Xcel Energy Inc

NASDAQ:XEL

Earnings Call Transcript 2020-Q1

[Operator]

Good day, ladies and gentleman. And welcome to the Xcel Energy First Quarter 2020 Earnings Call. Questions will only be taken from institutional investors. Reporters can contact media relations with inquiries, individual investors and others can reach out to Investor Relations. Thank you. Today’s conference is being recorded.

At this time, I turn conference over to Paul Johnson, Vice President of Investor Relations. Please go ahead, sir.

[Paul Johnson, Vice President of Investor Relations]

Thank you. Good morning. And welcome to Xcel Energy's 2020 first quarter earnings conference call. Joining me today are Ben Fowke, Chairman, President and Chief Executive Officer; Bob Frenzel, Executive Vice President and Chief Operating Officer; and Brian Van Abel, Executive Vice President and Chief Financial Officer.

This morning we'll review our 2020 first quarter results, share business development and regulatory developments, discuss how we're managing through uncertainty around coronavirus. There's an expanded list of slides today that accompany our call on our Web site. As a reminder, some of the comments during today's conference call may contain forward looking information, significant factors that could cost results to different than those anticipated are designated in earnings release and our filings with the SEC.

On today's call, we will discuss certain metrics that are non-GAAP measures, including ongoing earnings and electric and natural gas margins. Information on the comparable GAAP measures and reconciliations are included in our earning release.

I will now turn the call over to Ben.

[Ben Fowke, Chairman, President and Chief Executive Officer]

Well, thank you, Paul and good morning, everyone. You know, as I reflect back on the past few months, my heart really goes out to the individuals and families impacted by the coronavirus, the devoted health care professionals so bravely serving our communities and the businesses across all sectors experiencing tremendous economic challenges.

At Xcel Energy, we understand how critical our work is to the health and safety of our communities and local businesses. I'm so pleased with how our employees and industry have responded during this unprecedented time, working to keep people safe, delivering reliable service to customers and providing support to those in need as we've done for over a 100 years. I also want to thank our employees for their dedication, spirit, and creativity in finding ways to support our communities and stimulate local economic growth.

Now turning to the quarter. We've gotten off to a solid start, booking $0.56 per share for the first quarter of 2020 compared with $0.61 per share last year. We believe we can take actions that will allow us to weather the impacts of COVID-19. And as a result, we are reaffirming our 2020 guidance. Brian will discuss the financial results in more detail.

At Xcel Energy, we're taking significant strides to help our customers and protect our employees, while continuing to deliver critical energy services. Some of our actions include both committing to not disconnecting residential customer service and arranging payment plans if they're having difficulty paying their bills. In Minnesota, we were proposing to reduce our approved field forecast by $25 million to give immediate relief to our customers. We stepped up our charitable giving and are helping our communities during this time of need.

And we are working closely with our regulators and state and local leadership to identify constructive solutions to support our communities and customers. We’re keeping our employees safe by implementing work from home policies, providing personal protection equipment and following CDC social distancing guidelines and enhancing cleaning practices, conducting temperature checks at critical facilities, segregating crews and staggering work times.

To ensure continued reliability, we've implemented business continuity plans, which allows us to prioritize work and are prepared to sequest our critical employees on site if necessary. From a financial standpoint, we've enhanced our liquidity and developed contingency plans to mitigate the impact of COVID-19. Finally, we expect to be part of the solution to help get the economy back on its feet by continuing to invest in our communities through our capital expenditure programs that create jobs and drive demand for equipment and supplies. While this is a fluid situation with considerable uncertainty, Xcel Energy has always shown a remarkable dedication to serving our customers during difficult times, and this set of challenges is no exception.

Moving on to business development. We recently announced the opportunistic sale of the Mankato natural gas plant for $680 million. You recall we originally proposed this acquisition as a fully regulated assets. However, when the Minnesota commission rejected this proposal, we acquired Mankato as a non-regulated asset and stepped into the power purchase agreement.

While we thought Mankato would provide significant long-term value, especially as we shut down coal assets, we've heard from several investors that having a non-regulated asset cloud at the Xcel Energy story. As a result, when several potential buyers expressed interest in acquiring the plant, we decided to sell it and preserve our status as one of the very few fully regulated pure play utilities.

And since the earnings were back end loaded, we don't expect the sale to materially impact our earnings projections. And while it was not part of the rationale for the sale, the transaction will improve our liquidity in these uncertain times. We will use the proceeds to reduce funding needs and improve our credit metrics. In addition, we will book again, which we will use to fund charitable giving efforts, including supporting COVID-19 relief efforts throughout our communities.

Finally, we recently announced some important promotions as part of our succession plan. Bob Frenzel was named President and Chief Operating Officer and Brian Van Abel was named Executive Vice President and Chief Financial Officer. Bob has been our CFO for the past four years and has extensive experience in industry prior to joining Xcel Energy. While Brian has had increasing roles in finance, including treasurer, financial planning and analysis and corporate development. Both Bob and Brian are extremely intelligent and talented employees who have been instrumental in developing and executing our strategy and delivering a consistently strong financial. And while I don't plan to retire anytime soon, these promotions reflect a deep bench strength and thoughtful plan we have at Xcel Energy.

So with that, let me turn the call over to Brian who’ll provide more detail on our financial results and outlook, along with our actions to mitigate coronavirus impacts. Brian?

[Brian Van Abel]

Thanks, Ben, and good morning everyone. We achieved solid results recording $0.56 per share for the first quarter of 2020 compared to $0.61 per share last year. The majority of the quarterly deviation is driven by weather. We experienced warmer than normal winter weather this year compared with cooler than normal weather last year, which results in $0.04 per share unfavorable comparison.

While significant earnings drivers for the quarter include lower O&M expensive increased earnings by $0.03 per share, our lower effective tax rate increased earnings by $0.03 per share. However, majority of the lower ETR is due to an increase in production tax credits are sold back to customers through electric margin and tax reform impacts, both of which are largely earnings neutral. Offsetting these positive drivers were, lower margins due largely to unfavorable weather, which reduced earnings by $0.03 per share and which offsets riders and regulatory outcomes. Increased depreciation and interest expense, reflecting our capital investment program reduced earnings by $0.05 per share and other items combined decreased earnings by $0.03 per share.

Next, I want to discuss the potential impact to COVID-19 and the actions we are taking to mitigate our range of outcomes. Starting with sales, our first quarter of weather and leap-year adjusted electric sales declined by 1.1%, while natural gas sales increased by 0.4%. The coronavirus virus crisis had a minor impact in first quarter sales. The economic shutdown started in mid-March, so we did not experienced the full monthly impact.

From March, our total residential sales increased slightly, while C&I sales declined 4%, resulting in a total retail electric sales decline of 3% on a weather adjusted basis. However, a better reference point on the monthly COVID-19 impact is what we saw in our preliminary April numbers in which almost all of our states were under relatively strict shelter in place orders. Residential sales increased 3.2% while C&I sales declined 13.7% and total retail electric sales declined 9.6% on a weather adjusted basis. And keep in mind we have a sales mechanism for all electric classes in Minnesota and decoupling for the electric residential and non-demand small C&I classes in Colorado. This covers about 45% of our total retail electric sales.

And to help us prepare financially for the pandemic, we developed three sales scenarios as outlined in our presentation. The mild scenario assumes a severe impact through May followed by a relatively quick recovery in the third quarter. This results in the sales decline of approximately 2% compared to 2019. Our base case, and the case in which we are reaffirming our earnings guidance around as soon as the severe impact through the second quarter with the slower U-type shape recovery with lingering effects for the rest of 2020. This results in the sales decline of approximately 4% on a year-over-year basis. And lastly, the severe scenario, as soon as the severe impact lasts through the third quarter, followed by a portracted L-type shape for recovery. This is a challenging scenario with a deeper and longer bottom in our base case, resulting in a sales decline of approximately 8% for the year.

We use these scenarios as we develop our contingency plans. We view the mild and severe case scenarios as having a low probability of occurring. We think the base case scenario is the most likely outcome, or at least within the band around the sales impact we've outlined, we have incorporated a base case into our guidance assumptions. There was considerable uncertainty on what will actually occur, particularly the duration of the downturn and the lingering effects, which [Technical Difficulty] feel confident in our ability to mitigate what we view as the most likely scenario, and the April sales results came in slightly better than our forecast giving us greater confidence.

We're also closely monitoring our bad debt expense and working with our customers on payment plans that are having difficulty paying their bills. While it is difficult to project where we'll land, bad debt expense increased approximately $20 million in the 2008 to 2009 time period as a reference point. Additionally, our commissions in Wisconsin, Texas and Michigan, have issued orders to track and defer pandemic related expenses. We've also filed for deferred accounting treatment of incremental COVID-19 related expenses, including bad debt in Minnesota, Colorado, New Mexico, North Dakota and South Dakota.

We're implementing contingency plans to reduce our overall cost structure and mitigate the impact of COVID-19. Some of these actions include cost reductions related to employee expenses, consulting, variable compensation, deferral of certain work activities and the implementation of hiring freeze. Based on our contingency plans, we now expect annual O&M expenses will decline 4% to 5% in 2020, which should offset the impacts of COVID-19 in the base scenario.

We also have plans in place to ensure that we can implement additional contingency plans if the negative impacts of COVID-19 exceed our base case scenario. However, there are limitations to what we can offset. We will focus on providing strong customer service and reliability. And we will not make short term decisions that have a negative long-term impact on our customers or shareholders.

Turning to supply chain. The situation is fluid but we have not had any material impact to our supply chain with the exception of our wind farms. In mid April, we were informed of supply chain disruptions, which will likely result in delays in completion of two of our wind farms into 2021. We are monitoring the situation closely and are striving to complete the project this year. However, we have fully documented our activities since 2016 and have maintained continuous efforts since then. So we are confident these wind farms will qualify for 100% PTC benefit even if they are completed in 2021.

And the last topic I want to cover on COVID-19 is liquidity. We're in a very strong position after enhancing liquidity in March by entering into $700 million term loan with attractive terms, and we issued $600 million 10-year holding company bond. We now have available liquidity of approximately $3.1 billion. In addition, the sales proceeds from the Mankato plant will increase liquidity by approximately $650 million.

And finally, we issued an equity forward last year, which we expect to settle later this year and will provide another approximately $740 million in cash. In total, this will provide liquidity of nearly $4.5 billion. We also plan to issue $1.9 billion of operating company debt throughout the year. As a result of our enhanced liquidity, we have the flexibility on issuance timing to ensure that capital markets are accessible at attractive terms. For more detail on liquidity, please see our earnings release.

Next, let me provide a quick regulatory update. We have three rate cases pending and the coronavirus has not resulted in any material delays in regulatory proceedings. In New Mexico, we reached a constructive unanimous settlement that reflects a rate increase of approximately $31 million, ROE of 9.45%, an equity ratio of 54.8% and acceleration of depreciation on the Tolk coal plant to reflect an earlier retirement. We are awaiting a hearing examiner recommendation and commission decision.

In Texas, SPS and intervening parties have reached an unopposed constructive settlement agreement in principle. We are working with parties to document and file the settlement, which we expect to appear shortly. We anticipate a commission decision in the third quarter. In February 2020, we filed a natural gas case in Colorado seeking a net rate increase of $127 million based on an ROE of 9.95% and an equity ratio of 55.8%. It is fairly early in the process so there's not much to report, but the procedural schedule hasn't set with new rates expected to become effective in November based on statutory requirements.

In terms of the earnings, there’s considerable uncertainty around the coronavirus impacts. Therefore, we have implemented contingency plans to manage our cost structure and made regulatory filings that will help to offset the impact of COVID-19. As a result, we still expect to deliver 2020 earnings within our original guidance range of $2.73 to $2.83 per share based on our base case scenario, which we think is the most likely scenario.

In addition, we can implement additional O&M contingency plans if the COVID-19 impacts exceed the base case. However, there are limitations to what we can offset as we balance short term and long-term for both our customers and investors. Our contingency plans are not offset the severe scenario, which would likely result in earnings below our guidance range but we feel the severe scenario has a low probability of occurring.

With that, I will wrap up. We have implemented steps to mitigate the impact of COVID-19. We sold the Mankato facility for a modest gain. We increased our dividend 6.2%. We reached constructive rate case settlements in New Mexico and Texas. We remain committed to delivering on our 2014 guidance and our long-term earnings and dividend growth within our 5% to 7% objective range. We continue to provide reliable energy service to our customers, while ensuring the safety and wellbeing of our employees and communities. Despite the near term economic challenges, we're executing our strategy extremely well and we remain positive about the opportunities in front of us for the benefit of our customers, communities and shareholders. And finally, we believe we can help rejuvenate our local economies and work with our regulators and state leadership to help our communities and customers recover from the crisis. We're looking forward to being part of the solution.

This concludes our prepared remarks. Operator, we will now take questions.

[Operator]

Thank you [Operator Instructions]. We'll take our first question from Stephen Byrd with Morgan Stanley. Please go ahead.

[Stephen Byrd, Morgan Stanley]

I wanted to just get an update at a high level in terms of the opportunity for additional PPA buyouts. Just what are you seeing in terms of the opportunity, or is that sort of a little bit on pause just given the COVID-19 dynamics? And just curious at a high level what your views are on that opportunity?

[Ben Fowke, Chairman, President and Chief Executive Officer]

We're all focused on COVID-19, but we're still running a business and still looking for opportunities. Brian, do you want to give a little more detail?

[Brian Van Abel]

And so as we think about it, we're in regular contact with our counterparties. Obviously, there could be potential here as you see what's happening. And if any of them have an interest of selling, we're certainly regular in contact. We have our proceeding of the Mower acquisition in front of the commission, and we hopefully see a decision of that in Q2 or Q3. But then we're also looking at how we use the ERP and our IRP processes to help jump start some of that too. Some of the discussions around our acquisitions in Minnesota is how can we better improve the process with the department, our stakeholders, to ensure that we're bringing it forward and have a comprehensive discussion. So we're certainly active on that stage. And you know, we've talked before it continues to be part of our plan, but we don't include any of that in our base capital plan.

[Stephen Byrd, Morgan Stanley]

And just maybe at a high level in terms of resource planning. How do you think about the opportunity for further acceleration of renewables? I guess on the positive side, renewable costs keep dropping. We may -- there's always a potential for tax credits to get extended. The wind credit got extended again last year. On the negative side, I guess you have demand uncertainty from COVID. In Texas, we have uncertainty around the status of the energy sector overall. But how do you think about the potential for additional sort of renewables growth, additional shutdowns of some of your coal assets? Do you feel about the same as you felt before? Are there reasons to be more bullish or more cautious? How would you think about that?

[Brian Van Abel]

I guess the short answer is probably a little more bullish. The cost, as you mentioned, Stephen, continued to come down. And so our feel for fuel strategy continues to be, I think, obviously economically attractive. And I think the test of that was the ability to get our renewables approved in Texas and in New Mexico and basically on economic terms. I think the other element too, Stephen, which makes me bullish is that, and this is where I think we can partner with our states and our commissions and state administrations, to be part of the solution in getting people back to work and that's potentially accelerating some of our capital opportunities.

And using that to bring on more renewable at a great price point that actually helps save customers’ money and employees’ jobs, good jobs. So not unlike when we had the great recession and can tell you many times that we have people stop me, people typically working in our labor unions and actually thank myself and really the company for continuing to go forward with projects, because that was the only job we have. And that's something to be really proud of and I think we can replicate that again.

[Operator]

We'll take our next question from David Peters with Wolfe Research. Please go ahead.

[David Peters, Wolfe Research]

I was wondering if you could just give a view of where you guys see yourself with earnings guidance range in any of this base scenario?

[Ben Fowke, Chairman, President and Chief Executive Officer]

Where we are in the guidance range…

[David Peters, Wolfe Research]

Yes…

[Ben Fowke, Chairman, President and Chief Executive Officer]

I guess first I would say take a look at our track record over the last 15 years. I think we've demonstrated that we can deliver within the earnings guidance range, typically that's been at the middle or above. So we're quite proud of that and we expect we'll be able to do that this year. But if you look at what we've done in the past and our track record, on the first quarter earnings call, we don't give any additional guidance whether we're going to be the bottom, the top or whatever. So that's the first quarter. We're confident onto the base case scenario we'll be in the earnings guidance range. And as the months and quarters roll on as we've done in the past, we’ll potentially get more color on it.

[David Peters, Wolfe Research]

And then just preliminary sales data for April. Do you have a sense of which states are seeing more weakness than others, just understanding that you have decoupling in Minnesota and some protection in Colorado as well?

[Ben Fowke, Chairman, President and Chief Executive Officer]

David, well, the question about what states were affected, what the divergence in the states for April. Is that basically what you're asking, you're kind of breaking up on…

[David Peters, Wolfe Research]

Yes, that's right.

[Ben Fowke, Chairman, President and Chief Executive Officer]

I think as we look at it, we saw the most resiliency on the C&I side in SPS, and probably the biggest impact on the C&I side in Minnesota and Wisconsin, the northern territory. So I think that's the color certainly we'll watch it as we go over time. Now, part of what we saw in Minnesota is we did have a combined heat and power plant as we've talked about on our call before go online in May of last year. So that's part of what we see and we look at month over month, but overall commentary greatest weakness in C&I side, Minnesota and Wisconsin and less so in SPS and Colorado is roughly in the middle of those two.

[David Peters, Wolfe Research]

And then last question I had is just I think you said the equity forward that you expect to settle around year end, but just on the Mankato sale. Does that impact the equity plans at all either for this year or next? Just kind of what you guys weighed out last year?

[Ben Fowke, Chairman, President and Chief Executive Officer]

No, it doesn't. When I say we’ll use it to reduce our financing costs for this year but we don't expect to not sell our equity forward this year. We do plan to settle it but what Mankato does is really it’s infusion of cash of $650 million, and it’ll provide some additional headroom on capital investment if we have an opportunity to potentially accelerate investments, and really help our communities, and customers, and the regulators accelerate some of this rebound from this crisis. So I think it gives us just an additional capital headroom. As we think about longer term, we think about our five year plan. We'll reevaluate that and overall financing plans as we get to Q3 and lay out a new five year capital plan.

[David Peters, Wolfe Research]

And I think final question is the two renewable projects that you've mentioned that could flip into ‘21, which ones were that?

[Ben Fowke, Chairman, President and Chief Executive Officer]

Those are the two Minnesota farms that we're looking at. But I would say we've done, as you'd expect from us, we've taken a very conservative approach and then made sure we've had all the documentation since 2016, and we've maintained continuous efforts since then. So we're highly competent even if they do slip a month or two into 2021 that will qualify for 100% PTCs.

[Operator]

We’ll take our next question from Jeremy Tonet with JP Morgan.

[Jeremy Tonet]

Just wanted to start off, I guess, do you have any regulatory obligations or guarantees associated with the wind that could impact our earnings, because of the project delay into ‘21 here? Just want to touch base on that point.

[Brian Van Abel]

We have no obligations in terms of getting in service in 2020 and we're certainly working towards that, and that's our goal is to get them completed in 2020. But in terms of obligations and in term of timing we don't. There are obligations in terms of overall cost gap, but we're certainly working to mitigate any impacts on that as you start to see a delay in schedule. We're certainly working with our suppliers and our plant contractors to get those, to ensure that we bring it in under the original order PTC cost cap.

[Ben Fowke, Chairman, President and Chief Executive Officer]

Yes, so we're pretty comfortable with that, Jeremy.

[Bob Frenzel]

In addition, the SPS has been projects that we have 100% PTC guarantee. But again, we think that those are getting into construction by the end of the year and we're fairly confident on 100% PTC.

[Jeremy Tonet]

And just a cleanup questions, Slide 17. It seemed like AFUDC equity ticked up a bit there. Just wondering if you could give a little bit more color on that?

[Ben Fowke, Chairman, President and Chief Executive Officer]

Yes, from our regional guidance it did as you start to see some delays in some projects, and part of that was our Blazing Star 1 wind farm that we just put in service in April. That took as we were in the winter time, it took a little bit longer, so that's part of it. So just kind of across the board as you see part of it’s wind farm and part of it some other investments that we're making. And there's also a little bit higher -- as we took steps to improve our liquidity also a little bit higher AFUDC rate.

[Operator]

We'll take our next question from Julian Smith with Bank of America. Please go ahead.

[Alex McKerrell, Bank of America]

This is Alex McKerrell calling in for Julian. My first question is about your rate case filings that you have for this year. I was wondering, if you have any updates on whether or not you could potentially push out Minnesota again or potentially push out Colorado? And maybe how you're thinking about using existing trackers to track that rate base instead?

[Bob Frenzel]

We recognize that these are challenging times, and we do like to work with our regulators in advance. In both Colorado and Minnesota, we have been investing in infrastructure and assets that our customers value and our regulators support. But like in the past, we do think there are mechanisms that will allow us to not file those rate cases. And you can be assured that those conversations are happening with the staff in the commissions as applicable in the respective states. We like to not file those cases and we probably have more information for you on the second quarter call later this year.

[Alex McKerrell, Bank of America]

My second question and my last question, just about your CAGR overtime. I was wondering if you're still anticipating potentially upper end of that long term guidance? And thank you again.

[Ben Fowke, Chairman, President and Chief Executive Officer]

Yes, I think it's a great question. Again and I talked a little bit about it with an earlier question. But you look at what drives our 5% to 7% growth and it's investing in projects and opportunities that are very much aligned with our states, our communities, our regulators, our legislators. So, I don't see that changing and I don't see changes to our CapEx forecast unless to the upside going forward. So that's what drives the growth and that’s where we'll get it from.

[Bob Frenzel]

One of the things I think we've done as a company is on sunny days prepare for the stormy days, and we've got great dry powder on our balance sheet and Brian mentioned the other things we did. We also continue to invest in our system, keeping it strong and reliable. And so that allows you to weather situations like that and potentially come back stronger and a partner with our states as we look to jump start the economy when we get, all get through this.

[Operator]

We'll take our next question from Travis Miller with Morningstar.

[Travis Miller, Morningstar]

The question on the contingency plans, I think you might have answered this real quickly. But on the O&M side how much of these contingency plans have you been able to accomplish so far? We've been talking about first in the four or five months of the year. And then any change in the CapEx plan within those contingency plans? I think you just answered no, but just want to clarify the O&M side and then the CapEx side.

[Brian Van Abel]

We've really see no plans in our CapEx for this year. On the O&M side this crisis hit relatively recently so working through all those plans. And we have a plan for balance of the year in terms of implementing them. I think Ben said it pretty well is you often hear Ben and Bob talk about dry powder and you know that's been used in the context of our financial dry powder with our strong balance sheet, our conservative dividend payout ratio, but we also have operational dry powder. And you know we've invested in the system and then in the good days and as the time of crisis here, we’re able to weather it.

And we look at, when we think about the O&M contingency plans, we're putting in place, whether it's we’ve implemented the hiring freeze, we're looking at reducing employee expesens and that will happen over time, reducing consulting spend or other programs. And as we think about it we're targeting, as I talked about, targeting 4% to 5% purely mitigate that base case scenario. So we do have the ability to flex up all those, but it's a little bit worse.

[Travis Miller, Morningstar]

So evenly spread more or less throughout the year?

[Brian Van Abel]

That's a fair assumption.

[Travis Miller, Morningstar]

And then on the renewable development. How much are those delays project specific and how much are you seeing just across the entire industry supply chain issues or other financing delays, construction delays, stuff like that industry wide versus couple of projects you mentioned?

[Bob Frenzel]

We work with our OEM vendors as well as our balance of plant providers to execute the schedules. We have seen some supply chain disruptions started when China shut down for a while. We've had mild disruptions from other plants where we get some of our components. We think that's an industry wide phenomena. I think, as Brian mentioned, we've been exceptionally diligent in tracking our costs. We are really comfortable with our ability to meet the safe harbor provisions for achieving 100% PTC.

These are projects that were originally scheduled to be later in this year anyway. And so while we're trying actively to get them completed in 2020, there's the potential that do slip into ’21. But I do think it's stuff we're seeing around the industry and also not only is it our vendors but there's a logistics and a supply chain issue with ports and parts transport that we're seeing. It's not, I wouldn't say it's catastrophic by any stretch, it's just mild we just happen to have these later dated projects for us.

[Ben Fowke, Chairman, President and Chief Executive Officer]

We're very, very confident. I've worked with outside firms to know we’ll pass the continuous efforts test.

[Travis Miller, Morningstar]

Any difference you're seeing between solar and wind in terms of what you just talked about with supply chain and other logistics?

[Brian Van Abel]

Right now, Travis, we're only building wind farms on our own balance sheet. I haven't seen or heard a lot of solar delays. There's been a couple of public force majeure filings on some solar farms around the country, but I don't think we could speak with any authority on the solar side.

[Operator]

We'll take our next question from Sophie Karp with KeyBanc. Please go ahead.

[Sophie Karp, KeyBanc]

I was curious if you could provide a little bit more color on the supply chain disruptions that we've been talking about, particularly with these two wind farms. What you guys have seen in the supply chain? And also do you expect that the issues may in fact sort of other areas, maybe traditional power generation, transmission, distribution businesses where it might affect the the availability of parts and things like that as we move forward and the lockdowns and disruptions continue? Thank you.

[Bob Frenzel]

We haven't seen any supply chain disruptions on any of our other components other than maybe toilet paper and hand sanitizer and face mask. But on the wind farms themselves, a lot of the components are manufactured in overseas and assembled here. And so depending on the progress of the pandemic and which country it hit, which factories has caused, two, three, four week delays in various places, which compounded equals maybe a six, or seven, or eight week delay on our projects and that was enough to push them across, potentially push them across the go line.

We're seeing not just constraints on the OEM sidebut we do see logistics constraints around ports and air travel and shipping as well, and so that's caused some of the problems. I can't say that we've seen any other disruptions on any of our other components, we just haven't. Those discrete items are suffer watching closely. As Ben and Brian has said, we feel very confident in our ability to qualify for the PTCs at 100%, and we're working diligently with our vendors and our transportation providers to get all the components here and get them constructed by the end of the year.

[Operator]

Ladies and gentlemen, this will conclude today's question and answer session. At this time, I turn the conference back to Brian Van Abel for any additional or closing remarks.

[Brian Van Abel]

Yes, thank you. And thank you for all participating in our earnings call this morning. Please contact our investor relations team for any follow up questions, and have a good day. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference. We appreciate participation. You may now disconnect.