Catherine Stempien: Yes, I’ll just add that with the delay that was caused by the kind of unprecedented action from our components, and we continue to look at restarting construction as soon as possible. And with that restart construction, we’re negotiating with all of our vendors to make sure that we can optimize all the construction schedule as well as the pricing that we’re receiving. So, we’re doing that in the background as we’re proceeding along with the legal matters.
Michael Sullivan: Okay. So, this is more negotiating on the cost side, not the revenue contract side? Or is that part of this as well?
Pedro Azagra: Well, it’s both things. I think there is a change in law and those additional costs, legally, we believe we’re entitled to them. And I think that’s something part of the things that we’re working with ADCs and subsequent with public commission. So, the answer is yes, we’re going to be working and we are working in both sides.
Michael Sullivan: Okay. And then just on the 2023 guide on slide 18, you point out 9% growth, excluding some of the offshore wind gain and the divestitures planned for 2023. But then you show PNM as $0.30. I mean isn’t PNM the majority of that 9% kind of normalized growth? And if that’s right or what’s kind of going on with the rest of the business that it’s seeing such little growth, I guess?
Pedro Azagra: I will let Patricia to comment on details. But if you remember when we did our strategic presentation because of the rate cases negotiations that we have going on right now, we made it clear that out of the three years, this was the one with less growth and then things we catch up later. I think we’ve been very transparent on how this year will be. I think when you look at the numbers with and without PNM, and you look at the numbers also without existing gains. If you take out the two gains quarter one that we had last year, with the Texas event on some other asset divestitures. And you take out the actual gain that we had this year in 2022, I think you will see that the growth is 7%, okay when you think about it.
And when you think about the growth for 2023, if you think about the midpoint of the guidance, we go to 9%. Now, you say, well, if you take out PNM, based on those numbers go more to the 7%. So, that’s why I think for us, yes, this is the year that we made it clear what we have in our rate cases, negotiations, et cetera. And PNM is a factor to move from two, three points above or below. But Patricia, you can comment.
Patricia Cosgel: Yes, I think you’ve hit all the key points. I mean, what we’re really trying to show is that even though these events that happened in 2021 and 2022 are part of our really are — and we’ve said this a couple of times, our ongoing strategy of capturing value in our business. And we’ve been able to do that by having the strong operational performance in Texas. We’ve been able to do that by restructuring our offshore wind lease. So, now we have 100% ownership of those projects. If you wanted to exclude those, and we had some small asset divestitures also in 2021, which we have typically on a recurrent basis from our pipeline. You would have a 9% growth excluding that. Yes, in 2023, there is PNM and we have $0.30 there for the PNM operations.
But we also have rate cases that we expect will be — are very important to the companies that will go into effect mid to late year, so not early in the year. We also have operations from projects that went COD last year. And this year, that will add — we expect this year that will also add to the performance. We also have the funding costs for debt at the parent company level that needs to be considered into 2023. So, it’s really not any change from how we have been looking at it all along from Investor Day, considering all those factors other than we’re constantly looking, as I mentioned before, at the whole macro environment and other impacts to the business.
Michael Sullivan: Okay, that’s helpful. Thanks.
Patricia Cosgel: Yes, sure.
Operator: Thank you, Michael. Our next question comes from Julien Dumoulin-Smith from Bank of America. Julien, your line is now open.
Julien Dumoulin-Smith: Hey good morning team. Thanks for the time. Appreciate it. Just coming back real quickly here. I know you guys addressed this a little bit, the 6% to 7% CAGR. First off, just when you talk about the assumptions embedded, is it still assuming the same power curve from last year? Or how are you thinking in reaffirming your word, I think, a moment ago, today relative to incorporating some of the assumptions from last year, one of the big deltas would potentially be power? How do you think about the mark-to-market there and what the curve is as of?
Patricia Cosgel: We look — look — I mean, we called that a couple of things. I said interest rates, macro environment. We look at all these things combined to see how comfortable we are with the guidance. We haven’t changed some of the things I mentioned, like rate case assumptions in terms of investments, in terms of expected ROEs, and capital structures, CapEx across the business, megawatts, et cetera. But we do — when we are trying to determine our 2023 budget, we do — which came after Investor Day, we do deep-dive focuses on all of our expectations for 2023, so we take those into account. And anything else that we believe could be impact positive or negative in the long-term out and that’s how we get comfortable with maintaining the 6% to 7%.
Pedro Azagra: Maybe just to remind that also 70% of our earnings are linked to PPAs, so not subject to this change in the power curves. And also just — also to highlight that, yes, we were quite prudent when we made our budget forecast in 2022, we saw basis as an important vector in some assets and we would prudence in our 2023 budget.
Patricia Cosgel: That’s right. I think it’s important to note that to that 70% of the renewables business, which is less than 30% of the corporate earnings are for PPAs. And we do — when we look at pricing, consider basis risk and curtailments and are prudently managing around those.
Julien Dumoulin-Smith: Got it. Basically, the way to say this is your power curve assumptions haven’t changed formally for the range, but given the mark-to-market today, you’re still within the range. Is that the way to read it?
Patricia Cosgel: I’m saying we look at a lot of different things, pluses and minuses, and we’re not calling out everything that’s in our long-term — every assumption that’s in our long-term outlook, positive and negative, because then you’re just going to know those single things that we called out. We’re just basically saying — yes, when we consider everything.
Julien Dumoulin-Smith: And maybe the follow-up related to that would be, when do you think about coming out with an updated and roll forward long-term outlook? And then to that end, do you think that you could be in a position to give kind of a cleaner number, given the gains, et cetera, there’s a lot of lumpiness within the adjusted EPS sale? What point do you think we get kind of a cleaner view on the outlook for the business without kind of the jump in PNM here, for instance. And then related to that, what’s the time line do you think for PNM? It seems like the commission and others are keen to resolve, what’s your sense on when you’re able to get that clarity given some of the other sort of logistical and pending matters in the state?
Pedro Azagra: If I can respond to both. I think, first of all, we have confirmed the outlook for 2025. So, I think we don’t have any date right now that we will come back. I think it’s clear we’re working always in updating our onshore business plan. I think we’re working on updating you know there was a transmission approval last week. So, we’re working on that to come back to you. It’s a very material amount on COCPA Part 2. So, we always will have to come back to you with updates. It seems to me that most of the dates are more things happening than less things happening. I think on PNM, I hope you are right. I think we respect that you know the process. There is a new commission. The commissioners are very respectful. They have been confirmed.
And I think we are just right now working with them to see with the commissioners. We’re working with the parties try to come back to the commission. So, we are just waiting right now. But if there is something there is going to be in the upcoming weeks.
