Canadian Utilities Restricted (OTCPK:CDUAF) Q3 2022 Earnings Convention Name October 27, 2022 11:00 AM ET
Firm Individuals
Colin Jackson – Senior Vice President, Finance, Treasury, Threat and Sustainability
Brian Shkrobot – Government Vice President and CFO
Bob Myles – Government Vice President, Company Growth
Convention Name Individuals
Linda Ezergailis – TD Securities
Maurice Choy – RBC Capital Markets
Mark Jarvi – CIBC Capital Markets
Ben Pham – BMO
Matthew Weekes – IA Capital Markets
Operator
That is the convention operator. Welcome to the Third Quarter 2022 Outcomes Convention Name for Canadian Utilities Restricted. As a reminder, all contributors are in listen-only mode and the convention is being recorded. After the presentation, there will probably be a chance to ask questions. [Operator Instructions]
I’d now like to show the convention over to Mr. Colin Jackson, Senior Vice President of Finance, Treasury, Threat and Sustainability. Please go forward, Mr. Jackson.
Colin Jackson
Thanks. Good morning, everybody. We’re happy you would be a part of us for Canadian Utilities’ third quarter 2022 convention name. With me right now is Government Vice President and Chief Monetary Officer, Brian Shkrobot; and Government Vice President, Company Growth, Bob Myles. Bob leads Canadian Utilities’ non-regulated Power Infrastructure enterprise.
Earlier than we transfer into our formal agenda, I wish to take a second to acknowledge the quite a few conventional territories and homelands on which our international amenities are positioned. Right now, we’re chatting with you from our ATCO Park head workplace in Calgary, which is positioned in Treaty 7 area.
That is the ancestral territory of the Blackfoot Confederacy comprised of the Siksika, Kainai and Piikani Nations, the Tsuut’ina Nation, and the Stoney Nakoda Nations that embody the Chiniki, Bearspaw and Goodstoney First Nations. Town of Calgary can be residence to the Metis Nation of Alberta Area 3. We honour and respect the varied historical past, languages, ceremonies and tradition of the Indigenous peoples who name these areas residence.
Brian will start right now with some opening feedback on latest firm developments and our monetary outcomes, adopted by an replace from Bob on our power transition technique. Following these ready remarks, we’ll take questions from the funding neighborhood.
Please word {that a} replay of the convention name and a transcript will probably be out there on our web site at canadianutilities.com and will be discovered within the Traders part beneath the heading Occasions and Shows.
I’d prefer to remind you all that our remarks right now will embody forward-looking statements, that are topic to vital dangers and uncertainties. For extra info on these dangers and uncertainties, please see studies filed by Canadian Utilities with the Canadian safety regulators.
Lastly, I’d prefer to level out that in this presentation we could consult with sure non-GAAP and section measures resembling adjusted earnings, adjusted earnings per share, and capital funding. These measures should not have any standardized that means beneath IFRS, and in consequence, they will not be corresponding to related measures introduced in different entities.
Now, I’ll flip the decision over to Brian for his opening remarks.
Brian Shkrobot
Thanks, Colin, and good morning, everybody. Thanks all very a lot for becoming a member of us right now for our third quarter 2022 convention name. As Colin talked about, I plan to run by a few of our monetary outcomes for the quarter and supply some enterprise updates after which I’ll flip the decision over to Bob, who will replace you on the numerous progress made in our power transition technique, together with the just lately introduced acquisition of Suncor’s renewable technology portfolio that we’re very enthusiastic about.
Beginning with the monetary outcomes. Canadian Utilities achieved adjusted earnings of $120 million, or $0.45 per share, within the third quarter of this yr. That is $32 million or $0.12 per share increased than the third quarter of 2021. This $32 million enhance within the third quarter year-over-year earnings was primarily pushed by a continuation of most of the similar developments we highlighted in our second quarter convention name, such because the sturdy efficiency in our utilities.
Our worldwide pure fuel distribution enterprise in Australia continued to learn from sturdy working efficiency and favorable CPI indexing within the third quarter. After we posted our second quarter convention name in July, forecasts at the moment recommended the 2022 annual Australian CPI would attain roughly 6%. Right now, these forecasts are suggesting full yr CPI is prone to rise increased to greater than 7%. We count on this continued rise in inflation to drive sturdy earnings all through the rest of this yr.
Waiting for 2023, estimates recommend Australian CPI will start to development downward to extra regular ranges in, say, the three% vary. This will probably be a key development to observe and one we count on to realign our 2023 earnings again to pre-high inflation ranges after we — when seen on a year-over-year foundation.
Shifting on to our Canadian utilities. The sturdy efficiency we noticed from our companies within the first half of this yr largely continued within the third quarter. Particularly, our Alberta-based distribution utilities continued to ship distinctive efficiency of their last yr of the present performance-based regulation or PBR for brief cycle.
I talked concerning the mechanics of PBR in depth throughout our second quarter earnings name, so I gained’t focus on these particulars right here. However I simply wish to remind everybody that PBR frameworks are inherently cyclical.
The investments made within the early years of PBR to seek out efficiencies and to unlock extra worth translate to sturdy earnings within the later years of PBR. These efficiencies are then, finally, handed on to prospects within the type of long-term value financial savings on the finish of the PBR cycle.
To this impact, our distribution utilities unlocked vital efficiencies by the second PBR cycle, and now, 2023, we’ll see these companies enter a cost-of-service rebasing yr. This cost-of-service rebasing yr will then be adopted by a 3rd five-year PBR time period starting in 2024. We count on choices on the important thing particulars of this third PBR time period subsequent yr someday.
Whereas earnings from our Alberta distribution utilities will probably be reset downwards in 2023, as we move on the efficiencies achieved to ratepayers, we nonetheless have sturdy expectations for efficiency throughout our utilities. In actual fact, the choices just lately obtained from our distribution utilities on their 2023 cost-of-service functions have been constructive, with our functions largely being accepted as filed.
Notably, our functions had been primarily based on the common historic prices for the interval from 2018 to 2020, and that is against a much less favorable greatest yr mannequin. This highlights the regulator’s want for a supportive and constructive regulatory framework for this rebasing yr.
We even have a powerful monitor document of delivering distinctive ROE outperformance throughout many years and beneath quite a few regulatory frameworks and buildings. So mixed with effectivity carryover mechanism inside our present regulatory framework, which can permit us to hold ahead as a lot as 50 foundation factors of outperformance into 2023 and 2024, we consider we have now a strong basis on which to ship continued sturdy efficiency in 2023 and past.
Shifting on to Puerto Rico, I need to first acknowledge the horrible tragedy of Hurricane Fiona and the quite a few hardships that it has prompted for the individuals of Puerto Rico. Essential infrastructure throughout the territory was impacted and lots of households had been pressured to depart their houses. In lots of areas, entry to essential companies had been misplaced or needed to be turned off to be able to guarantee the protection of residents.
Returning service to impacted prospects and making certain the continuing security of all of Puerto Rico residents is LUMA’s primary precedence. Our groups have been working tirelessly on this effort and fewer than two weeks following the hurricane, service was restored to greater than 90% of shoppers. And by October tenth, this determine had elevated to 99%. That is an unbelievable feat, given the state of electrical energy system in Puerto Rico.
Now talking for all of our leaders at Canadian Utilities, we’re extraordinarily happy with the work the LUMA staff has finished, each main as much as the hurricane and within the days and weeks that adopted. The staff leveraged their native expertise and assets to plan for the occasion and reply instantly, driving significant outcomes for patrons with out compromising security.
This expertise highlights the important thing position LUMA has to play in Puerto Rico’s power future and the vital work that also must be finished to harden the electrical energy system to make sure its higher ready to deal with future occasions like this.
To that finish, LUMA has initiated greater than 225 tasks aimed toward enhancing grid stability, reliability and modernizing the power system in Puerto Rico, and began development on 29 FEMA reconstruction tasks. This tempo of development and modernization properly exceeds something seen traditionally in Puerto Rico.
I’d additionally encourage everybody to have a look at each the LUMA Power web site and their quarterly studies, which embody nice particulars on the quite a few accomplishments the staff has made to-date and initiatives nonetheless underway in Puerto Rico.
By way of capital funding, we invested $379 million in our enterprise within the third quarter of this yr. Of this $379 million, $295 million was invested in our core utility companies, which can guarantee continued technology of steady earnings and dependable money flows.
As I alluded to in my earlier feedback and as Bob will elaborate on additional, we made vital progress on quite a few initiatives associated to our power transition technique within the quarter. I need to congratulate Bob and his staff on their acquisition of Suncor’s renewable technology portfolio. That is really a transformational step ahead and precisely aligned with our power transition technique.
I’ll now flip the decision over to Bob Myles, Government Vice President, Company Growth to supply additional particulars on this and extra. Bob?
Bob Myles
Thanks, Brian. Good morning, everybody. It’s been a busy quarter and we consider we have now made glorious progress on quite a few fronts, together with the Alberta photo voltaic tasks we mentioned beforehand, our pumped hydro storage alternative in Australia and our ongoing hydrogen alternative with Suncor.
As Brian talked about, we took a giant leap ahead on our power transition technique with the profitable acquisition of Suncor’s renewable technology portfolio, which we introduced in early October.
Most could have heard me converse to our power transition technique beforehand and our three distinct pillars; renewable technology, clear fuels and power storage. The Suncor acquisition serves to quickly advance the renewable technology leg of this technique.
It provides 252 megawatts of working renewables to our portfolio, brings wind technology into our power combine to enhance our present photo voltaic and hydro property, and features a growth pipeline of greater than 1.5 gigawatts of latest alternatives.
It’s additionally price highlighting that almost all of the portfolio resides inside our residence market of Alberta. We now have been in Alberta for many years and are properly positioned to leverage our present relationships and experience right here to drive extra worth by each the execution of the event pipeline and thru the contracting of those property with high-quality counterparties.
Not solely will this transition drive money circulation and earnings accretion in 2023, it supplies a pathway to each assembly our 2030 renewable power ESG targets and rising our renewable power portfolio considerably within the coming decade.
Circling again to our different Alberta initiatives, I needed to supply a fast replace on the progress we’re making on each our photo voltaic developments, in addition to the hydro op — in addition to the hydrogen alternative we’re pursuing with Suncor.
Whereas our enterprise total has fared properly, regardless of the provision chain challenges being confronted globally, we’re seeing some delays on the acquisition of essential elements wanted to finish our ongoing photo voltaic initiatives within the province. Whereas these property are usually not individually vital to our total monetary outcomes, we now count on energization of our Barlow and Deerfoot photo voltaic alternatives to shift into early 2023.
Turning to our hydrogen alternative with Suncor, a challenge of this scale and complexity requires vital upfront planning and coordination, and whereas there’s nonetheless rather a lot to be finished, we’re making nice progress.
We’re very deep into the design foundation memorandum part of the method and have made vital choices round expertise choice, together with using auto thermal reforming processes at this facility.
Our groups are working laborious to proceed progressing this essential work and we count on to decide to maneuver into front-end engineering design of the event part within the first half of 2023.
Lastly, I needed to spotlight the sturdy efficiency we have now seen from our Alberta Hub storage asset that we acquired in December of final yr. This asset has carried out very properly for us since acquisition and within the face of heightened power worth volatility.
This asset and power storage property extra broadly, present essential power stability to the system, and we count on the significance of those property to solely enhance because the world decarbonizes and intermittent renewables make up a bigger share of the power system. We proceed to search for alternatives to optimize this asset and to develop our presence within the power storage market.
I’ll now move the decision again to Brian for any last feedback.
Brian Shkrobot
Thanks, Bob, and congratulations as soon as once more on the Suncor renewable technology acquisition. As Bob stated, it supplies a pathway to attaining our 2030 ESG targets and is predicted to be accretive to earnings and money circulation in its first yr of operations.
I’m glad to say all of our companies throughout the Board have continued to carry out properly, contributing to the general success of our consolidated enterprise, as we delivered one other sturdy quarter of outcomes.
Our core utility and long-term contracted property present the steadiness wanted to pursue our power transition technique and our latest renewable technology acquisition marks a significant step ahead on this journey. This technique stays essential to the success of our enterprise long-term and to society extra broadly, because the push to decarbonize the worldwide power system continues to achieve momentum.
That concludes my ready remarks. I’ll now flip the decision again to Colin.
Colin Jackson
Thanks, Brian. Within the curiosity of time, we ask that you simply restrict your self to 2 questions. When you’ve got extra questions, you might be welcome to rejoin the queue. I’ll flip it over to the Convention Coordinator now for questions.
Query-and-Reply Session
Operator
Thanks. [Operator Instructions] The primary query comes from Linda Ezergailis with TD Securities. Please go forward.
Linda Ezergailis
Thanks. I’m inquisitive about your Australian pump storage initiative. Do you will have a way of what nonetheless must be established or found out earlier than you get to FID and when subsequent yr do you count on to get FID and what can be the bookends of value estimates that you’d count on for it?
Bob Myles
Thanks, Linda. Bob right here. I can provide you a reasonably good replace on Central West. We had been simply in Australia final week. We’re submitting an software to the federal government for his or her long-term power companies settlement and that software goes on this week.
It’s going to be primarily based on the benefit of the candidates and assuming we get by that course of, then there’s a pricing part in Q1 of 2023, with a call from the federal government on the profitable candidates, we consider, in all probability late in Q2, early in Q3. So a last funding choice for us, we’re taking a look at in all probability this time subsequent yr to provide you a way.
On the capital aspect, it’s a bit early for us to work on that. We’re nonetheless finalizing capital with our development associate and that course of will take us to the top of this yr to get a greater sense of capital on the challenge. Hopefully, that helps, Linda.
Linda Ezergailis
Sure. That’s very useful. And possibly simply given the alternatives in entrance of you and this just lately introduced pending acquisition of your renewable portfolio. Simply as a follow-up and possibly that is extra for Brian, are you able to give us a way of what your financing plans, how they may evolve and would that probably contain the sale of some much less core property, both in full or partially and might you stroll us by the relative attractiveness and execution dangers related to the varied financing choices?
Brian Shkrobot
Yeah. Thanks, Linda. Pleased to do this. I assume, when it comes to financing, we proceed to position a major worth on liquidity, given the heightened broad market volatility proper now and our near-term progress plans, each on the utility degree and the non-utility areas.
Because of this, we’re presently considering using a short-term, say, 12-month bridge to fund the acquisition on shut after which, instantly following shut, we might anticipate having challenge financing in place on the contracted property and the power to take out roughly half of this preliminary bridge mortgage.
We glance to take out the rest of the bridge mortgage and consider quite a few totally different avenues, whether or not it’s strategic companions, ships on present property or different capital recycling initiatives. In an occasion that these initiatives are usually not executable inside the bridge interval, we might look to make the most of our present steadiness sheet capability to settle the bridge.
So, yeah, mainly, we’re look — protecting our choices open. We see worth in partnerships. However it’s the timing. We do have some flexibility in that, given the energy that we have now in our steadiness sheet. Hopefully, that solutions your query, Linda.
Linda Ezergailis
Sure. Thanks. I’ll bounce again within the queue.
Operator
The subsequent query comes from Maurice Choy with RBC Capital Markets. Please go forward.
Maurice Choy
Yeah. Thanks and good morning. My first query is about renewables versus utilities. It’s clear that there’s fairly a little bit of build-out that you are able to do, as a result of Suncor acquisition. Except you inform me in any other case, this build-out together with hydrogen alternative, all these items will in all probability outpace the expansion that you’ve got in regulated utility enterprise. From being about 95% utilities at times 5% power infrastructure, what do you envision this combine to be, say, by the top of the last decade when you hit your ESG goal?
Brian Shkrobot
Yeah. Thanks, Maurice. Possibly I’ll begin. And yeah, I feel, we have now been very clear that the power transition, we view that as a major progress automobile for Canadian Utilities. And Bob form of alluded to in his presentation and in earlier calls, the three pillars of fresh fuels; renewable, technology and power storage. We now have been fairly energetic on that entrance. Bob talked about the Alberta Hub facility that we bought, and clearly, this renewable Suncor acquisition.
So, yeah, we do count on the non-reg to take an even bigger portion of — rising portion of our total combine over the following 10 years and it’ll outpace the utility progress, which is correct now in that 1% to 2%. So, yeah, I’d say that, it should nonetheless be a excessive share, however nowhere close to we’re at to-date.
Maurice Choy
Acquired it. And simply to provide us some vary, are we speaking a few 60/40 or are we speaking a 50/50 kind of combine? I do know there’s no such because the goal combine.
Brian Shkrobot
Yeah. Yeah. Good query. Clearly, it will depend on how the renewables construct out and numerous various factors. However it will in all probability be extra in that 80% regulated, 20% non-regulated. However clearly, that share will depend upon the build-out and supportive authorities insurance policies.
Maurice Choy
Acquired it. And simply my last query is about, simply extra concerning the regulatory setting that you’ve got in Alberta. I’m certain you’ll have heard what occurred in Nova Scotia and the speed cap that was proposed over there. Given that you’re heading into the PBR discussions now that COS ones are just about finished, any ideas on what you suppose occurred in Nova Scotia and the way that will or could not relate to your price case and constructing relationships in Alberta?
Brian Shkrobot
Yeah. Good query. And Nova Scotia just lately introduced that it positioned a price cap on electrical energy price hikes. I consider it was 1.8% over the following two years for non-fuel prices. So we actually consider that the speed cap is actually on the wires portion, excluding retail.
For sure, the speed cap scenario in Nova Scotia may be very troubling for the utility there, because it really undermines the overriding rules related to recovering prices wanted to supply utility service and with the truthful return requirements and that’s actually on the coronary heart of a well-functioning regulated system.
Actually, we’re delicate to the truth that there’s excessive gas and electrical energy prices, however wanting in our jurisdiction, actually, we don’t see any discuss that in Alberta. In actual fact, after we take a look at our 2023 cost-of-service software, which we’re very pleased with, it was just about proved as filed. That’s very supportive. Our regulator has been very supportive.
And the one different factor I’d word, provided that we’re going by a rebasing yr for subsequent yr, our charges will really be declining by roughly 8% in our electrical energy prospects and about 4% of our fuel.
So we undoubtedly should not have a price enhance, we have now a price lower and I consider in Nova Scotia there was a fairly a major price enhance proposed at the moment. I feel we’re in a unique scenario right here in Alberta than down in Nova Scotia.
Maurice Choy
Nice. Thanks very a lot.
Operator
The subsequent query comes from Mark Jarvi with CIBC Capital Markets. Please go forward.
Mark Jarvi
Thanks. Good morning, everybody. Clearly, the Suncor acquisition beefs up your renewable energy ambition. Simply questioning, as you look ahead, form of the priorities there, would you do extra M&A, would you be extra targeted on natural growth and you’ve got elevated scale in Alberta, do you need to look and broaden your form of footprint look within the U.S. or, I assume, possibly do extra in Australia?
Bob Myles
Thanks, Mark. Bob Myles right here. I feel the entire above what you stated is, in all probability, the simple reply, however the Suncor acquisition for us on the renewable. We actually prefer it, as I stated in my remarks, it offers us a very good steadiness between wind/photo voltaic so as to add into our hydrogen property proper now.
We actually additionally sought to get us higher established within the renewable technology sector, constructing it in our personal yard in Alberta was a really prudent factor for us to will we thought. However we have now all the time seemed into the U.S. and that will probably be one thing we’ll look going ahead.
As a result of we have now a giant presence in Australia, we’re going to proceed to look in Australia. So we gained’t do an acquisition only for the sake of doing an acquisition. It actually must align properly with our technique, and if it does, then we’ll pursue these alternatives as they come up.
Brian Shkrobot
Yeah. It’s Brian right here. The one factor else I’d add, Mark, is that, the acquisition did include an incredible growth pipeline. And in order that’s the opposite factor that’s not simply having the working property, having that growth pipeline in place actually offers us an incredible progress platform.
Mark Jarvi
Proper. When you concentrate on the U.S. market, is that one thing you guys may do greenfield or do you suppose you would need to do an acquisition of some growth portfolio or possibly growth and working to achieve entrance available in the market there?
Bob Myles
I’d say to only begin full greenfield will probably be very troublesome. We undoubtedly have checked out partnering with corporations to carry us into the U.S. that or an acquisition. However to only attempt to begin greenfield, we really feel it will likely be very, very troublesome.
Mark Jarvi
Understood. And simply coming again to the shopper affordability, I do know you guys commented about the way you see the setup in a different way relative to what occurred in Nova Scotia. However on the UCP conference, they talked — one of many resolutions was about making an attempt to scale back transmission and distribution prices. Once you hear that from the politicians, what needs to be finished from educating out of your perspective, after which while you do hear that, the place do you suppose they may attempt to push again on you in any respect when it comes to both adjusting charges one way or the other or deferrals or something like that?
Brian Shkrobot
Yeah. Good query, Mark. And pay attention, the utility prices are entrance of thoughts for everybody proper now within the face of the worldwide turmoil, the commodity scarcity and the inflation driving up costs. And searching particularly on the scenario right here in Alberta, it’s vital to acknowledge that transmission and distribution costs are simply two of the various costs that make up a buyer’s utility invoice.
First, the commodity costs rose sharply within the face of the worldwide provide chain pressures and rising geopolitical tensions and — greater than doubling since final yr. Utilizing a mean buyer’s fuel invoice for instance, these commodity prices can account for greater than 40% of the entire utility invoice.
And these increased commodity costs had been compounded with increased fuel utilization throughout the province within the first few months of this yr. Franchise charges, which is one other a part of the invoice are additionally going up and for a mean fuel invoice, this might account for about 8% to fifteen% of the invoice.
So, I assume, all that being stated, clearly, training is a vital half and if you happen to take a look at our web site, we are attempting to placed on some training materials for our prospects. The very best issues that we will do and we have now form of introduced it at our AGMs, is simply run our enterprise as effectively as doable.
And we might word that our fuel distribution utility provides prospects the bottom month-to-month distribution costs in North America. In our electrical energy enterprise, we proceed to drive out efficiencies and we word that our working and upkeep prices per kilometre have been decreased by 17% during the last six years.
In order that’s what we carry ahead and we’re very conscious of any new challenge. It has to help prospects, and affordability is certainly one thing that we have now been speaking to everybody that we discuss to. It’s an important concern, reliability and affordability and security.
Mark Jarvi
Okay. Thanks for that, Brian. Respect it.
Operator
The subsequent query comes from Ben Pham with BMO. Please go forward.
Ben Pham
Hello. Thanks. Good morning. I used to be questioning, you talked about your returns in Alberta distribution. They’re going to come down however nonetheless stay enticing. How do these returns evaluate to this renewable portfolio that you’re shifting ahead with or will probably be shifting ahead with?
Brian Shkrobot
Yeah. Good query, Ben. And yeah, like, we — what I discussed on utility returns is we have now finished very properly within the final two PBR phrases as we drive out efficiencies for patrons. I all the time return to the regulated versus non-regulated.
Actually, we glance to contract, have some long-term PPAs with numerous renewable enterprise, so it takes among the danger away. So, while you evaluate a danger between our regulated enterprise versus our non-reg enterprise to the extent that we’re including on some extra service provider or take extra danger on a enterprise, we might count on internally that we might provide you with a better return.
That stated, we have now to begin someplace and strategically what we bought for the Suncor property with the event pipeline. Over the long-term with the event pipeline, we count on these returns to be fairly wholesome.
Ben Pham
Okay. So it seems like this renewable portfolio, the returns is likely to be — possibly not as nice near-term, nevertheless it seems like there’s numerous upside long run?
Brian Shkrobot
Yeah. I feel the event pipeline has, once more, nice progress in that portfolio and I’d say that they might be considerably aligned with what we bought for regulated, provided that we’re going to contract a very good portion of the off-take.
Ben Pham
Okay. Perceive. And possibly sticking with returns, possibly going to Australia, how ought to we take into consideration calculating a realized return in Australia, as a result of it’s — I feel it’s 5% allowed, however when your price base goes up with inflation, your earnings goes up. So do you really modify it to if you end up calculating your return after which if CPI goes all the way down to 2% subsequent yr, then how does that work, I assume, earnings begin to creep decrease into subsequent yr?
Brian Shkrobot
Yeah. Like, I feel we have now tried to be useful and provides everybody a rule of thumb and so the form of the rule of thumb is that each 10 basis-points change inflation interprets into about $1 million of earnings for Australia.
And if you happen to take a base authorised price of 5% and buried inside the regulatory mechanisms, in A5 was simply over 1% inflation. To the extent that inflation goes as much as 2%, that’s 100 foundation factors and that’s $10 million of earnings.
So, clearly, while you word that, I famous earlier that if inflation goes to be at 7% and subsequent yr goes to go all the way down to, say, roughly 3%. So, if that had been to occur, that’s a 4% change and you would do the mathematics on the foundations of thumb that I gave you.
So, yeah, you check out your regulated return, like your precise price of return that’s authorised in Australia, to the extent that inflation goes up or down, it will be listed accordingly with simply that rule of thumb that I gave.
Ben Pham
Okay. I do know I’m solely allowed two questions. I simply need to be certain I perceive this. I bought the earnings scenario okay, however I’m extra questioning along with your authorised price base of 1.4% or so. Once you calculate the ROE, does that denominator really change, as a result of if not, you might be incomes like a 15% realized ROE? I used to be simply making an attempt to verify I get my math appropriate?
Brian Shkrobot
Yeah. Within the present yr, like, mainly, we get — we acknowledge the truth that when inflation is increased, our price base will get listed increased and so we’re allowed to gather that over an extended time frame, over 40 years, however we acknowledge an earnings each time we index that price base in yr, we take these into earnings, understanding that’s going to be collected over an extended time frame, and that types a brand new foundation for going ahead in an x-axis association when it comes to how returns will probably be calculated on. The authorised price of return will probably be utilized to that new inflated price base. And definitely…
Ben Pham
Okay.
Brian Shkrobot
… our staff right here can work with you offline and we offers you a bit bit extra of that mechanics.
Ben Pham
Okay. Thanks.
Operator
[Operator Instructions] The subsequent query comes from Matthew Weekes with IA Capital Markets. Please go forward.
Matthew Weekes
Hello. Thanks for taking my query. Simply following-up a bit bit on some feedback about rising the renewables and that — and the way the power transition technique is predicted to form of develop within the portion of earnings going ahead. How do you see that form of including to the run price progress of the enterprise and outpacing the expansion within the utilities? Have there been any conversations about possibly rising the payout a bit bit on the dividend?
Brian Shkrobot
Thanks, Matthew. Thanks for the query. So, yeah, when it comes to our dividend coverage, broadly what we are saying is that, our dividend progress can be in step with form of the underlying progress of our portfolio.
So, at the moment, no, we might — we’re going to maintain it just about on the average form of will increase. However, over time, we could modify that, given the tempo of earnings progress. However for now, that may in all probability be a bit methods sooner or later.
Matthew Weekes
Okay. Thanks. And simply when it comes to the renewable energy portfolio and also you talked concerning the progress outlook there and the great backlog of tasks and return potential. So do you see form of the returns when it comes to the event portfolio possibly being increased than the present working portfolio, primarily based in your views of energy market and the outlook for PPAs and the carbon tax going ahead, et cetera?
Bob Myles
Yeah. Matthew, Bob right here. Completely, we do. That’s how we do see issues going ahead. The opposite factor I used to be going to remark earlier on one of many different questions is simply, we’re additionally wanting rather a lot on our renewable portfolio, in addition to all of our power transition portfolios.
As we usher in new companions, the power to truly enhance our returns by that course of after which additionally as we develop tasks as we glance to probably promote down, we really feel we could have a very good potential of accelerating returns from that mode of operation as properly.
Matthew Weekes
Okay. Thanks. That’s useful commentary. I’ll flip the decision again. Thanks.
Bob Myles
Okay.
Operator
This concludes our question-answer session. I wish to flip the convention again over to Mr. Colin Jackson for any closing remarks.
Colin Jackson
Thanks, Cherish, and thanks all for collaborating right now. We respect your curiosity in Canadian Utilities and we stay up for talking with you quickly. Thanks.
Operator
This conclude…
Colin Jackson
I’ll now flip it again to the Operator.
Operator
This concludes right now’s convention name. It’s possible you’ll disconnect your traces. Thanks for collaborating and have a nice day.
