Tristan Richardson: That’s great context. And then as we look out to 2024 and the acceleration of EBITDA growth into 2025, is there a thought about the appropriate pace of dividend growth relative to your 5% to 7% long-term EBITDA growth, particularly with the visibility you guys have over the next couple of years. And as we’re seeing the midstream space broadly return to a period of accelerated dividend growth?
Alan Armstrong: Yes. I would just say, obviously, that’s a Board-level decision in terms of how we grow that dividend. I do think, as we’ve said all along, we do intend to continue to grow it in line earlier with our EBITDA and now with our AFFO just because we do have to make sure that we don’t ignore any tax liability that would start to affect that. And so that’s the reason for the switch from EBITDA to AFFO growth. But having said all that, I think the 5% to 7% is well within our wheelhouse and it certainly looks like that growth even as our EBITDA gets bigger, here for the next several years, at some point, the law of big numbers starts to overcome that. But for right now, I think the 5% to 7% growth rate is very achievable within our dividend growth rate.
Tristan Richardson: Appreciate it, Alan. Thanks all.
Operator: Thank you. We’ll go back next to Jeremy Tonet at JPMorgan. Excuse me.
Jeremy Tonet: Hi, can you hear me now?
Alan Armstrong: Yes. Got you, Jeremy.
Jeremy Tonet: Thank you. Good morning. Just wanted to start off, if I could, with regards to capital allocation. And just wondering, as you’ve talked about it in different points of the call, but specifically as it relates to higher rates out there, how that impacts, I guess, thoughts on return of capital hurdles for capital deployment, specifically thinking about the dividend rate now, price appreciation has increased the yield a bit. Just wondering how this all mixed together with higher rates today?
John Porter: Yes. Thanks, Jeremy. Thanks for the question. I mean I don’t think we really have any significant change to the returns-based approach that we’ve been discussing for capital allocation now for the last couple of years. We have seen a slight uptick in our borrowing costs, but we’re managing through that. I think very well. And of course, we’re seeing the returns on many of our projects as we’ve been discussing with that Southeast Supply enhancement being stronger than ever. So, I think the spread in our business between the returns on our invested capital and our cost of capital continues to be holding up very well, if not improving over time. I think as far as the capital allocation decision matrix that we’ve discussed in the past, as I know you’re familiar with, we are somewhat unique in terms of our ability to make fairly discretionary large investments into our regulated rate base and achieve regulated rates of return.
We do have a rate case coming up starting next year or so, we’ll be revisiting our ROE on our Transco rate base. And – but again, we do have a somewhat discretionary and somewhat unlimited ability to invest into that regulated rate base and achieve that regulated rate of return. So that really does set the floor of our capital allocation decisions. And I think going forward, you’ll see us, as we have done in the past, just monitor what we see as the return on share buybacks up against the potential to continue to make additional investments in the regulated rate base. And if we see dislocations in the stock price based on what we – what the current yield is trading at and our view of the growth into the future, then we’ll quickly act to buy shares as we’ve done in the past.
Alan Armstrong: Yes. And I would just add at a macro level there, Jeremy. The strange as it may seem, the higher interest rates are actually on a macro level, I think, pretty good for this business and a couple of reasons. One, given the structure of our gathering contracts and the inflation adjustment in those, which goes against the entire rate, not against just the operating cost side of that rate. So that really continues to push our operating margin up. I would tell you that we don’t plan on the inflation rate continuing as we look to our long-term model. But to the degree that occurs, it’s actually a net positive for us. But in addition to that, I think you’re seeing the impact of high interest rates come across the alternatives as we think about power generation and infrastructure to meet power generation demand.
And in a simple term, a gas-fired generation facility has a huge advantage on the capital costs associated with it, but as a disadvantage on the fuel cost. And so the fixed capital element of power generation is very positive from a natural gas standpoint just because of the capital required on the front end is so much lower, but the savings are in the fuel. And so I think we’re in a very attractive environment right now for our business in our industry in general as interest rates have moved up. It’s just put more and more pressure on people’s need to have natural gas as a very real-world alternative to meet the very rapidly growing power generation demands that we’re seeing in the markets we serve.
Jeremy Tonet: Got it. Makes sense. I’ll leave it there. Thank you.
Operator: Thank you. We’ll go next now to Praneeth Satish at Wells Fargo.
Praneeth Satish: Thanks. I guess I’ll start with a high-level question, which is maybe touching on your prior remarks. Alan. But I guess, as you mentioned, there is pressure on offshore wind, even solar deployments under pressure under the higher rate environment. So I guess as you talk to your utility customers, have you observed any shift there in terms of their long-term perspectives on natural gas? And has there been any adjustments there in terms of their decarbonization time lines?
Alan Armstrong: Yes. I think for a number of reasons. I think even some of the shifts we’ve seen here in the mid-Atlantic states are the rapidly growing demand that they’re seeing from things like data centers and all kinds of incremental loads that they’re seeing, even industrial load from the fact that we have such low priced gas here in the U.S. is driving some of that demand. So yes, we’re seeing that mostly in the Southeast and Mid-Atlantic states. I think the Northeast is yet to come. I think people have kind of been holding out for that. And I think there’s been plans to depend on that offshore wind and I think, as I mentioned earlier, I think the harsh reality is going to hit us there. So we’re – we very much see ourselves as a complement to renewables, and we are all for seeing that develop.
But here as we sit in the Northeast to answer your question, we haven’t seen the shift or the capitulation perhaps you might describe it as in that market yet. But I would say we certainly are seeing a very sober mid-Atlantic and Southeast markets because they’ve been up against the – they’re seeing the demand growth in their markets, and they’ve got to have an answer for it.
