Earnings Call Transcript - FTS Q1 2024

Operator, Operator

Good morning everyone. Thank you for standing by. My name is Ludi, and I will be your conference operator today. Welcome to the Fortis Q1 2024 Earnings Conference Call and Webcast. During the call, all participants will be in a listen-only mode. There will be a question-and-answer session following the presentation. At this time, I would like to turn the conference over to Stephanie Amaimo. Please go ahead, Ms. Amaimo.

Stephanie Amaimo, Executive VP

Thank you, Ludi and good morning everyone. Welcome to Fortis' first quarter 2024 results conference call. I'm joined by David Hutchens, President and CEO; Jocelyn Perry, Executive VP and CFO; other members of the senior management team as well as CEOs from certain subsidiaries. Before we begin today's call, I want to remind you that the discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slide show. Actual results can differ materially from the forecast projections included in the forward-looking information presented today. All non-GAAP financial measures referenced in our prepared remarks are reconciled to the related US GAAP financial measures in our annual 2024 MD&A. Also, unless otherwise specified, all financial information reference is in Canadian dollars. With that, I will turn the call over to David.

David Hutchens, President and CEO

Thank you and good morning, everyone. Before getting started, I'd like to introduce Stephanie Raymond to her first earnings call since being appointed President of Central Hudson in April. Stephanie will serve as president until Chris Capone's retirement in October, at which time she will assume full responsibilities as president and CEO. Welcome, Stephanie. We look forward to working with you on the Central Hudson team. For the first quarter, we delivered strong and consistent operational and financial results as our regulated utilities continue to effectively execute their business plans. And with $1.1 billion of capital investments made in the first quarter, our $4.8 billion capital plan for 2024 is on track. Our low-risk growth outlook remains intact and opportunities to expand and extend our plan continue to progress. On the regulatory front, ITC has been focused on the right of first refusal statute in Iowa. While new ROFR legislation did not advance last month, we remain confident that ITC Midwest has the legal right and obligation to construct a Tranche 1 project in Iowa, assigned through the MISO's long-range transmission plan and associated tariffs. MISO also released its draft Tranche 2 portfolio, including a preliminary project map, while we expect further refinements; we view this as a promising step forward. With climate risks at the forefront of the utility sector, the recent release of our 2024 climate report was timely, highlighting how Fortis is preparing for and mitigating climate-related impacts across the group of companies. We continue our long track record of executing our capital plan. These investments in our energy systems support the delivery of cleaner energy and the reliability our customers expect. Our five-year capital plan of $25 billion remains on track, comprising virtually all regulated investments and a diverse mix of highly executable low-risk projects. With $7 billion earmarked for cleaner energy investments, we expect to interconnect renewables to the grid, invest in renewable generation and energy storage in Arizona, and deliver cleaner fuel solutions in British Columbia. Rate base is expected to increase by $12 billion to over $49 billion in 2028, supporting average annual rate base growth of 6.3%. Beyond the plan, our utilities continue to advance additional growth opportunities with a couple of key developments during the quarter. As mentioned, MISO released a preliminary map of its LRTP Tranche 2 projects with total transmission investments estimated in the range of USD17 to USD23 billion. While it is too early to estimate the investment opportunities within ITC's footprint, MISO Board approval is anticipated in the second half of 2024. The preliminary map of projects includes 765kV transmission lines. If approved, these investments would bolster MISO's ability to facilitate the ongoing generation fleet transition, accommodate load growth, and address increasingly frequent and severe weather events. We believe this is exactly the forward-looking, innovative planning required to deliver a reliable, resilient grid of the future. In Arizona, the team is working to advance the 2023 integrated resource plans, filed by Tucson Electric Power and UNS Electric, which requires incremental investments estimated at USD2.5 to USD5 billion through 2038. In late 2023, TEP and UNS Electric released a joint all-source RFP, calling for up to 1,500 megawatts of new resources aligned with their respective IRPs. Proposals were received in March, and projects are expected to be announced later this year. In March, the BCUC approved key elements of FortisBC's Renewable Natural Gas or RNG application, requiring that natural gas deliveries to all customers include a portion of RNG. In addition, the BCUC accepted FortisBC's Long-Term Gas Resource Plan, which outlines FortisBC's plan to serve customers' energy needs, transition to a low-carbon energy future, and support meeting provincial greenhouse gas targets. Overall, we are pleased with this decision as it recognizes the key role that the gas system will play in meeting British Columbia's energy future. Also in March, the province of British Columbia issued an environmental assessment certificate for the Tilbury Marine Jetty Project. The construction of the jetty supports the expansion of the Tilbury LNG facility, which is uniquely positioned to meet customer demand for natural gas. The site is scalable and can accommodate additional storage and liquefaction equipment and is close to international shipping lanes. Once constructed, the jetty would utilize FortisBC's assets at the Tilbury site to service marine bunkering. In the US, we are seeing momentum build around load growth opportunities. In ITC Midwest footprint, Google recently announced plans for a data center to be built in Cedar Rapids, Iowa, with a goal of coming online in 2026. The data center will support initial load growth of 300 megawatts and is expected to increase to 600 megawatts over time. In Michigan and Arizona, we are seeing increasing inquiries related to manufacturing facilities and data centers. Also in Arizona, South 32 continues construction of the zinc and manganese Hermosa mine, which is expected to become one of UNS's largest customers. These developments can provide strong economic growth for our communities and favorably impact customer rates. During the quarter, we released the 2024 climate report, which assesses the impact of climate on our priority assets over multiple scenarios. The report identifies key risks related to climate change, Fortis' mitigation activities to address those risks, and future opportunities to advance the resilience of our utilities. With a strong track record of increasing dividends for the past 50 consecutive years, coupled with our low-risk growth strategy, we remain confident in our 4%-6% annual dividend growth guidance through 2028. Now I will turn the call over to Jocelyn for an update on our first quarter financial results.

Jocelyn Perry, Executive VP and CFO

Thank you, David, and good morning, everyone. The first quarter of 2021 reported and adjusted earnings per common share for the first quarter of 2024 were $0.93. Adjusted EPS was $0.02 higher than the first quarter of 2023, and key drivers of EPS growth related to rate-based growth across our group of companies, and the timing of earnings associated with the new cost-to-capital parameters at FortisBC. Regulated utility growth was tempered by higher corporate costs and weighted average shares outstanding. The disposition of Acron Creek, which occurred in November 2023, also impacted EPS in the quarter by $0.03. While negative for the quarter, on an annual basis, the disposition of Acron Creek will be neutral to EPS. The chart highlights the EPS drivers for the quarter by segment. Our Western Canadian utilities contributed a $0.06 EPS increase, $0.04 related to the timing of the new cost-to-capital parameters at FortisBC, approved by the BCUC in September 2023, and retroactive to January 2023. Growth also reflected rate-based growth and a higher allowed ROE at Fortis Alberta effective January 1. At our largest utility, ITC, the $0.02 EPS increase was mainly driven by rate-based growth. Lower sought-based compensation for ITC was offset by higher holding company finance costs. EPS was $0.01 higher quarter-over-quarter for our US electric and gas utilities, largely driven by rate-based growth and the timing of operating costs at Central Hudson. In Arizona, earnings were largely consistent with the first quarter of 2023. The favorable impacts of new customer rates and higher margins on wholesale sales were offset by higher depreciation and operating costs and lower retail revenue associated with milder weather. Due to the seasonality of sales, the favorable impact of new customer rates at TEP is expected to be higher in the second and third quarters. At our other electric segment, rate-based growth and higher sales contributed a $0.01 increase in EPS, and for our corporate and other segment, the decrease mainly reflects the disposition of Acron Creek, which I mentioned earlier. The remaining decrease reflects higher holding company finance costs and unrealized losses on derivative contracts. And lastly, higher weighted average shares reflect shares issued under our dividend reinvestment plan. To date, we have not used the ATM program as participation under the DRIP remains strong. Through April, we have raised approximately $400 million of debt to repay short-term borrowings and fund our capital program. As shown on the slide, we have limited non-regulated debt maturing in 2024, and our $600 million series in preference shares are scheduled to reset at the end of this year. Overall, we remain in a strong liquidity position as we execute our five-year capital plan. Our investment-grade credit ratings with Moody's, S&P and DBRS Morningstar remain unchanged. We are on track to achieve an average cash flow to debt metrics of 12% over the next five years, and we continue to engage with S&P on our physical risk around climate change. In March, the Iowa District Court issued an order denying all motions for reconsideration of its decision in relation to the Iowa Rural Firm. This includes ITC's request for reconsideration with respect to the scope of the injunction for Tranche 1 projects in Iowa that were previously awarded to ITC Midwest by MISO. ITC has appealed the district court's decision to the Iowa Supreme Court. As discussed last quarter, under the MISO tariff, approximately 70% of the Iowa Tranche 1 projects are upgrades to ITC's facilities, allowing existing rights away, which under MISO's tariff grants ITC the option to construct the upgrades regardless of the outcome of the appeal. For any portion of the Tranche 1 projects in Iowa to be competitively bid, we believe a federal decision that significantly departs from existing rules under the MISO tariff is required. Until there is more certainty around the resolution of this matter, we cannot predict the impact on the timing of the capital expenditures related to Tranche 1 projects located in Iowa. In New York, Central Hudson's one-year general rate application is progressing. Hearings concluded in the first quarter, and we anticipate a decision from the New York Public Service Commission in July. Last month, FortisBC filed its 2025 through 2027 rate framework proposal with the BCUC. The rate framework builds upon the current multi-year rate plan and includes a prescribed approach for operating expenses and capital, an innovation fund for cleaner energy, and continued earnings sharing mechanisms. The regulatory process will continue throughout 2024. And with that, I'll now turn the call back to David.

David Hutchens, President and CEO

To conclude, Fortis is off to a solid start in 2024. We continue to advance our low-risk, sustainable growth strategy underpinned by our diverse, regulated energy delivery businesses across North America. Initiatives like our 2024 climate report, as well as our integrated resource plans in Arizona, show our proactive approach on behalf of our customers in identifying and mitigating climate risks and pursuing opportunities to ensure reliable and resilient service. With preliminary visibility on Tranche 2 of the MISO Long Range Transmission Plan, ITC is well positioned to advance investments in its footprint. And with low growth opportunities on the horizon, we are focused on investments that keep energy affordable for our customers. We remain confident in our five-year capital plan, which supports average annual rate-based growth of approximately 6% and our 4%-6% annual dividend growth guidance through 2028. That concludes my remarks. I will now turn the call back over to Stephanie.

Stephanie Amaimo, Executive VP

Thank you, David. This concludes the presentation. At this time, we'd like to open the call to address questions from the investment community.

Operator, Operator

Thank you. We will now conduct the question-and-answer session. And your first question comes from the line of Maurice Choy from RBC Capital Markets. Your line is open.

Maurice Choy, Analyst

Good morning, everyone. Please, let's kick off with a comment you made earlier, Jocelyn, about how you've engaged the S&P credit rating agency on physical asset risk. As we head into, I guess, the later part of this year with the potential for higher wildfire risk. Can you just compare and contrast the regulatory and legislative setup across your ten utilities or even just areas where you feel there could be higher versus lower risk?

Jocelyn Perry, Executive VP and CFO

So Maurice, I'll start off. Yes, we have engaged with S&P and we continue to do so. I would characterize up to this stage that we've been sharing information around that in terms of what we're doing from a mitigation point of view, engagements we're having with regulators, how we're working with EEI. So right now, we're just continuing to information share with S&P. As you can appreciate, a lot of our jurisdictions are different regarding how things are treated from a regulatory perspective. We don't have specific regulatory mechanisms that specifically address wildfires. But we've had wildfires in the past, like in Alberta last year, where we had around $10 million of cost in one particular fire. That will be accommodated through the current rate structure we have. I will say that given, I say, the attention on wildfires, our subsidiaries are having more conversations and more interactions with regulators so that they fully understand our plans. And that, we're just having more engagement generally with the regulator. I don't know if I see any one particular area that's having more risks than the others. One of the benefits of Fortis is that we're substantially regulated. We are in good regulatory jurisdictions. We've historically done well in front of regulators with how we've managed our utilities and recovered our costs. So, I'm not expecting any issues there, but it is evolving as time progresses.

David Hutchens, President and CEO

Yes, just to add a little color there, Maurice. Obviously, the risk does vary by jurisdiction, and the focus areas have historically been, well, I'll say even currently have been on the western North America side of the continent here. That primarily puts our focus on Alberta, BC, and Arizona in that order. But one of the things that folks have to understand, too, is the very different legal and liability and regulatory structures between BC and Alberta. Their structures are much more favorable, much more regulated, and much more defined on how things are handled from a liability perspective, creating a very different risk profile than in the US. In the US, our exposure is at Arizona, which has very limited exposure just because of the nature of the assets that we own. We own the majority of our assets in the Tucson metro area, which doesn't have a huge wildfire risk because there aren’t many trees in the Tucson metro area or things that necessarily burn. So it is a very different risk outlook. We have been spending a lot of time with our teams across all our subsidiaries, not just those three, to make sure we're taking the best practices that we see, not just across our utilities, but across the entire industry and finding ways to mitigate that risk and then getting out there and explaining the great job that we're already doing, but also making sure that we're explaining that to folks like our rating agencies.

Maurice Choy, Analyst

Got it. Thanks for that. And it makes sense. Moving quickly over to BC, I gather that there were a number of items that FortisBC proposed to keep and continue as part of the rate framework. I wonder if you could share if there's anything in there that's materially different from the current framework. It's clearly a three-year plan, not a five-year one. And if there's more of a holding pattern request until we get clarity on how the province will roll out the framework.

David Hutchens, President and CEO

Yes. So Maurice, the framework that they've filed, as I understand it, seems like almost the exact same mechanisms that we had in the prior one, maybe with just a little fine-tuning other than, as you mentioned, it's not a five-year plan. It's a three-year plan. But Roger, anything to describe that's sort of a little bit more out of the ordinary or slightly different from the last multi-year rate plan?

Roger Dall'Antonia, Executive VP

No, thanks, David. Thanks, Maurice for the question. I think David characterized it correctly. It is a multi-rate plan, three years versus five. We continue to pursue what we call a performance-based structure where our delivery rate or controllable O&M increases by an inflation minus the productivity improvement factors. That structure is the same. We've focused again on controllable O&M and have proposed all the flow-through items for the non-controllable O&M. I think one area of difference, whereas we had escalated base capital or sustaining capital by formula; instead, here for the utilities, we did a three-year sustaining capital forecast. However, we've maintained a similar structure on the growth capital that underpins BC energy and customer addition. So overall, the last plan we had, the PBR plan, the MRP plan was quite successful. No reason to vary significantly. I think the one area that we are putting a bit more focus on is things like energy transition. How do we undertake innovative investments, things like that, but more in relation to the policy drivers, not really much different on the underlying rate setting for the basic rates.

David Hutchens, President and CEO

And then the other piece, Roger, too, is the fact that we can still file for CPCNs for large projects, which is obviously important for us to do things above and beyond what the underlying MRP structure would allow for.

Operator, Operator

Thank you. And your next question comes from the line of Rob Hope from Scotiabank. Your line is open.

Rob Hope, Analyst

Good morning, everyone. Maybe first off on transmission. It does seem like various levels of government are very supportive of incremental transmission investments. However, we continue to see challenges on the permitting as well as the legal side there. So when you take a look at Tranche 1 and Tranche 2 and the challenges that we've had there, what is the path forward such that we could see an acceleration of transmission investment at ICT and some of the other Fortis subsidiaries?

David Hutchens, President and CEO

Well, I think for sure we're seeing some good positive results from one from the Fiscal Responsibility Act, as you'll recall, they did some NEPA reforms as part of that, which will simplify and expedite the ability to permit transmission. I think some of the focus on timelines and coordination were really brought home last week when the Department of Energy announced its SCI TAP program, which stands for Coordinated Interagency Transmission Authorization and Permitting. The whole focus there is to cut the timeline for permitting on federal projects in half to two years. So those are good positive signals. I should say that in ITC's footprint, it's not typically a lot of federal land that they have to get permits on. So it won't necessarily have a huge impact, at least as we look backwards on a forward-going basis. It's a good signal and hopefully can expedite those types of permits. But there needs to be additional legislation too because probably the biggest issue we get in delays is that we get all these legal challenges. The legal challenges can be brought up for very insignificant reasons. Those types of delays and hopefully some level of legislative solution for that will be what's going to be key for us and everybody else who's developing transmission in the U.S. to be able to get that done faster.

Rob Hope, Analyst

Thanks for that. And then just maybe moving over, like a number of your utilities here so far in Q1 have really been talking of increasing load growth in their jurisdictions. When you take a look at your asset base, where are you seeing the greatest uptake in terms of load?

David Hutchens, President and CEO

Yes, so it's mostly in the US and mostly in ITC and UNS service territories. If you look at the hotspot map of where data centers are looking to locate, you'll see Arizona is one of those spots. You'll see a couple of spots in the Midwest. I mentioned in the prepared remarks the data centers that are going in Iowa. If you've listened into other utilities calls like DT and CMS and how they're getting a lot of data center interest in Michigan; well that's our transmission that needs to be built to serve that type of load. All of that data center load has different, I mean we respond to it differently. Like in Arizona, we would be looking to supply any data center that came into one of our utilities there since we're vertically integrated utilities. We'd be looking at generation, transmission, and distribution, all three functions to serve them. In ITC, it's obviously only transmission, but there's still a lot of growth opportunity out there, not just in data centers, but I think we're starting to see a lot of conversations around manufacturing and siting. Again, good areas for that are the Midwest that ITC serves in Arizona. Both big, good, strong growth economic development outlooks on a going forward basis.

Operator, Operator

And your next question comes from the line of Ben Pham from BMO. Your line is open.

Ben Pham, Analyst

Hi, thanks. Good morning. Maybe to continue on the last question around load growth increasing on AI and data centers, do you expect that to have a meaningful impact on rate-based growth going forward? When you think about that setup and then you also comment, I know you mentioned it sits more US. Any comment on the Canadian opportunity for AI as well. Thank you.

David Hutchens, President and CEO

I'll answer this in reverse. In Canada, we aren't experiencing the same level of discussions regarding data centers and AI. We’re not hearing much about additional load growth or announcements in our service areas, particularly in Canada. There's also significantly less activity related to manufacturing. While there are some developments in Ontario, which we do not serve, specifically concerning electric vehicle plants, the incentives in the US, driven by the Inflation Reduction Act, are much stronger. These incentives are encouraging more activity in the US. The overall impact is still uncertain, as it’s early days. There’s a lot of dialogue happening, especially with hyperscalers exploring locations for their data centers. They have specific site requirements, such as proximity to fiber and a reliable power supply. The main focus right now is identifying areas with sufficient power to support them. It remains too early to gauge the potential for load growth and the subsequent capital investment that may follow. It may take some time, possibly until the end of this year, to understand where these developments will end up. Consequently, it will take a while for us to incorporate those insights into our planning processes within our utilities and other processes like LRTPs that MISO conducts.

Ben Pham, Analyst

Okay, thank you for that. And secondly, maybe on the Tranche 2, the product CapEx opportunity, anything you can provide directly in terms of making to the pie and anything you can be put in the CapEx and protection service states?

David Hutchens, President and CEO

Yes, no, it's too early days. I mean, we're still working with draft portfolios. Portfolios have to be finalized, they have to be approved. There's still things moving around. There's still studies to be done. So it's far too early for us to put numbers out there.

Operator, Operator

Your next question comes from the line of Linda Ezergailis from TD Cowen. Your line is open.

Linda Ezergailis, Analyst

Sure, just wondering about your PBR-3 appeal in Alberta. Can you comment on any sort of ability to defer capital extended to teachers until there's more certainty, whether a more prospective approach to capital programs can be taken or how to mitigate some of the uncertainty there, and maybe just talk more generally about some of the inflationary pressures in your capital program and whether they're dissipating?

David Hutchens, President and CEO

Yes, it was disappointing that in that latest PBR, we were using that historical look back of the prior years' capital to set the forward rate, which is what we're appealing and what we set to lead to appeal. I think that was a good result because it is important for us to ensure that we have that baseline capital set at the right level on a going-forward basis. I'll kick it to Janine to add some conversation around inflationary impacts and some other things, but the team there understands their current situation with the capital plan that they have submitted. Obviously, that doesn't mean we don't look at additional opportunities and invest in additional infrastructure. It just means that they may have to trade off different capital within their plan. They might have to prioritize it a little bit differently. Worst case, this is the world I lived in Arizona, where every once in a while you get a little regulatory lag because you don't get a media recovery for it. But if they are investments that need to be done and need to be made on behalf of our customers to provide reliable power, to do whatever we might need to do from a resiliency perspective, we make those investments and then we'll get it on the next round. But you need to want to add a little color on the impact of interest and how you guys would be managing that.

Janine Sullivan, Executive VP

Actually, thanks, Dave. You've covered it quite nicely. We are planning to execute our 2024 capital plan as we come to understand the various components of the PBR-3 plan as they were determined last year. So, there's a lot to digest with respect to where we have levers, where we can manage costs in certain areas to address the shortfall potentially in capital funding. We do plan on bringing or utilizing some elements of the plan with respect to type one capital, where we go forward with very specific requests to the AUC while this reconsideration of the methodology that they use to establish capital funding is also ongoing. So, certainly, all steam ahead just continue to deploy capital as we can and managing our costs as we do so until we see some of these other mechanisms start to apply.

Operator, Operator

And your next question comes from the line of Michael Sullivan from Wolfe Research. Your line is open.

Michael Sullivan, Analyst

Hey, good morning. I'll just try another one on the MISO Tranche 2 map. I know it's a little early, but maybe just relative to how you were feeling when you saw the draft map for Tranche 1. Does this feel like a better opportunity set or worse?

David Hutchens, President and CEO

Oh, yes, I can provide some directional color there. There's a lot more lines on the map and they're different color lines, right? So, the 765kV is exciting. Those are obviously big projects. The size of the overall portfolio, the estimates are in essence twice the size of Tranche 1. So, directionally, it's looking pretty good. Obviously, we don't know where those lines will fall down exactly. We're not sure what the final package will look like, but I think we're all very comfortable and confident in saying it's a lot bigger. How that allocates to ITC will come out in the wash as we go through the process the rest of this year.

Michael Sullivan, Analyst

Okay, I appreciate that. That's really helpful. Any chance you could also just give a little color on how the legislative session in Iowa ended up playing out? Was it just a matter of time or not enough support? Can you give this another shot next year? Yes, just more color on that would be helpful.

David Hutchens, President and CEO

Yes, I think the short answer is, politics are always a little hard to call exactly how the process is going to work. The team did a fantastic job getting up there in front of the legislators, getting the support that's needed, but it's some, periodically you just can't get the things to be brought up and debated. When that happens, you just say, okay, well, we'll give it a go next time. I think that's one of our others, there's, as Jocelyn mentioned, her prepared comments that what we think about our existing Tranche 1 and why those should still be allocated to us and the 70% that's in our rights of way. We've still got layers and layers of arguments and appeal to boot on those Tranche 1 projects. So it's really, what do we do next? I think the conversation around looking again next year from an Iowa perspective, recalling also, as we talk about Tranche 2, we still have our rovers in Minnesota and Michigan. You never know where those lines will land in relation to our existing rights of way. As we sit here today, we're just around the corner from putting out their planning and cost allocation rule, which could address some, at least on a limited basis, some of the federal rovers that they at least tossed out there in the no-bur. We'll see where that goes and we'll take whatever, I think I listed about seven different things that that team's working on related to this, analyzing each one of them to tackle these issues. We'll just stack them up and go through them.

Michael Sullivan, Analyst

Okay, thanks. And last one for me, if you could just update us on the Arizona process and the workshops there that I think have kicked off on trying to improve regulatory lag, and how you see that going so far?

David Hutchens, President and CEO

Yes, it's positive. I mean, very positive. It's got two different options that they're looking at there, whether it's a formula rate or a forward test, it comes with a different sort of batch of questions and issues within the Arizona regulatory and legislative construct. But at the end of the day, it's all positive. Either one of those is better than a regulatory lag basis that we're working on now. Obviously, we got the SRB, the System Reliability Benefit mechanism that allows us basically a capital tracker that we got at UNS Electric. We expect that next time we file a rate case, TEP will file for one as well. That's a great sort of second place for something like a formula rate. But again, we've got a couple of different options there, and we're just glad to see that it was getting traction after the first workshops. They are looking at continuing them. So that's all positive.

Operator, Operator

Thanks so much. Appreciate it. Thank you. Your next question comes from the line of Mark Jarvi from CIBC Capital Markets. Your line is open.

Mark Jarvi, Analyst

Yes, thanks. Morning everyone. Just with not full clarity on the roper issue, legislative process, the court process, haven't played out in your favor yet. What does that mean in terms of keeping certain projects in the five-year plan? What would you need to see or what would happen for you to withdraw that? And then, once the lines are drawn in and you see the allocation on the charge to projects in light of the roper issues not being settled, do you hold back in adding those to the five-year plan? I appreciate a lot that some of this comes maybe beyond the five-year plan, but anything that is within the five-year plan, does that preclude you from adding in your term?

David Hutchens, President and CEO

Yes, as far as timing on Tranche 1, you might recall that we only have about USD1.2 billion out of the USD 1.4 billion to USD 1.8 billion, and this is US dollars of the total capital expenditure in the current five-year plan. Most of these are probably finishing up on the tail end of that five-year capital plan already and then into the next two years. Really what's happened so far is just kind of delaying or, moving some of those in-service dates around a little bit. I don't think that's going to be substantial. It's not going to be, right now we're not changing our capital plan based on it because we still fully expect that those will be our projects to build. When we get into the Tranche 2 conversation, like you mentioned, yes, those are probably at best in year five of the next five-year capital plan, and then we'll go on from there. That's more of a conversation about looking at the length that we have in our capital runway. It's not necessarily even something that we’ll make it into the next five-year capital plan because we don't expect those projects to be approved, assigned, or allocated until late this year. We like to update our capital plan in the fall. We'd love to have quicker and sooner clarity on that. It's going to take some time. As you know, we don't put it in the capital plan until we really know it's coming. So we are a bit conservative from that standpoint. If we can give any color around the expectations when we put out our capital plan and as we get towards the end of this year, we'll do that. But as always, we want to ensure that we maintain the strong credibility that we have with you all that what we put out in those capital plans we're going to go out and do. We'll make sure we still live by those principles.

Mark Jarvi, Analyst

And any updated views in just in terms of the mix again, right-of-way assets in terms of the amounts that you've carved there at the USD1.2 billion to see in the budget now, just any refined numbers around how you think that would shake out if the ROFR was not reinstated?

David Hutchens, President and CEO

In the USD1.2 billion or the USD1.418 billion total package, we talk about that 70%. I think that would be, if everything went against us, I think that's the minimum that we would have. That would be the floor. That's what we would be thinking right now. But as it stands, we don't think that will be the case. We think we'll have all those projects.

Stephanie Amaimo, Executive VP

Thank you, Ludi. We have nothing further at this time. Thank you, everyone, for participating in our first quarter 2024 earnings conference call. Please contact investor relations should you need anything further. Thank you for your time and have a great day.

Operator, Operator

Thank you, presenters and ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.