Good morning, everyone, and welcome to the CMS Energy Call to discuss the strategic sale of EnerBank. The news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded. After the presentation, we will conduct a question and answer session. Instructions will be provided at that time.
As a reminder, there will be a rebroadcast of this conference call today beginning at two p. M. Eastern Time running through June 15. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section. At this time, I would like to turn the call over to Mr.
Sriri Madipati, Vice President of Treasury and Investor Relations. Please go ahead.
Thank you, Rocco. Good morning, everyone,
and thank you for joining us today. With me are Garik Rosha, President and Chief Executive Officer of Siemens Energy and Reggie Hayes, Executive Vice President and Chief Financial Officer of Siemens Energy. This presentation contains forward looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially. This presentation also includes non GAAP measures.
Reconciliations of these measures to the most directly comparable GAAP measures are included in appendix and posted on our website. Now I'll turn the call over to Garik.
Thank you, Sri, and thank you everyone for joining us. We appreciate your interest and are excited to be with you today. I've had the opportunity to meet with many of you over the past seven months and I'm hopeful you picked up on a couple of themes. One is commitment to excellence. It shows up in our culture, our work, world class coworker engagement and best in class customer service.
It shows in our commitment to the CE Way and industry leading ESG performance. But ultimately, it shows in our track record, our success today and in the future. The second theme, preparing the company for the future. It shows up on our work on electric vehicles, our integrated resource plan and as I often refer to it, our leadership of clean energy transformation. These themes continue to be balanced across our triple bottom line commitments to people, planet and profit and are critical.
Simply put, we are focused on leading a world class energy company. This commitment and our focus means simplifying and streamlining our portfolio of businesses on energy, our core area of strength and expertise. The way I see it, this is both strategic and straightforward. Today, I am pleased to announce that after a very deliberate and robust strategic review and sale process, we have found a new home for EnerBank. Earlier today, we announced that we entered an agreement with Regions Bank, a subsidiary of Regions Financial Corporation to sell 100% of EnerBank for $960,000,000 or three times book equity.
I couldn't be more pleased with this outcome. Regions is one of the country's leading financial institutions and will enable EnerBank to continue to deliver for homeowners, contractors and program sponsors. Since its inception, EnerBank has been a valuable member of CMS Energy. I want to thank our EnerBank coworkers for their service and wish them all the best as they continue to grow after the close under new ownership. The proceeds from this transaction will fund key initiatives in our utility business related to safety, reliability and our clean energy transformation by replacing our planned equity issuance needs over the next three years.
The sale is subject to regulatory approvals and we anticipate closing likely occur in the 2021. As I shared earlier, the rationale for selling the bank is strategic and straightforward. We are focused on leading a world class energy company, moving out of a non core business, adding attractive valuation and investing in the core in our utility makes perfect sense. This move is straightforward and ensures that our leadership and attention are squarely focused on the energy business. The customer investments we are making provide safe, clean, affordable and reliable energy.
And we know that you, our investors, value this approach. And now I'll hand the call over to Reggie.
Thank you, Gerrick, and thank you all for joining us. First, I would like to echo Gerrick's earlier remarks and thank the leadership team and employees, past and present at EnerBank. Their operational and financial performance over the past several years has been nothing short of exceptional and has been an honor for me to serve as their Board Chair over the past three years. Moving on to additional details associated with the transaction. As you can see on Slide six, we are moving EnerBank's expected EPS contribution of $0.22 for 2021 in our current guidance to discontinued operations.
You'll recall that we highlighted during our first quarter earnings call that the bank was well positioned to deliver toward the high end of its earnings guidance range for the year, and that still aligns with our expectations. As such, our adjusted EPS from our continuing operations in 2021 is estimated at $2.61 to $2.65 and our consolidated adjusted EPS guidance is unchanged at $2.83 to $2.87 for the year. Looking ahead, as you'll note on Slide seven, we are introducing 2022 adjusted earnings guidance of $2.85 to $2.87 per share, which implies strong financial performance from continuing operations fueled by expected rate base growth in our existing five year customer investment plan at the utility, reduced debt financings and the elimination of planned equity financings for the year. Needless to say, we have also excluded any expected EnerBank EPS contribution for 2022 with the working assumption that the transaction will close in the 2021. In other words, this efficient recycling of capital will enable us to deliver year over year consolidated EPS growth in 2022 and positions us well to continue our long term growth trajectory of 6% to 8% per year.
Moving on to other key details related to the transaction. It is important to note that we have not historically relied on dividend distributions for EnerBank. As such, we intend to maintain the current dividend of $1.74 per share, which we increased earlier this year. Longer term, we plan to grow the dividend in line with earnings as we have in the past with a targeted payout ratio of approximately 60%. From a balance sheet perspective, we are confident that this transaction will maintain our solid investment grade ratings and preserve our targeted mid teens FFO to debt.
Lastly, given the sale, we do not anticipate the need to issue any equity from 2022 through 2024, which provides more certainty in our ability to deliver consistent industry leading financial performance over the long run. Switching gears to our long term financial planning. I'll remind everyone that we have ample customer investment opportunities at the utility. In fact, our $25,000,000,000 ten year capital plan excludes 3,000,000,000 to $4,000,000,000 of additional opportunities given affordability, workforce capacity and balance sheet constraints. The EnerBank transaction offers a potential catalyst to enable incremental customer investments at the utility.
As illustrated on Slide eight, we foresee a potential path to fund key initiatives around safety, reliability and clean energy generation without the dilutive impact of new equity. And with that, I'll hand it back to Garik for some closing remarks before Q and A.
Thanks, Reggie. So what does this all mean? It means that our simple investment thesis gets even simpler and more utility focused. We continue to believe our model and track record of performance provides the most compelling story in the sector. We are a leader and this transaction will further enhance those efforts.
And combined with Michigan's constructive legislation and regulatory framework and our ability to create headroom by keeping customer bills affordable, we now have greater flexibility to invest more in infrastructure renewal. By eliminating our equity needs over the near term and investing in our core business, we strengthen and lengthen our runway to deliver six to 8% adjusted EPS growth. We believe this simple investment thesis will continue to deliver compelling total shareholder return for our investors for years to come. With that, Rocco, please open up the lines for questions.
Thank you very much, Gary. The question and answer session will be conducted electronically. And today's first question comes from Jeremy Tonet with JPMorgan. Please go ahead.
Hi, good morning.
Good morning. How are you today?
Good, good. Thank you. I was
just curious if you could give a little bit
of background on how this all came together here. Was this something that you guys had been exploring for some point? Did they approach you? Did you approach them? In just trying to see why now versus any point later or earlier to transact here?
Well, I'll offer some comments and certainly invite Reggie conversation too. And so I would just offer this. What I shared earlier in prepared remarks was this deliberate approach and a very strategic and straightforward approach. And so again, we are focused on a world class energy company. And what that means is, again, shared in the information, greater than 95% of our pro form a earnings come from a utility, a small part in enterprises.
And this is where we're focused. And we went through an exhaustive type of decision making process. We've shared some of that in previous one on one conversations as we think about the as we thought about the bank. But let me be clear, this is a non core asset and we are moving from a noncore business into our core. We're doing that at an attractive valuation and investing in the utility.
To me, it makes great sense. But Reggie, certainly offer more.
No, Gerrick, I think you've covered all
the key aspects. And I would just reemphasize that it was a nice broad process. This was not a source of reverse inquiry, we thought that it was a very nice process with a good amount of strategic buyers, and we're pleased that we ended up being able to do a trade with Regions here.
Got it. That's very helpful. And just want to be very clear as we think about 2022 in the dividend growth rate. So it seems like the dividend would grow something less than 7% next year, given that EPS is growing less than 7% kind of on a normalized basis here when considering the consolidated versus the sold assets. Just wondering if 2022 is kind of a rebase for 7% growth?
Or am I thinking about that the wrong way? And I
guess the other side of
it is if you're taking the equity off the table, would that lift kind of the back end of your growth rate because you no longer have that drag?
Yes, Jeremy, I can take that. Let me start by saying, well, first and foremost, we don't want to get ahead of our Board with respect to any type of perspective guidance on dividend per share. But we feel very good about the fact that we did not need to change our existing dividend for 2021 at $1.74 per share. And we did highlight that the payout ratio will be around 60%. And so based on our guidance for 2022, you can extrapolate as you see fit.
But again, we don't want to be presumptuous here because we haven't offered a recommendation to our Board at this point. And with respect to the question around the lack of equity issuance, certainly is helpful. If you just think about the rate base growth that we have forecasted in our existing five year capital plan, so $13 plus billion that we intend to execute on from 2021 through 2025. That equates to about over 7% rate base growth, and we're now taking out the vast majority of equity issuance from 'twenty two through 'twenty four. So clearly, that's going to help offset some of the earnings dilution associated with the bank.
And then clearly, we did highlight that there are some opportunities to potentially grow that capital plan. But again, we don't want to get ahead of that process. And come Q1 of next year, we'll be in a position to provide more clarity on the capital plan going forward.
Got it. I'll stop there.
Thank you for taking my question.
And our next question today comes from Steve Fleishman of Wolfe Research. Please go ahead.
Good morning, Steve. Hi. Can you hear me okay?
Yes, great.
Hi, Gerrick. Yes, good. Thanks. So just I'll follow on that last question. Just should we think about that $1,000,000,000 of incremental CapEx as being in your plan at this point?
Or that would still be kind of additive? And would that require equity? Or would that also be doable without equity?
I'd offer this. One, it'd be additive to the plan. And of course, we'll guide that through the regulatory process, ensuring that we continue to maintain affordability for all our customers. And so you should assume that. But again, we're not going to issue the intent here is to no equity issuance over the course of the next three years through 2022 through 2024.
Okay. Even with $1,000,000,000 more potentially?
That's correct.
Okay. And then when you guys have been giving your growth rate guidance, you've been referring to a bias to the midpoint in all your recent updates. I don't really see that in here. Could you kind of maybe update, is there maybe a bias given the lack of equity above the midpoint now?
Well, it's very deliberate, Steve. There is no bias, and we're guiding to six to 8%. And you've known us long enough that we plan conservatively, and we've got good confidence in continuing to deliver in that guidance range. And as I stated earlier, we're going to just continue to be thoughtful about the deployment of capital from affordability for all our customers' perspective. So just it's what we do.
You're used to our model there. And also, I just would offer this. We're going to continue to we've done this year after year as when customers and our investors and kind of that flex process, we will do that as well. So we believe that contributes to the consistency and the length and strength of, frankly, our financial performance.
Great. Thank you.
And our next question today comes from Shar Pourreza of Guggenheim Partners. Please go ahead.
Hey, guys. Hey, Josh. Hey, Shar.
Hi, Shar. Just two quick ones for me. Maybe just a little bit more of your thoughts on sort of as we're thinking about the dilution and maybe the offsets from the transaction.
I mean, when so you're taking out
$0.22 of earnings from the bank. Can you just elaborate maybe a little bit on the timing as we think about the organic growth redeployment? I guess, could you be a bit more specific on how that $0.22 gets backfilled, including any sort of regulatory approvals that are needed for the key initiatives that help offset the lost bank earnings? I guess is there any kind of risk to not offsetting the $0.22 of drag?
Yes. I'll offer Reggie first whack you might say at this question, and then I'll follow-up if there's anything else.
Shar. So we have taken into account, obviously, the absence of EnerBank's earnings And when you think about the potential opportunity to increase the capital plan by about $1,000,000,000 we would foresee that layering in not in 2022, obviously, given that our forward test years incorporate the current plan, but potentially from 2023 through 2025. And we foresee an opportunity over that timeframe to get back to the prior trajectory. Now clearly, don't want to get ahead of the regulatory process.
We don't want to get ahead of our planning process where we look at affordability in addition to workforce capacity. Then clearly, the other constraint we've talked about in the past is balance sheet constraints, and this solves that third issue. But we have to look at affordability and workforce capacity. But we feel good about the opportunity to potentially incorporate another $1,000,000,000 We would foresee that flowing in, in 'twenty '3 through 'twenty five, which would be incorporated in subsequent rate cases. And again, we do think we can backfill that in a reasonable amount of time.
Got it. And then just I'm sure this is something very small and minor, but is there any sort of dissynergies that we should be thinking about from this transaction?
Yes, Shar, the business to its full credit was very well decoupled from the parent And so it had a standalone board, ran on its own, and there was very little commingled operations. Occasionally, they'd get tax counsel and things of that nature, but it was really its own shop. And we also, as you know, did not infuse any equity into the business for over a decade plus. And so it really was a stand alone operation, and we do not think the decoupling of it, assuming we close, would lead to any dis synergies on either side. Perfect.
Thank you, guys. Thanks, Gerrick. Thanks, Reggie.
Thank you.
Yes. Thanks, Gerard.
And our next question today comes from Stephen Byrd with Morgan Stanley. Please go ahead.
Hi, good morning. Good morning.
Just a couple of questions for me. Just wanted to confirm on tax leakage. Is there any tax leakage here on proceeds?
Reg, I please walk through
can take that. So I would say the quick answer is on a cash basis, it's de minimis. As you know, we've got a pretty good balance of NOLs and tax credits, and those should soak up most of the potential tax you'd have on the gain. And so our rough estimate is about $30,000,000 of cash tax leakage. Obviously, on
a book basis, if you
just look at the book equity versus the purchase price, you'd have a pretty decent sized book tax leakage. Think about 5x above that cash tax leakage I highlighted. So on a book basis, fairly decent, but
on a cash basis, which
is much more important here, of course, pretty de minimis.
Got you. That's helpful. And then sorry to go back to the question on use of proceeds, but just to to be clear, when we think about the 900 and change million here, approximately how much of of that would be essentially to avoid the issuances that you were already planning for your base plan versus how much would essentially be allocated for incremental growth above the base plan?
Yes, Stephen, in the very near term, so think about it, if we're assuming a Q4 close for transaction, we'll get the proceeds right as we step into 2022. And we have pretty substantial debt estimates, call it, roughly $05,000,000,000 and then obviously the equity, is, call it, $0.02 5,000,000,000. So in the near term, it would obviate the need to issue any equity and reduce our debt financing needs substantially. And then we feel very good about the lack of any equity issuance needs from 2022 through 2024. And so you really forego a lot of external funding needs.
And then as we bring in the incremental capital that we've talked about at the utility, say from 2023 and beyond, as Derek noted, we don't anticipate any additional equity to fund that. So it funds in the short term a lot of our external funding needs in the current plan. And then if we can weave in or incorporate additional capital investments in the utility in our subsequent five year plan, we think it funds a good portion of that growth growth as well. Is that helpful?
Yes. That makes sense, Rich, because we had you all at about $250,000,000 a year of equity. Obviously, the ninethirty million of net proceeds would take you beyond the three years. So it would help to finance $1,000,000,000 And I guess, you know, there's going be there's obviously a lot of focus on the stock price today on on the the dilution. But I guess the dilution is essentially smaller by 2024 because of that avoidance.
Know, you're obviously getting all the proceeds upfront, but you're also losing all the earnings upfront. I guess I've been thinking about it roughly as you're it's essentially issuing equity at a little over 15x earnings or thereabouts versus your overall company multiple, which is higher. But of course, this derisks, it refocuses on a utility business that gets a higher multiple. So I guess that's kind of mathematically how I've been thinking through that. Does that kind of make sense?
Yes, that's exactly right. I mean, what this trade is, when you cut through it, is that we are trading bank earnings for utility earnings, and we anticipate doing that in a relatively short period of time. Yes, of course, the short term, as you redeploy the capital, you're going to have a little dilution given the loss of the bank's earnings. But over time, again, we expect to backfill that relatively quickly, and we think it's a much higher quality of earnings. And to Garik's earlier comments in his prepared remarks, we are focusing, obviously, the vast majority of the earnings and the business profile and what we know best, and that is regulated utility business.
Yes. Yes. That makes sense. And the dilution is a little higher, as you mentioned, because initially, you'll avoid, call it, $250,000,000 of equity. The other proceeds can be used to pay down debt, but that's going to look a little more dilutive near term, but then it starts to even out as you avoid those issuances later on.
And then, I guess, sort of 'twenty three and beyond as you kind of spend additional capital to increase your earnings power further.
Yes. You said it right. The only thing I'm modifying in your working assumptions there is that it's not to pay down debt, to be clear. It's just the avoidance of new money issuances. And so obviously, every year we plan, we issue new debt, new equity.
And so we would forego or not have the need to issue either of those. So it's not paying down debt, but just we're just reducing planned debt financings for the year.
Good point. That's all I had. Thank you so much.
Thank you.
Thank you.
And our next question today comes from Julian Smith with Bank of America. Please go ahead.
Welcome, Julian.
Hey, good morning, team. Thanks so much for the time and the opportunity to connect here. I just wanted to be very clear about just the baseline and more importantly, you stand within it. Obviously, you have some time to reposition earnings over the cumulative CAGR period. Where would you say you are within that range to the extent to which you're able to articulate eventually some of these upside $1,000,000,000 of utility investments?
Julien, just to clarify, when you say range, do you mean the EPS guidance range? I just want to be clear that I addressed the right part.
Oh, no, the 6% to
eight here.
Yes, that's what I thought you got.
Again, as Derek noted, we're guiding 6% to 8%. We feel good about that in the long term. There is no bias. And so if you just look at the rate base growth of our current capital plan and then take out the equity dilution, your modeling will take you to pretty attractive levels. But our guidance is six to eight and that's where we'll keep it for now.
And I think we've proven time and time again that we're very thoughtful in derisking subsequent years when we have a good upside. And so again, there's no bias, but we feel good right now where we sit at the six to eight longer term.
Got it. Okay. No bias. But then in terms of the balance sheet and FFO, in terms of the pro form a for the sale, latitude for the agencies, can you talk about that a little bit further? I mean, it seems pretty clear that you don't need the incremental any incremental equity to fund $1,000,000,000 of CapEx, or you just take the sale proceeds, put it back into the reinvestment of the business.
But how do you think about FFO metrics required from the agencies and the market FFO otherwise?
Yes. So as per my prepared remarks, we still feel good about maintaining our targeted credit metrics for FFO to debt in that mid teens level, which we've been guiding to for some time. And we think that keeps us in that solid investment grade credit ratings that we've worked very hard to achieve at this point. I would say directionally for Moody's and Fitch, it's neutral on a credit metric basis. S and P, there should be some pickup there because S and P, unlike Moody's and Fitch, did include the core deposits of EnerBank, which is about $2,800,000,000 in their imputed debt calculations.
And so with the absence of EnerBank post closing, you should see a decent lift for S and P to the tune of about 200 basis points run rate. So you'll see a lift in S and P. But for Moody's and Fitch, I'd say relatively neutral, if that's helpful.
Got it. And sorry, I still just want to clarify this to
be extra, extra clear. The 6,000,000
to 8,000,000 is off the original 21,000,000 question mark?
No, no, no. The 6,000,000 to 8,000,000 is off of the 22,000,000 And so if you just look at the math of what we're guiding for 2022, so we've said $2.85 to $2.87 That implies pretty attractive growth off of 2020 operations. It should get you slightly over 9%. And we're saying off of that new base in 2022, we would grow 6% to 8%, again, with no bias in, say, 2023 and beyond. And obviously, over time, we'll recalibrate, but we feel good where we sit today.
Again, given what we've highlighted that we're losing a lot of external funding needs, that there's an opportunity to increase the capital plan at the utility by roughly $1,000,000,000 We think that all suggests a very attractive and consistent growth once we get beyond 2022.
Okay. Thank you guys for clarifying that.
Thank you.
And our next question today comes from Michael Weinstein with Credit Suisse. Please go ahead.
Hey, guys. Hey. Good morning. To follow-up on everybody else's questions. The Reggie, if you're using 2022 as a base, right, that would imply a lower growth rate versus the prior guidance, which would been off, I think, 2020 number, right, 2020 base.
If you go out to like 2025, you would wind up at a lower number if you're just growing it off that 2.85%
to 2.87%
for 2022.
And Michael, what I would add is, remember, we update our five year plan every year. And so again, we've highlighted that we believe we have the opportunity where we sit today to add another $1,000,000,000 to
our five year plan, but
we don't want to get ahead of that process. And so what's missing from your working assumption is the fact that the capital plan may increase in Q1 of next year, and we don't want get too far ahead of that process. But where we sit today, we think it's roughly $1,000,000,000 and you'll see attractive rate base growth as a result of that. And then again, absent any additional equity to fund that additional rate base growth. And so higher level of rate base growth driven by a higher capital plan with less equity dilution and in the short term reduced debt financings over the course of 'twenty two.
And we think it drives, again, very attractive growth from 2022 and beyond. So again, we don't want to start giving guidance out to 'twenty four and 'twenty five, but we do think we should get pretty close to that initial trajectory over the foreseeable future.
The initial trajectory, what do you mean by that? Like what are we basing the initial trajectory off of?
The initial trajectory is our current plan before what you heard today in the sale of the bank. So our current plan before announcing the sale today had a certain level of EPS trajectory associated with it. And now with the sale of the bank, coupled with the reduced external financing needs and then adding additional capital investments to fund rate base growth, we think, gets back to that current trajectory we were on prior to today's announcement in a relatively short period of time.
All right. So basically what you're saying is that officially it's six to 8% off 2022, but it's high end of that or it's boosted by the $1,000,000,000 of additional growth. And then that gets you back to the original initial trajectory by 2024, 2025, say?
I'll go back to saying no bias. You can extrapolate as you see fit, but there's no bias. Again, we're guiding six to 8% off of 2022. And again, as we update our capital plan over the course of next year, as we highlight our funding needs, we feel very good about the need for no new equity, and we feel good about the prospects of growing the capital plan next year, which will drive more attractive rate base growth. So it's six days off of 2022.
We have nothing more to provide beyond that and there's no bias.
And our next question today comes from Travis Miller of Morningstar.
Morning. Thank you. Morning. You've answered almost all my questions. A real quick return to two quick things to clarify.
One on the dividend payout ratio, I know you've said 60%. If you look at obviously what you're guiding to in 2022 would imply essentially no increase. How flexible do you think the Board would be in that 60% target? Would you be comfortable going up to like a 64%, 65%? Or are we 60% here yet?
Yes.
Let me offer some comments on this, and then I'll certainly turn it over to Reggie. And so I'm not going to make any commitments on behalf of the Board or conversation of the Board. We offer what we believe a competitive payout ratio. Frankly, do a lot of benchmarking on that as well to ensure it's competitive across the space. And so we'll continue to be thoughtful about that as we move forward.
But I mean, what we committed to in this call is a 60% payout ratio. And I don't know Reggie if you want to add more to that.
No, I think that's right. The only thing I would add Travis is that we do benchmark our peer group and we look at retention rates and payout rates and we try to benchmark as closely to those who are growing at a comparable level. And so we'll take that into account. And as per my prepared remarks, we feel good about the guidance of approximately a 60% payout ratio, but clearly we're not going to
get ahead of our Board on that.
Okay. Very good. And then second clarification or thoughts in terms of your long term view on parent level debt without the bank earnings and cash flow? Are you comfortable with what you've got? I know you've got maturities coming up here in the next five or so years.
What are
your thoughts long term on that parent level debt?
Yes, Travis, we have really targeted trying to be around 30%. And that should over time reduce just with the cash flow generation of the business and just less debt financing needs at the parent over time. And so we anticipate being sort of in that 30% range and do foresee it ticking down over time.
Okay, great. I appreciate it. Thanks.
And our next question today comes from Andrew Wiesel with Scotiabank. Please go ahead.
Thanks. Good morning, everyone. Just wondering, within the 6% to 8% range, is there a bias one way? No. I'm just joking.
I understand that you're gonna be conservative and not answer that, but, signs seem to be pointing up. Just two clarifying questions I have for you. First, on equity after 2024, is $2.02 $50,000,000 a good number for us to pin to Lynn for 2025 and beyond?
So Andrew, I appreciate your question. And I'm just glad we're not talking about swimming pools. That's what I'm really glad bottom line is right now our plan in 2025 is $250,000,000 of equity up to, I should say, $250,000,000 of equity issuance in that year. And again, a lot can change between now and then. We'll be thoughtful about what that looks like in 2025.
Okay. Then just quickly on the CapEx. So you point to $1,000,000,000 of upside. I understand you don't want to get ahead of your next update or the regulators, but you've got the IRP going on underway. So that ten year plan hasn't been updated since the last IRP with the 3,000,000,000 to $4,000,000,000 of opportunities.
When can we expect an update and roll forward to the ten year CapEx plan? And is that part of the same process as adding the $1,000,000,000 or are those two independent tracks?
Yes. I would not link this activity in this transaction with our IRP or our plans for IRP at all. So yes, they fall in the same month and we've got good news here on this transaction and we'll share some exciting news on our IRP, but I would not link the two. We're going to file this IRP here June 30. And it's a we're looking out twenty years on what the supply needs are, as you well know, Andrew.
And I would we'd be getting way ahead of our skis if we started to connect the two so the whole regulatory process in front of us with this integrated resource plan. So we're just going to be very thoughtful about that. Now there could be some additional capital investments as part of our integrated resource plan. And at some point, we'll have some type of true up if in fact it's approved through that process. At this point, we'll update our five year look here in Q1.
And then if it makes sense, we'll look at our ten year plan later in 2022.
Okay, understood. So just to be sure then, the $1,000,000,000 of upside that you're pointing to in the slide deck today is not related to the IRP nor related to this transaction. You're simply emphasizing that that's something that we might see in six months or eight months or whatever the next update is. Is that right?
Yes, that's correct. As we typically do in Q1 is update our five year capital plan. But I'll just go back a little bit of what we shared here on the slide and have shared here over the last couple of years. There's 3,000,000,000 or $4,000,000,000 of opportunity. Those are specific projects that we have identified that offer greater improvements in our electric reliability, modernization of the grid, decarbonization across our natural gas business, with our clean energy transformation.
And so those are thoughtful investments, customer oriented investments and that we'll look to feather in as appropriate.
Great. Thank you and congrats on getting the deal done. Yes. Thank you.
And our next question comes from Paul Patterson with Glenrock Associates. Please go ahead.
Hey, morning. Good morning. I recall, there was you guys tried to do this earlier, many years ago with Home Depot, is that right?
That's correct.
And obviously, there was a the conditions changed and what have you. But I'm just wondering, with respect to the current situation, how should we think about are there any special contingencies or anything associated with this deal? Or is it just pretty much sort of
the
customary that's involved kind of closing conditions?
Reggie is Chair of our Board. I think he shared that in his prepared remarks. But he's close to the transaction specifics. And so Reggie, if you wouldn't mind.
Happy to. Yes, Paul, I would say certainly a different fact pattern from when we tried to trade the bank in 02/07 to Home Depot. And so Regions Bank, the subsidiary of Regions Financial Corporation is a traditional bank. And so the regulatory approvals are limited to the FDIC, the Utah Department of Financial Institutions and the Alabama State Banking Authority. And so we do not anticipate the same types of obstacles or constraints we had in the Home Depot trade.
And I'd say the other closing conditions and terms and conditions in general are pretty customary for a merger agreement. So we feel good and cautiously optimistic about the ability to close in Q4 of this year.
All my other questions were answered. Thanks so much.
Thank you.
And our next question today comes from Anthony Fodel with Mizuho. Please go ahead.
Hey, good morning. Hopefully, quick question following up on Mike Weinstein's question earlier. I guess, is management prefer to get back to the original target as we move in the out years and get back to the original track of that chart we would see with the 7% over twenty years? And this would just look like a divot, maybe this 'twenty one, 'twenty two, 'twenty three possibly? Or is the goal to maybe have a steeper curve with a new base?
Is that the preferred long term story at CMS?
Well, let me offer this, and I'm sure Raji is going to want to jump into this. And so what we've communicated here 2022 up by 2022, it gets at 6% to 8%. And again, we haven't referenced the bias with that six to 8%. But I think the bigger picture question in my mind is this shift. And it's a shift from bank type earnings to utility type earnings.
And we know and we believe that our investors ascribe great value to that. There's a lot more predictability in that. And frankly, that's in our wheelhouse. That's in our expertise. And so I'm not going to make any promises about 2025.
That's pretty far out. We've got a good financial plan. We'll continue to be conservative as
you
would expect. We've done that historically. And I think our track record speaks for itself on the ability to deliver on that our guidance range. But Reggie, I don't know if you want to add more to that conversation.
No, Eric. I think you summarized it well.
And then just lastly, how do you view enterprises? Do you view that as a core asset? Or just thoughts on enterprise? And I'll leave it there.
Enterprise is an important part of our company. And again, when I think about their work and I think about our wheelhouse of energy markets, capacity markets, renewable contracted renewables, biomass and natural gas generation, those are the things that we do in the utility. But as we've shared, we're going to be greater than 95% pro form a on an EPS basis, adjusted EPS basis as we look forward. So enterprises will be part of that. It will be a tidy what I'd call a tidy piece of that and because it offers great value for our customers.
As we shared in the past, some of particularly our customers that have a national footprint want us to be able to deliver options from a contract renewal perspective. And we are able to do that at utility like returns. And so that's a need and we deliver on that need for our customers. And then we'll continue to optimize our traditional assets, biomass units, those natural gas units across energy and capacity markets. And so again, I feel good about the mix from a broader company perspective and the role that enterprise plays.
Great. Thanks for taking my questions.
And our next question today comes from Sophie Karp, KeyBanc. Please go ahead.
Hi, good morning. Thank you for squeezing me in here. Just a housekeeping question, if I may. Am I reading the fact that there's no debt that actually will be leaving your balance sheet with this sale?
It was hard, Sophie. Thanks for joining, but I had a hard time hearing the whole entire part of the question. So could you repeat?
Yes. Hi. Is this better?
That's a little better.
Great. Am I I just had a housekeeping question here.
Am I reading this right that no debt will be leaving your balance sheet as a result of the sale?
Reggie, why don't you address the balance sheet piece there?
Yes. Sophie, so to be clear, EnerBank has core deposits, which are liabilities and per S and P's calculation of credit metrics, debt equivalents. And so with the potential sale of the bank, those core deposits obviously would go with the business. And from an S and P credit metric perspective, it would be a delevering event. But for Moody's and Fitch, already exclude those core deposits.
And so it would be, as I highlighted earlier, credit metric neutral from a Moody's and Fitch perspective.
But should we model a reduction in parent level debt or liabilities from your balance sheet as a result of this?
So no parent debt would go away as a result of the transaction, but there is I said core deposits, they're more formally called broker deposits. But those broker deposits would go away from our balance sheet and it's about $2,800,000,000 or so that would go away from our balance sheet as a result of the transaction assuming we close in Q4 of this year.
Got it. Thank you so much.
Thank you. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Garrett Rochow for any closing remarks.
Well, I just want to thank everyone for joining us today for this announcement. Appreciate your time and wishing you a safe and happy day. Take care.
Thank you, sir. This concludes today's conference. We thank you all for your participation. You may now disconnect your lines and have a wonderful day.