but the medium-term projections show demand will exceed supply as we lack FIDs over the past few years. With our franchises, we believe we'll capitalize on this growth effectively.

Speaking to our development projects, at ECA, we hope to reach FID within this quarter. The capacity for that project is fully sold. For Cameron phase 2, we are optimizing design while continuing discussions with partners. We are watching the market closely before final investment decisions for Port Arthur, where we had to delay to 2021 due to practical constraints around COVID. We're actively co-developing with Saudi Aramco, and while we see challenges, we remain optimistic about the long-term success of these projects.

Got it. Thank you, guys. I had a follow-on, but it's very unrelated. It's probably for Allen. Just curious Allen, any thoughts if I remember correctly Oncor has got to file a rate case next year. Any thoughts on; a, given the broader economic environment with COVID you could delay or push out that rate case; and b, if you can, any kind of early read on whether this is kind of a move-the-needle type of request, or is this just a mandatory coming back in, but it's not something that's going to drive significant rate pressure on the customer?

You're 100% correct. We are required by PUC rule to file our next rate case by October 1 of next year. We’re currently planning on that, working on that. However, given the very unusual test year, I have not had any discussions about potentially delaying. We always engage stakeholders collaboratively, so if the state prefers a delay, we would certainly explore that. On our request amount, I can't predict currently what we'll be asking for, but the goal is to work amicably with stakeholders in a manner that is reasonable for both customers and us. That’s where we stand on the rate case.

Now that’s super helpful Allen. Much appreciated. Thank you, guys.

Thank you.

Yes. Really appreciate it. As I come to the end of today's call, I wanted to thank everyone for joining us. I know that there's like a dozen other companies that are reporting this morning. I hope everyone continues to be safe and healthy. Feel free as usual to reach out to anyone on our IR team if you have additional questions and this concludes today's call. Thank you.