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spk01: Good day and welcome to the separate second quarter earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Glenn Donovan. Please go ahead.
spk16: Good morning, everyone. Welcome to SEMPRA's second quarter 2022 earnings call. A live webcast of this teleconference and slide presentation is available on our website under the investor section. We have several members of our management team with us today, including Jeff Martin, Chairman and Chief Executive Officer, Trevor Mihalik, Executive Vice President and Chief Financial Officer, Kevin Segara, Executive Vice President and Group President, Justin Bird, Chief Executive Officer of Semper Infrastructure, Alan Nye, Chief Executive of Encore, Peter Wall, Senior Vice President, Controller, and Chief Accounting Officer, and other members of our senior management team. Before starting, I'd like to remind everyone that we'll 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 statement we make today. The factors that could cause our actual results to differ materially are discussed in the company's most recent 10 and 10 filed with the SEC. Earnings per share amounts in our presentation are shown on a diluted basis, and we'll be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for reconciliation to GAAP measures. We also encourage you to review our 10Q for the quarter ended June 30th, 2022. I'd also like to mention that the forward-looking statements contained in this presentation speak only of today, August 4th, 2022, And it's important to note that 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 four and let me hand the call over to Jeff.
spk17: Thank you, Glenn, and thank you all for joining us today. Earlier this morning, we reported second quarter 2022 adjusted earnings per share of $1.98, and year-to-date 2022 adjusted earnings per share of $4.90. Based on the strength of these results, we're now guiding to the high end of our full year 2022 adjusted EPS guidance range, and we're also affirming our full year 2023 EPS guidance range. Next, let me offer some perspectives on how we think about the future. At SEMPRA, we've worked hard to simplify our business model to improve safety and operations, and with the benefit of more disciplined capital allocation, to also improve our financial performance. Today, we have built three large-scale growth platforms operating in some of the largest energy markets in North America. Within these platforms, we have an exciting opportunity set. Here's a quick summary. At Sempra California, we're making capital investments to continue improving safety, reliability, and sustainability. Each are key components of our recent GRC filings. At Sempra Texas, we couldn't be more excited about the work Encore is doing to support strong economic and demographic growth and the continued integration of clean and renewable resources. At Semper Infrastructure, there are significant growth drivers across all three business lines, LNG and net zero solutions, clean power, and energy networks. In the first half of this year, the United States became the number one global exporter of LNG. And by the end of the decade, we expect the United States will extend its significant leadership advantage in this area. In combination, these investment opportunities support our record $36 billion capital plan for 2022 through 2026, as well as our continued confidence in our projected 6% to 8% annual average long-term EPS growth rate, which we announced earlier this year. Please turn to the next slide while I turn the call over to Trevor to provide several business updates.
spk13: Thanks, Jeff. Beginning with Semper California, both SDG&E and SoCalGas filed their general rate cases with the CPUC in May to update their authorized revenue requirements for 2024 through 2027. These comprehensive filings represent a thoughtful effort to support our customers by striking the right balance between maintaining customer affordability and making the necessary infrastructure investments for safer, cleaner, and more resilient energy systems. Notably, both utilities have outlined the critical areas of investment needed to safeguard their systems and support the state's clean energy goal of achieving carbon neutrality by 2045. As an example, SDG&E's GRC filing is centered around investments such as wildfire mitigation, system hardening, EV infrastructure, and innovative technologies to modernize our electrical system. For SoCalGas, investments in pipeline safety and integrity and emissions reductions are key priorities in its application. Support for these rate case priorities will lead to a cleaner energy system and provide long-term benefits to our customers. We look forward to working with all stakeholders on these proceedings to advance a positive outcome. In April, both SDG&E and SoCalGas filed their cost of capital applications to update their respective authorized rates of return for 2023 through 2025, and we expect a final decision by year end. To further support grid resiliency, the CPUC approved SDG&E's four new microgrid facilities. These new energy storage projects are expected to improve power continuity during grid outages and are great examples of the critical investments SDG&E is making to integrate renewables while enhancing reliability for its customers. Additionally, SoCalGas recently announced that since 2015, it achieved a 37% reduction of fugitive methane emissions, significantly ahead of the state's goal of a 20% reduction by 2025, and nearing the state's goal of a 40% reduction by 2030. This achievement is significant and demonstrates SoCalGas's focus on helping to accelerate the decarbonization of California's energy systems. Shifting to Sempra, Texas. Encore continues to benefit from its demographic growth and strong economic expansion across its service territory. As a result, Encore has added another 35,000 new premises so far this year. we continue to anticipate maintaining an annual premise growth of approximately 2% in the near term, which is significantly above the industry national average. Also, Encore has seen more than a 70% increase in new requests for transmission interconnections compared to the second quarter of 2021. This highlights the continued growing demand and expected penetration of renewables in their service territory. On top of significant organic growth Encore continues to experience near record high temperatures and in recent weeks ERCOT has set new records for peak electrical demand. As a grid operator Encore has been doing its part to help maintain grid reliability during these extreme weather events, while also executing against a record $15 billion capital plan for 2022 through 2026. Given Encore's significant growth across its service territory, we expect their CapEx program will again be adjusted this fall. As it has done in the past, Encore will present its updated rolling five-year capital forecast to the Board at their October meeting. In May, Encore filed its rate case with the Public Utility Commission of Texas, requesting a 4.5% revenue requirement increase over current adjusted rates to support Texas's rapid growth trends and need for continued reliability. The new rate is expected to go into effect in the first quarter of 2023. Encore looks forward to working in partnership with its stakeholders to achieve a positive outcome. Now I'll turn the call over to Justin to discuss updates at Semper Infrastructure, where we've successfully reached a number of important commercial milestones this quarter.
spk02: Thanks, Trevor. Last year, we formed Semper Infrastructure to be a leading North American infrastructure platform with a standalone investment-grade balance sheet. This has enabled us to attract strategic investment partners like KKR and Audia, while also highlighting the growing equity value of the business. In June, we were pleased to close our 10% sale to Adia for approximately $1.7 billion, with an implied equity value of close to $18 billion. We look forward to a strong partnership with Adia and, together with KKR, we are working collaboratively to advance our strategy of providing cleaner and more secure energy to global customers. Jeff talked earlier about the growth that we're seeing in all three business lines at Sempra Infrastructure, but what I thought would be helpful is to focus my time on recent developments in US LNG. Please turn to the next slide. Sempra Infrastructure's US LNG development portfolio has made significant strides. As we outlined in our last quarterly earnings call, the key work streams that Cameron LNG faced to include completion of our pending FERC amendment, the competitive feed process, and ongoing marketing. With regard to our recently announced commercial arrangements at Cameron, we have worked hard to align our economic and commercial interests with those of our customers. You will recall that we plan to take our 50% share of the Train 4 offtake and sell it back-to-back to global counterparties under long-term sale and purchase agreements. We are pleased to confirm that we have substantially achieved this marketing goal as a result of the HOAs with the Polish Oil and Gas Company and INEOS, which include the optionality to move volumes between Cameron LNG Phase II and Port Arthur LNG. Turning to engineering, we are running a competitive feed process with Bechtel and a JGC Zachary joint venture. This is expected to be completed in the summer of 2023, at which time, we would expect to move to FID. Next, let me discuss Port Arthur LNG. Similar to Cameron, we have maintained a disciplined marketing approach with a focus on linking U.S. natural gas production with some of the leading European buyers of LNG. This strategy has served us well in the current environment given supply disruptions in Europe. Just as a reminder, we have a FERC order and a DOE expert permit in hand, and the permitting and design work are highly advanced for the initial phase of the project. The key remaining workstreams involve finalizing the EPC contract with Bechtel to include updated pricing and signing definitive offtake arrangements. Since our Q1 earnings call, we have entered into HOAs with RWE, the Polish Oil and Gas Company, and INEOS, and announced a strategic partnership framework with ConocoPhillips, under which Conoco would receive roughly half of the offtake volumes, or 5 MTPA, under a 20-year tolling type arrangement, and potentially make a 30% equity investment in Phase 1. Importantly, These announcements mark substantial progress in the marketing phase of this project. As it moves forward, we will continue to work with stakeholders, including customers, contractors, debt holders, equity investors, and credit rating agencies. The positive takeaway from this is we continue to see great interest from European buyers, and volumes are coalescing around projects that have the greatest probability of advancing. We look forward to updating you on future progress in November on our third quarter call. As Jeff mentioned earlier, the U.S. has recently become the number one global exporter of LNG. Based on the quality of our development sites and their geographic positioning relative to Europe and Asia, we believe our business can help advance America's leadership position in this area while also providing energy security to our allies and helping facilitate the global energy transition. Please turn to the next slide where I'll turn the call back to Trevor to discuss SEMPRA's financial results.
spk13: Thanks, Justin. Turning to SEMPRA's financial results. Earlier this morning, we reported second quarter 2022 gap earnings of $559 million or $1.77 per share. This compares to second quarter 2021 gap earnings of $424 million or $1.37 per share. On an adjusted basis, second quarter 2022 earnings were $626 million, or $1.98 per share, which compares to our first quarter 2021 adjusted earnings of $504 million, or $1.63 per share. On a year-to-date basis, 2022 GAAP earnings were $1,171 million, or $3.70 per share. This compares to year-to-date 2021 GAAP earnings of $1,298 million, or $4.24 per share. Adjusted year-to-date 2022 earnings were $1,550 million, or $4.90 per share, which compares to our year-to-date 2021 adjusted earnings of $1,404 million, or $4.58 per share. Please turn to the next slide. The variance in the second quarter 2022 adjusted earnings compared to the same period last year can be summarized by the following. $48 million of higher equity earnings at Sempra Texas Utilities, primarily due to customer and consumption growth and increase in invested capital. $41 million of higher CPUC base operating margin, net of operating expenses at SDG&E and SoCalGas, as well as higher FERC margin at SDG&E. and $33 million of higher earnings at Sempra Infrastructure. There are a number of items driving this variance, so please refer to the appendix for further detail. Please return to the next slide. As we close our prepared remarks, let me give you a couple of key takeaways. First, comparing the financial results from the first half of this year to the same period in 2021, we posted adjusted earnings growth of 10 percent and adjusted EPS growth of 7%. It's equally important to note that we have accomplished these results even with the sale of a 30% minority interest in SEMPRA infrastructure. Second, the steps we've taken to diversify and strengthen SI's capital structure came at an opportune time and have put us in an improved position to execute on a new set of exciting development opportunities, particularly in the LNG space. Third, going forward, we remain highly focused on safety and operational excellence by executing on our strategy, which includes progressing towards constructive GRC outcomes at SEMPRA California, extending and improving electric grid resiliency in Texas, while Encore works with its stakeholders to finalize a constructive base rate case for its customers, and achieving further milestones in our overall development pipeline at SEMPRA infrastructure. And with that, This concludes our prepared remarks. So I will now stop and we can open the line to take your questions.
spk01: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions. And we'll take our first question from Char Barraza with Guggenheim Partners. Please go ahead.
spk19: Hey, guys. Good morning.
spk17: Good morning, Char.
spk19: Jeff, just recently, You know, obviously you're guiding now to the top end, and it appears you're tracking well ahead of plan, especially with some of the commodity optimization upside. How are you thinking about, I guess, the cadence of further updates on 22 as we think about the rest of the year? And then just more importantly, how are you sort of thinking about 23 update, especially as we're now bridging to a higher 22 base? Are there some of the recurring benefits that you anticipate taking to 23, like maybe O&M pull forwards, any other optimizations?
spk17: Well, we appreciate the questions, Char. I would start by just reflecting on the fact that over the last decade, we've grown our earnings per share at roughly an 8% CAGR. I mentioned this in my prepared remarks, but we continue to expect the average annual long-term adjusted EPS growth rate to be in the range of 6% to 8%. And I think we're fairly excited about being ahead of plan for the year. I think that's the right characterization. and given the strength of our results in the first half, plus some of the opportunities we itemized in our prepared remarks, We certainly think this sets us up for a continued very, very strong growth and income story. We're obviously guiding to the high end of the range for 2022. And I would note, Char, this is the fifth time in six years that we've guided to the high end of the range or increased our guidance. So we feel like there will be some pull-through in 2023. As we head into our Q3 call, we should be in a better position to give you a more definitive update.
spk19: Okay, perfect. That helps as we're bridging. And then just Port Arthur is now optically oversubscribed. Just given the advanced stage of Port Arthur 1 and the expansion, I guess what are the hurdles to putting an FID timeline for us? Like if EPC is done, would it be feasible to finalize commercial agreements in a relatively short time, i.e. like maybe mid-23 along with Cameron 4?
spk17: Yeah, I will tell you that one of the ways we're thinking about our FID decision, I know, Char, you may have followed this, but there's a lot of interest in our San Diego Padres over the last couple days. And to use a sports metaphor, some people talk about playing small ball, you know, moving runners around the bases. And that's exactly what Justin and Fize and the team are doing in our LNG business. Let me just start by kind of characterizing where we're at with Cameron expansion or what we refer to as phase two, and I'll go right to Port Arthur to get to the heart of your question. First, at Cameron, we're continuing to move forward on definitive commercial agreements with our partners, namely moving to SPAs. We're continuing advanced permitting, and we're making progress on the competitive feed work. So we expect to complete those work streams in the middle of next summer and assess an FID decision thereafter. At Port Arthur, we're not prepared to set an expected FID date yet, but I can confirm there are scenarios where FID could occur in 2023 and even in the first half of 2023. We've had some exciting developments. I think, as you correctly noted, using it optically to kind of subscribe at least phase one through a series of HOAs. The next steps for us is make sure we convert those to SPAs. A lot of times, buyers, as you know, will want to secure their interest in the facility and move quickly to an HOA and follow it with an SPA thereafter. Secondly, it's very important work we have underway with Bechtel. We've already started our partnership conversations with ConocoPhillips. We think they'll be very, very helpful with us as we evaluate and optimize that feed process. And thirdly, we're advancing our financing and other development activities. So there's no question from our perspective, Char, that it's an exciting project. Our goal at this point is to manage the work streams I just described in a way that maximizes the project's value for our shareholders. I think we'll be in a better position on the November call to give you a more definitive update.
spk19: Got it. Perfect. And just, Jeff, one last quick one is obviously there's multiple projects that are advancing in parallel paths. I just want to get your reiteration that, you know, just given the ways you've been able to finance these projects, maybe some incremental debt capacity that you see this as being an equity-free project. build out as you go through the growth opportunities at the LNG business?
spk17: Yeah, I will tell you that Faisal and Trevor and Sandeep and Justin and the team have spent a lot of work around this. Now, I give them credit because we've made, as you followed, a series of strategic moves to not only form simple infrastructure with a standalone balance sheet and diversified capital structure, But these steps we took in the last 18 months also gives us a lot of flexibility. So let me give you a couple ideas that we've outlined previously about how we expect to these projects. First, as you know, we can always use non-recourse financing. You've seen the team do this on campaigns one through three and on ECA. Second, as we've done in the past, we can sell down project-level equity to our off-takers. This is our current plan with ConocoPhillips. Justin made this comment earlier, but we're expecting to take a 30% equity interest in Port Arthur. And I would also mention, Char, we may also look to bring in other equity partners at the project level in Port Arthur. Third, Semper Infrastructure is rated as an investment-grade credit. This was an important development for us. with significant cash flows, and this gives us another great option to access the debt markets. And then I would say fourth, with the inclusion of KKR and ADI in the capital structure, it provides us with other third-party sources of capital, and it probably doesn't surprise you to know that we're also routinely taking quite a lot of reverse inquiries from other third parties to participate in our projects. So our goal as we move forward in the development process for Cameron Phase II and Port Arthur Phase I is to make sure we're evaluating all these options through the lens of getting off a really high-quality project and also through the lens of making sure it creates the most value for our owners.
spk19: Perfect. Fantastic, guys. Thanks so much. I'll jump back in the queue. Appreciate it. Thank you, Char.
spk01: And we'll take our next question from David Arcaro with Morgan Stanley. Please go ahead. Good morning, David.
spk06: Hey, good morning. Hi, thanks so much for taking my question. Yeah, I was wondering if you could talk about some of the CFE news of late, and maybe on one hand, could you just talk about the Vista Pacifico project? How does the agreement that you've got in place there now help move that project forward incrementally? And then I'm also curious on the Selena Cruz LNG terminal site, just any other details you might be able to give at this early stage in terms of size strategic appeal and competitiveness, timing, et cetera.
spk17: If I understand your question correctly, I think you want me to kind of summarize some of the recent developments with CFE, kind of our views on that marketplace and some of these newly referenced projects. I would start by saying we have very constructive relationships in Mexico. Tanya Ortiz does a wonderful job in Mexico, and I've had the benefit probably in the last 90 to 100 days meeting with the President of Mexico three different times about how we continue to grow that relationship and better serve that country. So I think big picture in the short term and long term, we think they'll need additional investment, particularly in the energy infrastructure space. And David, because of the size of our existing energy network, we think we're as well positioned as anybody to help meet some of the new investment needs of that country. There is a list of SIS development projects summarized in the appendix at slide 13 by way of reference as I go forward. But on the couple projects you mentioned, we recently signed up the commercial terms for us to reroute the Sonoran Pipeline around the Yaqui territory. There's still some work to be done by the Mexican government to resolve issues with the indigenous peoples, but we think that's an important step. Vista Pacifico is a very interesting project. It's on or around that 3 million ton per annum stage. It's accessed by two existing pipelines. It's always a nice attribute when you can work with the government to make sure you secure your land concession, your local, state, and federal permits. We're also having conversations with CFE to do a capacity release so we have access to the type of volumes of natural gas we need to build that project. That's something we think The government of Mexico is constructive on, and we're going to continue to work forward on a development basis. As to Salina Cruz, one of the things that's interesting as we think about the root causes of migration is that the Isthmus of Mexico, which is about a narrow waste at the southern part of the country that's just over 200 to 250 kilometers in width, There's a lot of interest to create an industrial corridor there. I think the president of Mexico is hoping to create 10 different industrial zones, and they're trying to find a way to bring natural gas down the Gulf seaboard so they could have a potential for an LNG opportunity on the Gulf side as well as an LNG opportunity on the Pacific. Because we have such a strong position in U.S. Gulf Coast LNG today, we have been far more interested in the Salina Cruz facility. That facility would also, very similar to Vista Pacifico and Eco Phase I, provide a unique geographical access to the Asian markets. with on-sea transfers taking about 11 days to reach that marketplace. It's very early stage, David, but I think what it really goes to is our ability to work with various administrations in Mexico because our baseline approach is to make sure when we put dollars down there in the country, number one, we do it selectively. Number two, we tie it to raising the standard of living for the Mexican people. And number three, we tend to try to do it in cooperation with the government so we're also meeting their stated policy objectives.
spk06: Excellent. Thanks. Very helpful. Thank you. Separate question. I was curious. I know it's early in the process, but in Texas, in terms of the rape case, any thoughts on the prospects of settling that case here?
spk17: Sure, I would say similar to our California utilities. I'll just start off by saying that Encore, you'll recall, filed its base rate application in May with a view toward reaching a final regulatory outcome later this year. But we've got Alan with us on the call. And, Alan, perhaps it would be helpful if you just provide some additional color around the process as we move forward from today to get to a good outcome that benefits the ratepayers of Texas.
spk14: Yeah, you bet, Jeff. Thanks for the question. As Jeff said, let me just start by saying kind of where we are, and then I'll get to where I think we're going. As Jeff said, we filed in May. Right now, we're in the discovery phase of the proceedings, so we've been asked quite a few RFIs. We're responding to them now. Kind of some important dates that are coming up. Discovery will end on our direct case on the 22nd of this month. Intervenor testimony is due on August 26th, and then staff testimony would be due on September 2nd with a hearing on the merits, only if it's necessary, obviously, September 26th through October 5th. So that's kind of where we are right now. Now, where we're going, I've said on these calls many times over the last five years or so, we have a very strong reputation in Austin, and that strong reputation is built over years and years of doing the right thing and being able to get along and work with our constituents and our state and staff and find solutions for difficult problems, including rate cases. And so we have a history of finding good outcomes to these rate cases that benefit our customers and our state, the ERCOT market, and our company. It's always important in rate cases, it's essential really, to allow the intervenors to have time to analyze your filing, our filing, and to ask the appropriate questions that they need to do that analysis. And that's what we're doing now. However, we're in constant communication with all the parties in our case, and we will very soon, once they've asked the questions they need to ask, engage them in serious settlement negotiations. And we've done in the past. We know how to do it. It's not easy, but we're going to work very hard to try and figure out something that benefits us and the state and our customers. And that'll be over the next few weeks or months. So by the time we get back in October, I suspect we'll have a lot more to talk about one way or the other. But that's kind of where we are now, where we're going. I feel very good about our case. I feel very good about our relationships. I feel very good about our history and the manner in which we engage these stakeholders in these settlement discussions. And we'll work very hard to try and make that happen in the near future. But right now we're still in the discovery phase, so that's kind of a summary of where we are. Thank you. Thank you, Alan.
spk06: Okay, great. Appreciate all the color. Thanks so much.
spk05: Thank you.
spk01: And we'll take our next question from Nick Campanella with Credit Suisse. Please go ahead.
spk03: Good morning, Nick. Hey, good afternoon. Good afternoon, everyone. Nice to hear from you. I guess I'll just, I'll keep the questions going with Alan and Encore. You know, we've seen a lot of folks in, you know, service territories adjacent to yours kind of talk up their load forecasts. And, you know, I know that the board meets and updates capital plan higher, you know, virtually every year. But is there anything kind of specifically discreet and different about this year versus prior years when we're kind of thinking about the magnitude of what's needed for the system here?
spk17: Yeah, it's a great question. I'll frame it two different ways and pass it to you, Alan. I think it might be helpful if we just move to some of the growth drivers that you've been seeing in your marketplace, number one. And, Nick, the reason that's important is I think there's an expectation that the current $15 billion CALPA program, when it gets revisited on the board with Trevor and I later in the fall, it has an opportunity just to meet growth for that budget to be increased. I don't want to get ahead of our board decision on that. But secondly, Alan, maybe talk about the work that your team is doing beyond just meeting capital growth and how that might play into the fall.
spk14: Yeah, Jeff, I appreciate the question again. And I'll start with just what we're seeing on the growth side, to your point. You know, the state continues, to your point, to see just very high demand for our services. and very strong growth, both organic and demographic growth. You know, we're still seeing 1,500 people a day move here. We are seeing corporate relocations. We now have the most Fortune 500 companies in any state. And we're seeing just really large industrial expansions like Samsung and Taylor, TI, Globatech, and Sherman, things like that. So our kind of growth statistics, I know, are covered in our earnings release, and Trevor mentioned them as well. in his presentation, so I'm not going to go in too deep detail there, but suffice to say, you know, we are on a very strong path as far as premises go, including not, independent of what we have in our press release, just a couple other factors. In June, we received the largest request for service to new subdivisions in our company's history. So that's one. And then two, for July, our serve new requests are up about 40 percent above what we had in our forecast, which were already very strong. So the outlook on the premise side is very positive. Transmission POIs, as is stated in our materials, are at historic record highs. And then we continue to see just incredible demand out west and need for investment as we continue just to see new peak after new peak on our Culberson Loop, on the far west Texas weather zone. and then very, very similar growth at Culberson on our Stanton area, Stanton Loop, that serves the Midland Basis. So switching back from that to the CAPEX, those are some of the things that are going to be in our minds and that we're going to discuss with our board going into October. And you all know we do these updates in October, and to Jeff's point, we've been already working very hard on that. And so while, yes, what we're going into October is kind of traditional low growth, the growth of the state of Texas, all the things we traditionally talk about on these calls, I think what would make this one potentially slightly different, and Jeff alluded to it, is I think we are going about the exercise this year, and the team's been working very hard on this, on seeing, given some of the extreme weather that we've been seeing over a period of years now, from URI to all the things we're going through in ERCOT this summer, we feel we have a real need It's really necessary that we look at and try to figure out how we can harden our system and make it more resilient. And so I know many other utilities are doing the same exercise. Some have already announced some things. But that's the other piece of what we have kind of on our plate going into the October boards. We'll have the traditional growth, which is already causing pressure on our plan. But then we have the other piece, which is what do we want to do to try and ensure that we provide the best customer service, the most reliable service that we can to our customers, given some of these extreme shifts in weather that we're seeing and just the need to address that on our system. So, yeah, our October board meeting will probably be a little more expansive when we talk about CapEx than it has been in the past, and I think that's potentially going to create a lot of opportunities for investment on our system. Thanks.
spk03: Thanks a lot. That's, that's, that's great. Um, I guess just more a capital allocation question too, is you've had this, you put the six to eight plan out there in the beginning of the year, and you realize a lot of momentum on this LNG business since then. And, you know, as you kind of think through all these financing considerations, should we still be thinking about the same level of buybacks here? Uh, that was outlined on the fourth quarter of 21.
spk17: Yeah, Nick, I appreciate that question. It's something that Trevor and I have talked a lot about. It's something we'll continue to have conversations with our board about. But I would give you a couple takeaways here. One is buybacks and dividends have been a foundational part of how we've thought about capital allocation for a long period of time. Since last summer, we've had roughly $1.25 billion of shares that have been repurchased at a price of roughly $132 billion. And at the time, at each juncture across the way, we viewed our stock as being undervalued and repurchases, Nick, as an effective tool to create value for our owners. Given where our stock's trading today, I want to be very clear, we continue to believe our stock's undervalued, particularly given the growth opportunities that are being outlined on today's call and in some of our materials relative to our peer group. That's why, as we go into the fall, Trevor will lead the team in revisiting our overall capital allocation strategy to evaluate opportunities for share repurchases in the future, but he'll also evaluate those options against some of the new capital projects that we likely expect to move into our investment horizon. This exercise, Nick, is done every fall with a view toward driving maximum long-term value to our shareholders.
spk03: All right, I appreciate that.
spk05: Have a good day. Thanks, Nick.
spk01: We'll take our next question from Julian Doolin-Smith with Bank of America. Please go ahead.
spk18: Morning, Julian. Hey, afternoon, Jeff. Pleasure. Thank you. So let me clean up on a couple things here. I'll use another baseball metaphor here. Just with respect to taxes and IRA legislation here, any thoughts about AMT and how that breaks up across the businesses here? If you can, just super brief here. I get it's preliminary.
spk17: Yeah, obviously the bills and draft, we think it'll go through a variety of changes. We certainly like the support for the EV market. We certainly like the fact that there's an opportunity for the 45Q subsidy to go up. Streamlining permitting has been raised in this bill. It may be separated, Julian, as part of a companion bill. We think that makes all the sense in the world. In terms of the minimum book tax issue, Trevor, you want to go ahead and just kind of address how we're looking at that?
spk13: Sure, Jeff. Hey, Julian. Hey, look, you know, on the initial assessment of what we're looking at right now, we think the earnings impact will really be de minimis or non-existent on an earnings standpoint. And then from a cash tax impact, we think there may be a real slight cash tax impact, but very manageable. So I think overall, we think, you know, the way it's drafted right now, it's very easy to work through.
spk17: We looked at it, Julian, against our $36 billion capital program, and whether the bill goes forward or doesn't go forward, we don't see it having a material impact either way.
spk18: Excellent. Thank you for being clear about that. And then just going back to Port Arthur here, again, we're just trying to sharpen our pencils a little bit, and I get that it's preliminary around your conversations with Bactel and any number of other parties here, but how do you think about the cost of that project here again? We're looking at a backdrop, inflationary in a holistic sense, obviously Greenfield site. Any updated sense at all just to kind of frame the value proposition here?
spk17: Yeah, I'll give you two things to think about because we haven't publicly announced cost either for Cameron or for Port Arthur. But Cameron, because it's a brownfield project, it will also have some de-bottlenecking benefits associated with it. We think it's going to be one of the lowest per unit cost projects built in the world. Now, obviously, we need to get some work done here. It's still a competitive process. But we feel very, very good about the cost structure of that as an addition to the base project. At Port Arthur, it's a greenfield project. The good news, both of these are in the Gulf. I think you can kind of look at comparables of what other things are costing in the Gulf region. But the good news is we've got a world-class EPC contract we're working with. I could not be more excited about our relationship with ConocoPhillips. I had a call with Ryan Lance yesterday, their CEO. I think they've done 12 different LNG projects in the world. They're going to bring a lot of value and expertise to our partnership. I think between us and ConocoPhillips and Bechtel, we have an opportunity to get to the right call structure.
spk18: Got it. So leaning on your partners here for some of that. And, in fact, to that end, just when you think about the SPAs and just lining this up for even the first half of 23, as you alluded to a moment ago, When do we need to start to see that announcement? I mean, it seems like you also have some equity sell downs coming. Is that part of the update this fall here that you kind of alluded to when you think about putting everything together, Trevor, maybe?
spk17: No, I think what we talked about is we've got You know, a series of work streams underway at Cameron. Those work streams are a little bit more discreet. We've got a fair amount of work to be done yet on Port Arthur, and I think what we're saying is we probably could not be more excited, Justin and Julian, about where we're at right now, this far in the year, about Port Arthur. But I think we've got enough work streams ahead of us. What we want to do is choreograph that through the lens of creating a lot of value. And I just want to make this comment, too, which is we're running this business for utility shareholders, right? So we have a defined view about our strategy investing in T and D type assets that have low risk. And there's a lot of other opportunities in the LNG space for people that want to be commodity exposed or take construction risk. Our job is to make sure that we risk adjust these projects and put those cash flows in a box that looks substantially similar to our utility cash flows. And that's the type of work the team will be doing as they choreograph those work streams to make sure when we come back later in the fall, we can give our investors a very clear view of how we expect to execute.
spk05: Got it. All right. Thank you, guys. Got Justin and LNG on the mind. You're right.
spk01: And we'll take our next question from Alex Cania with Wolf Research. Please go ahead.
spk10: Great. Thanks for taking my question. Maybe just another one on LNG and, you know, the discussions about maybe potentially electrifying the terminals. Do you see that a little bit as kind of a benefit as you're talking to European parties, off-takers, potential off-takers? Is that important to them? And then, you know, maybe... If you could elaborate a little bit more just in terms of, you know, how you think about the CCUS development. You know, you mentioned that the tax credit would be, you know, higher tax credit is obviously a good thing, but maybe just thinking about permitting and such being a little bit onerous right now, do you think there may be a way through permitting reform to simplify that as well to make that a kind of more likely potential?
spk17: Thank you for those questions, Alex. I will address the first part of your question and pass it to Justin to talk about some of the carbon sequestration opportunities. But let me go back to some basics here. A little bit over 15 years ago, Semper was a big energy company. We had a big commodity desk. And I think one of the things we've tried to focus on as part of our strategic work with our board of directors, particularly over the last five years, was our transition to an infrastructure company. and we have a decided view that infrastructure, namely continued investment in the grid and network, will be a big part of how we support North America's continued economic expansion. And what we like about it, Alex, is it is a lower risk profile, and as we continue to electrify the grid, and move toward green molecules on the gas side, we think we're in a unique position to be a leader in the clean energy transition. So as you think about how we approach Europeans for the sale of LNG, for example, this is right in our sweet spot. So this is not something that's unique to our LNG business. Every one of our facilities in California, and there may be a couple of limited examples around our compressor stations, today source renewables to power those facilities. or a renewable green tariff from the local utility. In Mexico, we're helping the government move away from oil fire generation to natural gas generation, and we're kind of a top three or four renewable developer there. So going back to your specific question, At Cameron, we think there's an opportunity for the expansion to be built on the basis of electric drives. We actually delayed the project somewhat to make sure that we could be more competitive. Yes, it does help us with the Europeans, but it's actually intrinsically aligned with how we think about our own business. Certainly, the Europeans like the fact that we're looking at certificating over a longer period of time our upstream emissions, including where we get our source, our natural gas. And from an operating standpoint, if we can power those facilities with electricity that over time is increasingly decarbonized, we think that's a plus. So over a long period of time, I actually think the United States will be a competitive leader in being able to source and deliver LNG on a more cost-competitive basis, but also on the basis of a reduced emissions profile. So the second part of your question is the opportunity to sequester carbon. Again, aligned with my prior comments, but maybe, Justin, you could talk about our approach on the sequestration side.
spk02: Yeah, thank you, Jeff. Yeah, Alex, if you think about Hackberry, you know, we're very excited about that opportunity, in part because it will help reduce the emissions associated with the Cameron facility. Equally, we think it's an exciting new business, and I think, as EIA has said, we will not get to net zero without substantial carbon sequestration. So, in that light, in the third quarter of 21, we filed for a Class VI carbon injection well permit with EPA. You talked about permitting reform. I do think it's early stage for EPA to consider these projects and we are doing all we can along with the industry to help support that process and to make this process expedient and to make sure all the right factors are considered. In May of this year, we signed our participation agreement with the Cameron LNG partners to jointly develop the opportunity. We're very excited about it. I think as Jeff referenced earlier, a change in the Q45 benefits that project. But again, at a higher level, Alex, I think you asked about the Europeans. I think we as SI and SI as part of SEMPRA are doing all that we can to make our projects less emitive and to promote the energy transition. As Jeff mentioned, whether that's through electric drives, whether through carbon sequestration. Jeff made a reference to sourcing gas. We're pursuing responsibly sourced gas. and also other design and operational changes that will make our projects better.
spk05: Great, thank you. Thank you, Alec.
spk01: And we'll take our next question from Jeremy Tonnet with JP Morgan. Please go ahead.
spk12: Hi, good morning. Thanks for the time today. I wanted to follow up on the reduction act questions. California already has some leading environmental goals, but I'm curious to see the potential changes in the state that could come from greater federal support by the legislation.
spk17: Look, I think the good news is California has been a leader in the environmental space for three or four decades. I think that one of the great things about the IRA bill is particularly its support for electric vehicles. So I think anything we're doing to help the United States continue to decarbonize is a positive. I think you'll find a lot of collaboration between California policymakers and a lot of the policy alignment that's embedded in that bill. But I would again step back and say, look, it's in draft form today. A lot of different folks have taken different views and perspectives on it. We think it has a number of positive attributes, but I think there will be some changes and revisions going forward. So we're going to continue to evaluate it in its current form.
spk12: I did appreciate the commentary there. And then separately, this has been asked a couple different ways, but I just wanted to circle back to the Bechtel work. Can you just provide background on when that started in terms of finalizing the EPC refresh on Port Arthur and just walk from the start of that process to the end of that process and when that should end?
spk17: You know, look, we've been working with Bechtel for a number of years. From time to time, you'll get updated call structure and processes from them. It's an open book process that we're working on with them right now, and all you're really talking about is they refresh or bring down to the cost based upon their earlier work, and that's something that is ongoing this fall.
spk05: Got it. Thank you very much for your time. Thank you.
spk01: And we'll take our next question from Michael Lapides with Goldman Sachs. Please go ahead. Good afternoon, Michael.
spk08: Hi, good morning, Jeff. Thank you guys for taking my questions. I actually have a couple of them. I apologize. The first one is labor and wage inflation. We saw SoCal Ed recently make a Z-factor filing. We haven't actually seen one of those in a while in California, talking about incremental costs in between rate cases to get linemen. Can you talk both for the California utilities and the Texas utility and maybe how they're different in terms of just what you're seeing in O&M expense escalation?
spk17: Well, what we try to do is when we lay out our five-year plan, Michael, each fall we adjust that for our expectation of costs in O&M and in capital. Today, one of the good news is as you think about other participants in the marketplace, They've had rate cases a year ago or two, three years ago. I haven't been following the Edison case. What's most important for us is we're actually filed all three of our rate cases in May of this year. Alan outlined it earlier today, but Alan expects to get through his rate case proceeding this year with a good outcome, we hope. Then SDG and SoCalGas, the most important part of this is SoCalGas has just recently reached their labor agreement with their union. All these current costs are going into the rate cases that were filed in May, and there will be a bring-down to our cost structure here in California. I think it's an October, November filing. Separate apart from various mechanisms that account for this, I think one of the things that really is a benefit to SEMPRA and is really a tailwind is we're going to bring down on all of our costs. really in the next six to 12 months. The other thing which is related to your question, which I wouldn't mind touching on, Michael, is the interest rate environment, which obviously impacts all three of these businesses, given how much they're leveraged to debt. But Trevor and his team have been actively managing our exposure to maturities and variable cost borrowings. So think about this as an example. Since 2017, we've been able to reduce our debt to cap from roughly 46% to 47% today, and we don't have any maturities between now and 2027. At our utilities, we have limited near-term maturities, all of which are in the regulatory mechanisms in California and Texas. At Semper Infrastructure, you recall we've got a standalone balance sheet. They've done a lot of recent financings. They all have very limited near-term maturities. We've even worked with KKR and Audi and raised a million dollars in the last 12 months from that business. So as you think about our call structure, it will be updated in our current pending rate cases. Things like interest rates, which we're following closely, we think we're in great shape on.
spk13: And Jeff, just as a cleanup, it was 56 to 47. Yeah, so 56, not 46.
spk08: Understood. And this one may be for Trevor. Just curious how you're thinking about this. I mean... Look, Encore CapEx may go up just given the new connects and the demand trends, which have been phenomenal in that part of Texas or those parts of Texas. And you've already got the CapEx lined up as part of the California rate cases. It doesn't seem like LNG CapEx would ramp dramatically next year. It'd probably be more in 2024 and beyond. And a lot of that would be self-funded down at the operating subsidiary. You're sitting with $2 billion of cash on the books. You have almost no short-term debt or a very limited amount of short-term or currently maturing debt on the books. At what point do you actually think you're getting underleveraged?
spk17: Well, you know, obviously we've got a record capital program of $36 billion. I think you can take from today's call, as we go through the process this fall, I think if I was going to take the over or under when we come back on our February call next year, I would certainly take the over. We feel great about our balance sheet, but Trevor, maybe as you think about Where do you expect the Encore CapEx to go? You know, how are you thinking about managing the balance sheet going forward?
spk13: Yeah, sure, Jeff. And, Michael, just with regards to the balance sheet, you know, that's kind of just a flash in time. And so a lot of those cash proceeds that we got from the sale of the 10% to Adi are sitting on the balance sheet there. And, again, we have deployed that cash, you know, to pay down certain short-term debts since that period of time. But again, as Jeff said, you know, we've got an opportunity to continue to deploy capital across the three businesses. But in particular, you know, we're seeing a lot of opportunity at Encore and at the Cal utilities to continue to harden the systems and bring growth to their various resources and their businesses. you know, rate-based areas. And so we feel good about, you know, deploying that capital into the CapEx plan. And, you know, as we continue to see, you know, CapEx most likely, you know, going up in the near term, you know, that will be a way to continue deploying that cash.
spk08: Got it. And can you remind me, Trevor, does Encore generally dividend cash back up to the Sempra holding company, or does Encore retain that cash to finance its growth?
spk13: Now, Encore will distribute certain amounts of cash back up under the LLC agreement that we have, and they do it both in dividends with excess cash as well as tax payments back up to us so that we can cover the cash tax payments. on their earnings. Right now, you know, they do have a lot of capital in front of them, and we continue to see us deploying cash into that business, but we are getting, at a minimum, cash tax payments on a quarterly basis back from Encore.
spk08: So Encore is largely self-funding from the Sempra holding company?
spk13: Absolutely. Yeah, Encore is self-funding.
spk08: Got it. Okay, great. Thank you, guys. Much appreciated. Congrats on a really good quarter. Thanks, Michael.
spk01: I'll take our next question from Ryan Levine with Citi. Please go ahead.
spk09: Hi, everybody. Hi, Ryan. In terms of the LNG cargo diversion for the quarter, can you comment on how impactful that was during the second quarter and if you expect any benefits from that half a day of contractual opportunity that you have into the future quarters and beyond? Yes.
spk17: Thank you for the question, Ryan. I'll pass it to a city alumnus and let Faisal respond to you.
spk00: Yeah, Ryan, so I think we've talked about the sort of exposure, you know, quite a bit over the last several years. It really comes down to sort of our contract with Tangu. It's about half of ECF today, as you mentioned. And so, you know, for every dollar, you know, increase or decrease in the index price, you know, our earnings sort of move up and down from that contract by just over $10 million in after-tax earnings. So that's kind of what you see. Whether the cargoes come in or not really isn't important. It's just that the contract itself is indexed. index to a price.
spk09: Do you have a sense on what that was during this quarter?
spk00: We disclosed it on an annualized basis. So, I mean, if you want to, you can kind of split it up that way. But that's kind of how the contract works. There's no seasonality to it. Okay.
spk09: And then it was briefly mentioned the Hackberry CCUS opportunity. To the extent the Inflation Reduction Act were to pass, Is that enough to reach FID there or would there be any mitigating hurdles to cross to move that project forward?
spk17: Yeah, I appreciate the question. Obviously, similar to some of my other projects, we're continuing the process there from a permitting standpoint. We've recently made some progress with the participation agreement with the Cameron Partners. Obviously, if that goes forward, it moves it from $50 a metric ton to $85 a metric ton, which certainly improves the economics. It's a project that we're optimistic about in terms of building, Ryan, but just as importantly, it's thematic to how we think about making Cameron more competitive as an LNG exporter.
spk05: Okay. Thank you for taking my question. Thanks a lot, Ryan.
spk01: We'll take our next question from Paul Patterson with Glenrock Associates. Please go ahead.
spk15: Hey, good morning. Hi, Paul. So I wanted to touch base with you on the provision in the Senate for a methane fee. It sounds like you guys are pretty well positioned in terms of your own operations, at least You know, you're opening comments, et cetera, about being ahead in California. A, is that correct? Is that a correct assessment? And then, B, I'm just wondering, is there any potential opportunity, assuming that's correct, to perhaps engage in activity with other parties, perhaps lowering their methane stuff?
spk17: Any comments on that? Yeah, it's a very interesting question, so thank you for raising that. I'll give you a couple thoughts, which is you may have seen in our materials that since 2015, SoCalGas has really been on their horse trying to reduce methane or fugitive emissions. They've got them down about 37%, well above the targets and state set for 2025, and very close to the targets and state set for 2030. So this is going to be an issue of innovation, new technology, how you kind of improve your operational processes, I think natural gas, Paul, has a long-term role in the economy here in the United States and globally. I think there will not be an energy transition without energy security, so base fuels like natural gas are important. If we don't get about the business, about making sure that we don't have fugitive emissions, we're going to handicap the long-term viability of natural gas as being part of the energy mix. So there's no question that California is led in this area. And the second part of your question is kind of interesting. I do think there will be a number of very large businesses built over the next decade and decade and a half around carbon trading and companies that can assist others in reducing their carbon footprint. Because remember, at least today, the goal is net zero by 2050. So the ability to basically lower your emissions, get credit for it, offset other emissions will be really important. And I think that's a business case that many people will be evaluating.
spk15: Okay, great. And then San Diego, I think earlier this week, passed a carbon plan that dealt with sort of aggressive electrification and gas, sort of an anti-fossil fuel sort of thing. I'm just wondering what you guys think of it and what it may or may not mean to you guys.
spk17: Yeah, I'll give you a couple of thoughts. One is, I made this comment earlier, but we're an infrastructure company, right? And the beautiful thing about that is in California, we'll go out and purchase the fuel at a certain price, whether it be electricity or natural gas. We'll run a really highly efficient system, and we pass that cost on to the customers without markup. So whether we're selling more natural gas or less natural gas isn't really a financial issue to us. What we do believe in is decarbonizing California. So we've made a goal to be a leader in electrification, but we also believe, Paul, over time, we as a state will be agnostic as to whether it's a green electron or a green molecule. So in San Diego, similar to LA and other parts of the state, You know, they're establishing a precedent where they'd rather focus on electrification. And look, at SCG&E, we're in both, right? So if you reduce capital investment in natural gas and you want to increase capital investment in new projects and electrification, again, this is not a financial impact to us. What we worry about in the process are whether people are inadvertently driving up the cost without the benefit that they might think from that. But look, we're supportive of where the city wants to go, and I think one thing that's unique about our business, whether we're in Louisiana or Mexico or California, we're strongly aligned with supporting policymakers and making sure we're advancing services for consumers. So we don't tend to be an obstructionist on these types of issues. We tend to try to find a way to help them meet their goals. Okay, great.
spk05: Thanks so much. Have a good one. Thank you, Paul. Hello?
spk04: And we can now take our next question from Craig Shear of TOWIE. Please go ahead.
spk11: Hi. Thank you for fitting me in. So two LNG-related questions. First, it seems you're focused more on mid-scale in Mexico. I know there's a variety of drivers for that, but we are hearing that nickel inflation is weighing more on the large-scale design versus mid-scale, and was wondering if you have some thoughts about inflation and optimal designs in the U.S. as we look past Cameron Stage 2 and Port Arthur Stage 1, and then I've got one more.
spk17: Well, I appreciate the question. Certainly, nickel is an important component in a variety of industrial processes, including LNG facilities. The focus on mid-scale projects in Mexico appeals to us from a number of angles. One is, these are particularly Vista Pacifico and Salina Cruz are greenfield projects. And number two, we tend to try to avoid adding pipeline costs to a project. So in the Vista Pacifico case, we get to leverage existing pipelines. In the ECA Phase I case, we had an existing pipeline. There are no new tanks, for example, at Cameron when you move to the larger-scale projects. so we're not impacted by nickel. But that's one of the reasons that your question is important is it's not just nickel. Look, there's inflationary pressures across the entire supply chain, and that's why getting the work done with your EPC contractors to have your costs refreshed and make sure you marry those up with your HOAs and SBAs to preserve your economics are so important. So you raised an important issue, and it's one that we address in overall cost structure.
spk11: Great. And my last question, and I preface this by saying I'm not saying it's a probable scenario, but would you view it as crazy to think we could have four LNGFIDs in 2023, totaling perhaps 25 to over 35 NTPA, combining Cameron Stage 2, Port Arthur, and some combination of a second and third Mexican liquefaction project?
spk17: Craig, I certainly appreciate your optimism. I can tell you that the folks that I spend time with, particularly in the international oil and gas community, I think there's a growing recognition that the world today is short natural gas. I think not only is it short natural gas in key parts of the civilized world, OECD nations and non-OECD nations, we're short infrastructure in key markets to export it. We're going to be very disciplined about how we think about projects going forward. Justin did a good job of articulating the various stakeholders we're working with. Right now, our primary focus is on making sure we deliver ECHA phase one on time and on budget. It takes up a lot of Justin's attention. That's our top priority. Secondly, we've taken the step of giving some guidance around when we expect to take FID at Cameron. We think this is a world-class project. The type of partners we have there are absolutely excellent and partners that we've worked with for a long period of time. And as it comes to Port Arthur and other opportunities, there's no question that there is tremendous excitement on the marketing side of it, and it's our job to to take the additional time to make sure we line up the economics, manage the risk, and do it in a way that creates a win for our utility shareholders.
spk05: Thank you. Thank you for joining us.
spk01: We'll take our next question from Anthony Cradell with Mizuho. Please go ahead.
spk07: Thanks so much for taking my question. Hopefully a real easy one, and I do wish your Padres luck after the big signing earlier this week. If I could focus on an offtake agreement for the LNG, I guess I just want to understand, is there significant competition from the LNG terminals? I'm kind of looking at it from the offtaker signing. Other than price, what else would a purchaser of the LNG use to pick terminal A versus terminal B or their options?
spk17: Yeah. Well, let me just start by saying that a lot of times people tend to focus on, you know, Company A versus Company B versus Sempera. And the way I try to think about it is the United States has a big role to play, and you're out there competing as a nation against Australia and the Qataris, North Russia, Mozambique, and other locations. As you get down into the United States, you start thinking about competitive advantages. One of the things that a lot of people are focused on is the relative advantages of having a West Coast facility that can shorten the transit time on the high seas from roughly 25 or 26 days to go from the Gulf Coast through the Panama Canal to Asia, whereas a West Coast export facility can do that in 10 or 11 days. And the Gulf Coast, it really is well-positioned, obviously, to serve Europe. And as you talk to those parties, a couple things that creates an advantage for us. Number one, we're a $50 billion equity value company. We've got a strong balance sheet. We've been in the gas business for over 100 years. We have a lot of established relationships. So if you're talking with a utility in Europe, those are important to them, that we've got that utility background, that strong balance sheet. Also, we've got a track record, right? We've been in the LNG business for close to 17 years now. We're not a new entrant. So I think scale, strength of balance sheet, track record is important. And obviously having Cameron as one of the flagship projects in America today is a really, really important part of our reputation. And we take the operational excellence at that facility seriously. You know, it's one of our top obligations. So, look, it's not about us talking down the competition. We've got a pretty unique footprint, and that's being recognized today when we market our projects, and it's created a lot of excitement around our opportunity to bring some of these to the market.
spk07: Great. Thanks for taking my question.
spk17: Hey, thank you for joining us.
spk01: And that concludes today's question and answer session. At this time, I'd like to turn the conference back to Jeff Martin for any additional or closing remarks.
spk17: Sure. I'd just like to conclude by thanking everyone for joining us. I know it was a busy day with a lot of other competing company calls. If there are any follow-up items, please reach out to our IR team with any additional questions. I also want to mention Trevor and Glenn look forward to seeing many of you who are attending the Citi Conference later this month. I think that's on the 16th and 17th in Las Vegas. This concludes our call.
spk01: Thank you for your participation. You may now disconnect.
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