NorthWestern Corporation (NASDAQ:NWE) Q4 2022 Earnings Call Transcript

NorthWestern Corporation (NASDAQ:NWE) Q4 2022 Earnings Call Transcript February 17, 2023

Travis Meyer: Good Friday afternoon, and thank you for joining NorthWestern Corporation’s financial results and webcast for the year ending December 31, 2022. My name is Travis Meyer. I’m the Director of Corporate Finance and Investor Relations Officer for NorthWestern. Joining us on the call today to walk you through the results are Brian Bird, President and Chief Executive Officer; and Crystal Lail, Vice President and Chief Financial Officer. NorthWestern’s results have been released and the release is available on our website at northwesternenergy.com. We also released our 10-K premarket this morning. Please note that the company’s press release, this presentation, comments by presenters and responses to your questions may contain forward-looking statements.

As such, I’ll direct you to the disclosures contained in our SEC filings and the safe harbor provisions included on the second slide in this presentation. Please also note this presentation includes non-GAAP financial measures. Please see the non-GAAP disclosures, definitions and reconciliations also included in the presentation today. The webcast is being recorded. The archived replay of today’s webcast will be available for one year beginning at 6:00 p.m. Eastern today and can be found in the financial results section of our website. With that, I’ll hand the microphone over to NorthWestern’s President and CEO, Brian Bird.

Brian Bird: Thanks, Travis. I think many of us would agree, 2022 was a challenging year in many fronts, but we also had some very good outcomes in ’22. From an operational performance standpoint, we maintained a safe and reliable service while reaching new all-time system peaks for both our electric and gas businesses in 2022. We also had significant storm response, both in South Dakota with two that occurred during May and with substantial flooding in both Montana and Yellowstone National Park. Our employees did such a great job responding to that. We were acknowledged by EEI for our response there. We are also one of the very few utilities with improved JD Power Customer Satisfaction scores in 2022 and most improved for both electric and gas among the West Midsized peers.

We were recognized by Newsweek as one of America’s most responsible companies, one of the 13 of the EEI companies acknowledged by Newsweek there. We also had very good regulatory execution. The rate case continues to progress well in Montana, and we received interim rates in October. We also had our largest capital investment year ever at $580 million invested in 2022, and most importantly, we did that safely. We announced our Net Zero by 2050 at the beginning of 2022 and have since published our TCFD and SASB aligned Sustainability Report. And lastly, from a reliability and affordability standpoint, and I’d argue sustainability standpoint, we negotiated an agreement with Avista to transfer our Colstrip ownership to us of 222 megawatts effective December 31, 2025, for a zero purchase price.

And regarding Colstrip, why Colstrip? When I think about that, again, I would say reliability, affordability and sustainability was an extremely important acquisition, or I’d say, transfer of ownership. Reliable, it’s a known asset to us. We’ve been in Colstrip for decades. It’s been a hugely reliable resource for Montana customers in the past. It’s going to help us avoid lengthy planning, permitting and construction of any new facility that’s going to reduce our reliance on imported power and exposure to volatile markets. It’s an in-state and on-system asset, mitigating any transmission constraints to import power and adds critical long-duration 24/7 on-demand generation when we need it most. It’s affordable. 222 megawatts of capacity for zero, no upfront costs, and we know it has stable operating costs.

We had to build on an equivalent new build today of 222 megawatts, to be approximately $500 million. This is a substantial win for our customers. And on operating costs that we are known and reasonable and certainly have been a discount to market prices we’ve seen as of late. And lastly, sustainable. We are certainly committed to our Net Zero goal by 2050. And one could argue with us that you’re procuring more coal here. But from our perspective, with the addition of the Yellowstone County plant and this incremental Colstrip ownership, we have actually closed that capacity deficit through the end of this decade, and that will help us think through from a longer-term perspective, what can we do in the future at the Colstrip site or nearby from a noncarbon long-duration alternatives.

And so we and our partners that are moving forward with Colstrip are already speaking about those potential opportunities. And another recent Colstrip, obviously, our transmission assets are there. And we have a highly skilled labor force in Colstrip. So not only it’s a sustainable in essence from a clean — transitioning to a clean resource at some point in the future, it also is very sustainable for the community of Colstrip. And lastly, I’d say just the action itself of taking on incremental ownership in Colstrip protects our existing 222 megawatts in Colstrip, that’s extremely important to us. When I speak about Colstrip on the next slide, Slide 5, I want to demonstrate the value to you of our existing Colstrip. This chart, which you can find on our web page, will show you our generation portfolio.

On a weekly basis, you can see that on our web page. This is for the Christmas week in Montana. The gray bars at the top represents our thermal, coal and natural gas. The blues are hydro, and you can see between those two types of resources, very consistent throughout the week. The green represents wind. And you can see in the back half of the wind, that green was higher than the black line, which is our load. So it wins great. When the wind is blowing, we’ll have excess energy, we can sell in the market and reduce our costs to our customers. But earlier in that week, particularly during high pressure systems, we had no win whatsoever. And so we are solely in the need of a capacity resource to fill in that time period. We do not have that today.

But as you can see, it’s all — it’s perfectly supply and demand, that red dotted line, which is a little more difficult to see on this chart. When we had no win during that time period, we had to procure 41% of our power in the market. And on the 22nd, we saw power prices as high as $900 a megawatt hour. The bottom of this chart shows just the value of our existing 222 megawatts on the week of December 20 to 26. The variable and fixed operating costs to run Colstrip, our existing ownership, approximately $2 million. To acquire that amount of end market purchases that we need to do in that week, same amount, 222 megawatts, $12 million on the market. So our existing ownership in Colstrip save customers $10 million. So it’s quite clear why we’d love to have more of Colstrip to fill in days like this and can provide continued value to our customers.

And with that, I’ll pass it over to Crystal.

Crystal Lail: Thanks, Brian. And before I walk you through the ’22 financial results, we acknowledge it is a Friday afternoon before a holiday weekend. So we appreciate your interest in joining us this afternoon, and we’ll keep our comments not too lengthy. The other thing I will mention is Brian just covered the key things that we executed upon in ’22 is how important that ’22 was from a base and foundation for us of laying the groundwork for a strong rate case that we’re working with staff and the commission and interveners on and continue on regulatory execution, but also importantly, from a credit metrics perspective, resolving our negative outlook with Moody’s and continuing to enable a strong foundation for growth as we go forward.

So with that, I’ll speak to our results for ’22 on Slide 6, beginning with our fourth quarter results, which we closed out the Q4 of ’22 at $1.16 on a GAAP basis and on a non-GAAP basis, that’s $1.13. In comparison to 2021 on a GAAP basis, that’s a $0.20 increase and on a non-GAAP basis, $0.09. From a full year perspective, however, we did come in just slightly to the low end or outside of our guidance range. Our guidance range was $3.20 to $3.40 initially. We did lower that as we went into closing out the year, but concluded on a GAAP basis at $3.25 as compared — on a GAAP basis and $3.18 on a non-GAAP basis. So with that, on Slide 7, I’ll give you a bit of how we think about the significant drivers for the year and what we expected and what we didn’t expect, you’ll see our guidance range on the left-hand side of this.

Photo by Javad Esmaeili on Unsplash

And to the right, the things that significantly impacted us for the year. So what was it that drove us outside of our expectations and importantly, towards the latter part of the year, and I’ll speak to the storm that Brian just laid out the criticality of supply for us, the criticality of that to our customers and the work that we do, but also how that impacts us, is while we did expect to see some higher O&M, and if you’ll recall in our bridge, we had $0.04 to $0.06 from a full year basis, that was a $0.20 headwind to us. And you see higher interest expense, us and our other mid-cap peers and others are seeing impacts of that. But importantly, the things that happened to us when you see volatility in the market is things like PCCAM from a 22 basis that $7.2 million of detriment to us, or $0.10.

And I would tell you that’s sharing 90% of those costs to go to customers. But Importantly, the volatility, the impact on bill headroom, they impact our balance sheet and what we see in those small moments where we have extreme weather, and you just heard what Brian mentioned as to the price of power during those times has significant impacts to our results. And importantly, the latest of which occurred right before Christmas and at year-end when we don’t have room to adjust from a results perspective. As you also know and have followed over time, we have adjusted weather, a non-GAAP cut out to give you an indication of our earnings power what fundamental earnings do below that. So we adjust our revenues to normal to remove weather impacts.

However, we don’t adjust the broader impacts to our results. Importantly, I just mentioned $0.10 of PCCAM for the year that impacted our results. But the further detriment to that is when we see severe weather like that, we not only see market prices are high, but the strain on our system and the overall operating costs at both transmission, distribution and the supply side, all go up. And I would just remind you again, we take out the favorable, which would be the revenue side of that, but we don’t adjust out all the things I just mentioned that also drive an impact to our results. Slide 8 gives you a look at fourth quarter financial results from a net income basis, $66.7 million compared to $51.3 million in the prior period, an improvement of $15.4 million or 30%.

Slide 9 gives you a bit more detail into that look from Q4 again, a solid perspective — or solid performance for the quarter. We did see October, November really offset themselves and being neutral from a broader weather impact and outsized impact of weather in December, as I just alluded to. And we talked about key critical days that we saw there. So you did see higher volumes driving improved margins. The other thing in the slide before we show that, and we included in our guidance this year, but the outsized impact of interim rates. That’s very solid for us and back to the regulatory execution of the ability to actually earn our returns and work with the commission. That’s certainly a key piece there and you see the positive side of that and margin.

And you see the offsets here of operating costs driving up and also interest expense and property taxes, the general things that we’ve discussed as headwinds for us and a bit of favorable income tax from a quarter perspective, closing that out at $1.16 on a GAAP basis and again, $1.13 on an adjusted non-GAAP basis. Slide 10 gives you a look at how we approach that non-GAAP adjustment. And again, as you think about our performance year-over-year, this year, we are adjusting out favorable weather. So you see the left-hand side of this. To the right-hand side, last year, we had unfavorable weather, so we had an add-back on a GAAP-adjusted basis. For non-GAAP, $65 million compared to $55.6 million in the prior quarter. With that, I’ll move to full year results with Slide 11.

From a net income basis, closing out the year with $183 million of net income as compared with $186.8 million, which is a decrease of $3.8 million or 2% on a GAAP basis, that’s $3.25 compared to $3.60 for the prior year. And again, as a reminder, that was our expectation of having a down year based on the equity that we had transacted upon late in ’21 and the dilutive effect of that and in addition, setting a solid base for our rate case filing that we made in 2022. So with that, on Slide 12, you see a bridge again of the key drivers there. Margin being an improvement that includes both interim rates, but also some strong results from our electric and gas business, continued customer growth and usage trends on that on top of weather, offset by higher operating and general expenses.

And again, the things that impacted us in ’22 no different than most of our peers, but things like fuel expenses, material expenses, insurance all of those things seeing inflationary impacts that are flowing through to us and ultimately to our customers. Also, you see the higher depreciation. And then ultimately, higher interest expense, I think I commented at Q3 that our PCCAM is the gift that keeps on giving because not only do we not recover those costs fully, they impact our balance sheet by carrying higher average revolving balances for those undercollected supply costs that we don’t have a carrying charge for. So cost of capital is no longer free as we saw the unprecedented increase in interest expense or interest rate last year, driving pressure to us ultimately at the interest expense line, you see $0.09 of headwinds in our bridge here.

And then again, our property taxes, we don’t recover our full amount of property taxes until we come in from a rate case, which you all know we’re in the middle of. So we still continue to see drag there, and that drag was even higher than we expected initially for the year. All of that resulting in a $3.25 GAAP basis results for the year, again adjusted at $3.18. Slide 13 speaks to the margin impacts. I would remind you or highlight just a couple of things here. I mentioned solid sales and volumes across our customer classes. The other thing being interim rates, which are crucial to us and closing out ’22 and offsetting some of the detrimental impact that we saw in those other areas, but obviously not enough given the amount of headwinds we saw versus the impact of those interim rates.

The other thing I would just highlight here is that lower electric transmission revenue. If you recall, last year, we had an item of a deferral release there. And absent that, we were about neutral on the electrical transition. That’s been a key part of our businesses. I would highlight that our rates actually decreased their but demand actually went up. So solid results there too. And then the PCCAM impact last year, $5.4 million of detriment to us. This year, $7.2 million, and that would be year-over-year $1.8 million impact. I would also remind you that in 2021, we have filed and requested to reset the base early or outside of a rate case. The commission has denied that request. So of course, we didn’t see that base reset until October 1.

The other thing that I would highlight from a Q4 perspective that I didn’t mention above is even with that base reset of interim rates, the application of PCCAM to us in Q4 was a significant detriment. With that, closing out the year on a utility margin with an overall improvement, but again, adjusting out some of the things with interim rates and property taxes on the slide to give you additional detail. Slide 14, again, shows you our GAAP to non-GAAP adjustments. Same story for the year-to-date as it is for the quarter in the sense of favorable weather that we’re adjusting out also adjusting out the correct penalty that we had talked about in Q2 and in the prior year, that was unfavorable weather. So an add-back with that $178.9 million or $3.18 for 2022 as compared with net income of $182.4 million or $3.51 in 2021.

From a cash flow perspective, the other thing that we remain focused on is working to improve our credit metrics in our FFO. And I would tell you, we’ve had a really strong year from a cash flow perspective, and you can see that in the numbers on this page of significant improvement of cash from operating activities versus the prior year and think about that as selecting some of those deferred costs from the prior period. The challenge is we continue to be — have significant deferred costs as it relates to mostly primarily our Montana PCCAM. So you see an improvement there, but still an under-collected position that we’re working to recover from customers. With that, the other thing I would just mention, and that takes you right to the guidance slide.

But as you all know, and we talked about at EEI in Q3, we are not giving ’23 earnings guidance until we conclude our rate case and have an outcome from that and from our commissioners as we’re working that, that has outsized impact as to how we think about our growth going forward. We expect coming out of that to refresh both our long-term guidance rate and also our financing plans. But in the near term, we do expect — most of you recall we have $75 million remaining on our ATM equity program. We do expect to issue that during 2023. We also have manageable debt issuances, but one piece that we need to refinance of $144 million late in the year, but all that consistent with our long-term guidance that we’ve given before, we also have a continued significant capital program.

Brian talked about the execution in 2022. And I would commend our teams in what was a challenging year of supply chain challenges and the ability to get their work done to continue to execute upon what we think is critical for the system and also to continue to execute on the Yellowstone development. So all of that, a significant amount of capital in ’22 closed out and a continued plan for ’23, in line with what you’ve seen from us before. And with that, I will turn it over to Brian.

Brian Bird: From a capital investment perspective, I think from the last five years, we invested about $2.1 billion over those five years and obviously, heavily weighted in the back years as we embarked on building Yellowstone County plant. We’re still going up about another 15%, approximately 15% going now to $2.4 billion in the next five years from a forecast perspective. Obviously, that investment is going to address a generation and transmission capacity constraints. We have transmission constraints on both the electric and gas side and particularly in Montana as Montana continues to grow. On the distribution side, certainly grid modernization is important. And from a generation standpoint, renewable energy integration and just continue to deal with the capacity constraints that we have as a company.

This $2.4 billion, it does include the Yellowstone County Generating Station, and it does include some hydro upgrades that we plan to do and some maintenance of our generation, but it does not include any new plants. And with that, I take you to the next slide from a looking forward perspective. Yellowstone County certainly in those numbers we just spoke about, but I’ll talk about in a minute some plans for South Dakota. Speaking Yellowstone County, we began construction early in ’22, we’re already in great progress there over from a spend perspective over halfway. And the current schedule anticipates a commercial operation during the first half of 2024. And so we’re excited about the continued progress on the Yellowstone County plant. We actually take the Board for a tour of the construction at our April meeting in billings.

From an electric supply resource plan, we did file our South Dakota plant in late ’22 in September, and we’re already talking about — to the commission about a retire and replace candidate up in Aberdeen, somewhere in that 30 to 40-ish megawatts, continue to have a dialogue in terms of appropriate size there. So the thoughts about moving forward building the plant there is exciting for us. And again, those numbers are not in the capital we just shared. Lastly, as a result of certain changes participating in wrap, thinking about IIJA and IRA, we decided to hold of filing our integrated resource plan in Montana until the end of March. We’re still on track to do that at the end of the March. And we’ve also, of course, incorporated our news regarding Colstrip into that plan.

So we feel good about progress we’re making there, and we’ll look forward to sharing that with you and speaking with you during the April earnings call. And with that, we’ll conclude, and I’ll hand it back over To Mr. Meyer.

A – Travis Meyer: Thank you, Brian and Crystal. With that we will take our first call from Jamieson Ward from Guggenheim. Jamieson, your line should be unmuted.

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Q&A Session

Jamieson Ward: Perfect. Yes, it is. You got a little pop up there now that actually says stay muted or unmute. That’s quite helpful. I think that should make the call go smooth. Thank you for taking our question here. Appreciate it. Just got a couple for you. Understanding that, of course, you’re not going to be issuing ’23 guidance until after the rate case standard procedures you’ve done in prior years. You did, though, go to or opt to put out not just ’23 but a full five-year capital plan, which was great. It’s helpful for modeling. Some questions around both of those and then just some differences in the slides. So you reiterated the 3% to 6% long-term EPS growth today. But looking back at the third quarter deck and last year’s 4Q deck, the base year of 2020 is missing.

So I’m just wondering, is that sort of soft signaling that you’re kind of reevaluating what an appropriate base would be, and that might be one of the things that gets unveiled after the rate case when you roll forward and put out your official guidance. Or was it just missing in the slide deck in 2020 stands?

Crystal Lail: Jamieson, you have great attention to detail. That’s my first comment. An excellent job of figuring out how to unmute yourself. I know we make that challenging for a Friday afternoon. But your comment is a good catch and correct. We will evaluate what is our base year. Obviously, 2020 is pretty dated at this point. And so when we do come out with updated guidance, I would expect to see a new base from us.

Jamieson Ward: Got you. Totally makes sense. Just want to check and run it by you. The second one is on rate base. And the first part of it, you’ve answered there. It just had to do with the $4 billion in 2020 as a base. The second part of it, though, so I think that’s dealt with. The second part was when I looked at CapEx year-by-year, summed them up and pulled out the Yellowstone component from last year’s ’22 to ’26 plan and then this year’s ’23 to ’27 plan, it still kind of looked pretty comparable from a dollar standpoint. So I’m just wondering if maybe I should be looking at it differently. But essentially, 2.2 times Yellowstone for the ’22 to ’26 plan and 2.240 times Yellowstone in the current plan, how do you get rate base growth of 4% to 5% if the dollars amount — the dollar amount being invested stays the same, but of course, have depreciation and so on?

Or is it more that it’s a CAGR rather than an annual growth rate and it’s sort of more back-end loaded, weighted towards more transmission opportunities? Just trying to get some color on how to best sort of understand the path you guys might see going forward since you’ve opted to give CapEx guidance and roll the five-year plan today?

Crystal Lail: Great questions, Jamieson. We did opt to give CapEx guidance because we knew if we didn’t, you would all have the questions. So we might as well, right. And how we think about that? And as the CFO sitting here, managing our credit metrics versus the CEO over there saying, we need to get after capacity, there’s plenty of capital to be done. So what I would say this roll forward represents is, one, you are rolling off Yellowstone. There are some slides in the exhibit. It sounds like you’ve already been there that really give you that exact math of Yellowstone is incremental to what we would say as a normal run of the mill capital spend. And then secondly, the key piece here is we’re focused on our FFO metrics. So plenty of capital will be done.

But how can we do that and maintain our ethical metrics and importantly, drive affordability? Again, there’s — I would call it almost an unlimited amount of capital, if you can get the folks to get the work done. The question is, what can we do and maintain affordability to customers? How do we think about that? And then how do we think about our FFO metric? So the capital roll-forward you would see here as steady as she goes. It is indeed a CAGR. And so I would think about it in that regard as well.

Brian Bird: One thing I’d add to that, that I think the issue with Colstrip, I think people have been concerned about our capital needs as a result of procuring something for zero and an opportunity you may miss, if you will, from a generation investment perspective. One of the reasons we’re certainly comfortable, obviously, we address that issue because we’re concerned for our customers. We’re going to do this in essence to reduce risk for us on our end in terms of owning Colstrip also for our customers and keep sufficient bill headroom so we can have this high level of capital and notice that this slope is not the upward hockey-stick type slope that we’ve seen historically for our capital plans. It’s pretty relatively flat across the time period. It just demonstrates the amount of capacity investment we need to make as an organization for our growing communities.

Jamieson Ward: Got you. That’s very helpful color. And it makes a lot of sense why you opted to go to the road that you did there. It definitely seems like that was the right approach to take. Last question for me, and then I’ll pass it off to others in the queue. On FFO, prior metric target had been 14% to 15%. Now it’s greater than 14%. Just wanted to get a sense of, a, is that for a certain period of time, and then it’s back to the 14% to 15%? Is 14% just the new normal going forward? Is it dependent on whether you get things like the capital, right? Like how should we think about what moved you from the 14% to 15% down to the 14% and decided to keep it there as the new standard single level there in guidance?

Crystal Lail: Again, great attention to detail. I don’t know that I overbought changing it from 14% to 15% to just being over 14%. I would tell you that’s where we’re targeting as being — and to your point, it’s unlikely that we would target to be well above that number. So 14% to 15% is probably fair to think about that, but we continue to be focused on making sure that we’re maintaining. Moving our credit metric expect for that, we’ll acknowledge that this year pulls out a little lower FFO than we were anticipating because of the pressures we saw at year-end, again, supply costs and how that affects our debt level. But no intent of change in tone or where we’re headed between saying above 14% versus saying 14% to 15%.

Jamieson Ward: Got it. Thank you. Very helpful.

Crystal Lail: Thanks, Jamieson.

Travis Meyer: Okay. We’ll take our next call from the line of Anthony Crowdell at Mizuho. Anthony?

Anthony Crowdell: Hi. Good afternoon. Can you hear me?

Travis Meyer: We can hear you, Anthony.

Brian Bird: Hi, Anthony, we could.

Anthony Crowdell: I don’t know what’s — a box keeps popping up. A box keeps popping up to unmute multiple times, but unlike Jamieson, I’ll try to keep it brief. Just quickly, thoughts you’re acquiring Colstrip for zero, I’m just curious, does that flow into rates or?

Brian Bird: Well, the issue is we’re acquiring Colstrip for zero, obviously, there’s no upfront capital cost. So that is effective in 01/01/26. It’s our intent. Of course, by the time we get to 01/01/26, we want to make sure that we get recovery of our operating costs that will start on 01/01/26. And if there’s any incremental capital from a maintenance perspective, we want to have certainty of that on a going-forward basis. I think the feedback we’ve seen in Montana from the governor, the U.S. — our U.S. representatives and total delegation, the state legislature and even a former commissioner, at least, a tremendous support for Colstrip. And so we feel good about where we sit on this particular issue. And then ultimately, whatever cost we associate with Colstrip on a going-forward basis, high chance of recovery.

Anthony Crowdell: Do you have the option of using Colstrip as a merchant facility to help offset some of the volatility that you’re seeing in the PCCAM, as like a natural hedge that is…

Brian Bird: Well, Anthony, I’d say this. We don’t have to operate as a merchant to offset the volatility in PCCAM. We can operate it as a regulated resource to do that, right? Because we can use that. We sort of calling on the marketplace, we can operate our existing asset. And my biggest complaint about this Colstrip acquisition is we have to wait till 01/01/26 to get. I think another thing I’d just say on PCCAM, I think what Crystal’s done in terms of trying to adjust what’s a proper way to treat the PCCAM and how we should get proper recovery and hopefully, that gets captured in this rate case, that’s going to certainly help us, too.

Anthony Crowdell: Great. And the last one, on the FFO to debt, when do you get to 14%?

Crystal Lail: That’s a great question. And as I said, we’re not giving long-term guidance, but we definitely — the key determinant of driving our FFO improvement is this rate case outcome.

Anthony Crowdell: If the rate case outcome is within expectations, do we hit 14% by year-end?

Crystal Lail: Yes.

Anthony Crowdell: Okay. Thanks so much. I’ll leave it there.

Brian Bird: All right. Thanks, Anthony.

Travis Meyer: Thanks, Anthony. We’ll take our next call from the line of Sophie Karp at KeyBanc.

Sophie Karp: Hi.

Travis Meyer: Hi, Sophie. We can hear you.

Sophie Karp: Hi. Good afternoon. Thanks for taking my questions. So my first question is on the IRP, which you, I guess, slightly delayed the filing of it, and you alluded in your prepared remarks that you’re evaluating options given the IRA and the Colstrip. Just was curious to kind of maybe if you could discuss what those new options are that you’re seeing given the new reality under the IRA framework and your acquisition or transfer of ownership of Colstrip?

Brian Bird: I think really, the three things that come to mind on there is, there’s new capacity accreditation associated with RAP we have to take into consideration. Obviously, having Colstrip in the mix impacts the amount of capacity that we need and the type of resources potentially. And then lastly, just thinking about what the cost resources would be, IRA is one factor, but obviously, we’ve seen increased inflation and other things, supply chain issues impact costs in other way. So just trying to consider those things into the mix. And it’s requiring us to do quite a bit of work to change and update this. And Sophie, it’s too soon for us to tell you what we expect to see from a change perspective, the resource plan will be out here in about a month and half.

Sophie Karp: Okay. All right. We’ll wait. And then my other question was, would you care to comment about the broadview decision? And I guess, the broader question I have is what kind of an impact would interconnect and such facilities have on your already challenged, I guess, power supply costs and I guess the calculation of the avoided cost, is that going to change in your favor, maybe with the addition of Colstrip, other resources? How should we think about this moving forward?

Brian Bird: I think Colstrip certainly helps as we closed that gap and have reduced capacity requirements. Obviously, the broadview decision we’re disappointed in. From our perspective, at the end of the day, this — from an energy perspective with some of these resources, we believe, is customers — it’s energy, our customers don’t necessarily need and certainly at the prices that they ultimately have to pay over the life of these contracts. And it certainly gives us less flexibility as a company to operate our portfolio of resources when more and more of these contracts are part of the mix.

Sophie Karp: All right. Thank you. That’s all from me.

Crystal Lail: Thanks, Sophie.

Travis Meyer: Thanks, Sophie. And I think with that, we’ve exhausted our queue of questions. I hand it back to Brian for any closing remarks you might have.

Brian Bird: It’s my first time of closing remarks. I should have been prepared to say something. Actually, I would just say this. I think we’re very excited about kind of from a tailwind perspective. I know as an industry we’ve got tremendous amount of headwinds in front of us, higher inflation, higher interest costs, higher commodity costs. But as an individual company, I think from the rate case, from how we’re handling our capacity issue with Yellowstone County and Colstrip, and I think the reception we’ve received from the state in terms of some of these decisions we made, I feel as an individual company, we’ve got a lot of tailwinds as well. So extremely excited about 2023 and where this company can go.

Travis Meyer: Thanks, again, for joining us on a Friday afternoon before holiday call. Please feel free to reach out to me personally if you have any questions following the call. And with that, you may now disconnect.