Welcome to the fourth quarter 2019 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Barbara Tuckfield. Please go ahead.
Good morning, everyone. Before we get started, I would like to remind everyone to read the safe harbor statement on page two of the presentation, including the reference to forward-looking statements. Our presentation also includes references to operating earnings, which is a non-GAAP financial measure. Please refer to the reconciliation of GAAP earnings to operating earnings provided in the appendix of today's presentation. With us this morning are Jerry Norcia, President and CEO, and Peter Oleksiak, Senior Vice President and CFO. Now I'll turn it over to Jerry to start the call this morning.
Thanks, Barb, good morning, everyone, and thanks for joining us today. This morning, I'm going to give you a recap of our 2019 business performance and provide you highlights on how we are well-positioned for future growth. I'll turn it over to Peter, who'll provide a financial review of the year and wrap things up before we take any questions. Let's start over on slide four. 2019 was another successful year, with many great accomplishments, including strong operational and financial performance. I'd like to thank all of our employees for the hard work that they contributed to achieving this success. We achieved strong financial results in 2019, with operating EPS of $6.30. We were able to increase our guidance twice in 2019 and still beat our last updated guidance midpoint.
2019 EPS results provided 9% growth from our original 2018 guidance. 2019 was the 11th consecutive year we exceeded our operating EPS original guidance. We also increased our dividend by 7% for the fourth year in a row. We are targeting 7% dividend growth through 2021. When it was announced that I was taking over the CEO role, I said that we would continue to sharpen our focus on the priorities that have driven our success. I'm confident in our ability to continue to focus on an employee engagement culture that drives service excellence, which in turn helps us deliver distinctive shareholder returns. On the next slide, I'll turn my focus to 2020 and beyond. With a strong 2019 behind us, I'm confident that 2020 is going to be another successful year.
Our 2020 guidance provides a 7.5% increase over our 2019 original guidance and includes the benefit of the recent Midstream acquisition. Our 2020 EPS guidance midpoint is $6.61, which will be the base for our 5%-7% long-term growth. We continue our commitment to a long-term business mix of 70%-75% utilities. We will invest 80% of our capital in our two utilities over the next five years, which will continue to provide our customers with cleaner and more reliable energy and deliver high-quality operating earnings with increased certainty. These goals are attainable with the strong culture we have here at DTE. As you can see on the next slide, this marks the 11th consecutive year we have exceeded our original EPS guidance. This does not come easily and is a result of a rigorous planning model.
I'd like to talk to you about that a little more on slide six. As I mentioned, we exceeded our EPS guidance for the 11th consecutive year in 2019. We attribute this continued success to our planning process, which includes a detailed five-year plan with earnings contingency across the portfolio for any number of potential scenarios. The first two years of the plan are worked in detail, with weekly reviews by the management team. The goal of these weekly meetings, which I chair, is to understand with a high level of detail how we seize opportunities and address challenges in the plan. These reviews provide us real-time information to help make plans to allow us to stay on track financially. As I said, we have contingency across all our business lines.
While much of the contingency is based on addressing weather conditions at our utilities with our lean and invest plan, we also have contingencies planned in our non-utilities. This allows us to manage the entire DTE portfolio of businesses to react to any number of developments that may occur during the year, and many times over, deliver our financial goals. We have successfully employed this lean and invest approach over the years, allowing us to pull back expenses when needed and to invest back in the business when the opportunity presented itself. I'll turn over to slide seven. I'll talk about our employee, customer, and community successes. Our employee focus on customers and communities makes me proud to be part of the DTE family. A key area of focus here at DTE is safety. I'm proud to say that we had another safe year.
For the second time in a row, DTE was ranked in the top 2% in safety culture by the National Safety Council. Safety is a great indicator of an employee's level of focus and discipline, resulting in a strong safety culture with engaged employees. This engagement leads to a customer-focused environment. Although I would say there's always more we can do to improve employee safety, we are currently driving new leadership competencies and key communications in an effort to make another step change and improve employee safety. We're ranked in the top 3% of the world by Gallup for our high employee engagement, and every day I see evidence of this through the distinctive work our team does around service excellence. You can feel the high energy of our employees at all our facilities, in our headquarters, and in our field operations.
I'm often approached by employees and told how much they love working at DTE Energy. We also received our seventh consecutive Gallup Great Workplace Award, the only utility company ever to receive this award. I'm confident we'll continue our focus to earn our eighth award in 2020. Our focus on service excellence positions both of our utilities high in the customer satisfaction rankings. Our electric and gas companies both rank in the top quartile of JD Power's residential and customer satisfaction study. DTE was also ranked one of the country's top corporate citizens by Points of Light and JD Power. I'm proud of all the accomplishments our team has made this past year, and I'm looking forward to more successes in 2020 and beyond. Before I turn over to the business update, I just want to let you know how the local economy is doing. Michigan's economy remains strong.
Unemployment continues to be at the lowest rate since 2000, the population continues to grow. GM recently announced that it would invest $2.2 billion in Detroit, the plant where it'll produce all electric trucks and sport utility vehicles. You may have seen the commercials at the Super Bowl, where they're going to build a new Hummer, electric Hummer, here in Detroit. Very exciting. Fiat Chrysler is planning to spend $4.5 billion to update several Detroit plants, allowing the company to start making electric versions of its Jeep models. Ford Motors is converting the abandoned train station in Detroit into a center for autonomous driving and innovation and investing $740 million. All of these are examples of the revitalization of Detroit and Michigan as a whole. Turning over to the business update, all our businesses achieved successes in 2019, which positions us for continued growth in the years to come.
As you remember from last year's EEI, we mentioned that we were going to invest $19 billion between 2020 and 2024 in our utilities and non-utilities, with 80% of these investments going into our utilities. Starting off with DTE Electric on slide eight, as a leader in the march towards clean energy and more reliable energy, we continue to invest heavily in clean energy, infrastructure renewal, and technology innovation. In 2019, we announced we were accelerating our carbon emissions reduction by a full decade, targeting 80% reduction by 2040 and reaching net zero emissions by 2050. Achieving these milestones will help us shape our environment for all future generations. Our Blue Water Energy Center, which is a natural gas plant that we're building, is also progressing quite well. We're nearly 40% complete with an expected spring of 2022 in-service date.
It supports our carbon reduction plan by reducing our carbon emissions by 70% compared to the three coal plants that we're retiring. Early in 2019, DTE Electric received the approval for our Charging Forward program for electric vehicles. This program is bringing the benefits of EVs to more Michigan residents and businesses through incentives, customer education, and charging infrastructure growth. We have also partnered with a number of groups, including the City of Detroit and General Motors, by installing charging stations near our headquarters here in Detroit. There is a step to promote EVs in Michigan, and it goes hand in hand with our Charging Forward program. I'm looking forward to seeing many more charging stations here in the state of Michigan. Additionally, DTE Electric is progressing on its voluntary renewable program very nicely.
In 2019, over 400 MW were committed by commercial customers, including Ford, General Motors, the University of Michigan, and the Detroit Zoo. Additionally, about 10,000 residential customers have committed to voluntary renewable power. I can tell you that every day we're enrolling new customers into this program. We're also upgrading circuits to improve reliability, redesigning substations to avoid overload, and enhancing remote monitoring and operating capabilities to detect and resolve outages much more quickly. A few items of note include the completion of two substation upgrade projects and one new station. Over the next five years, there will be 18 new or upgraded substations that will be planned and built. In the city of Detroit and surrounding areas, about 128 miles of overhead lines were upgraded in 2019, with over 1,000 miles planned to be upgraded over the next five years.
We began construction of our new electric system operations center, with completion expected in 2021. Overall, our electric utility had a very successful year, and I'm feeling confident we are well-positioned for 2020 and beyond. Moving to slide nine, I'll talk about some of the accomplishments at our gas company. We made progress with Accelerated Main Renewal Program. In 2019, we renewed 180 miles of bare steel and cast iron. We are looking to complete 200 miles in 2020, keeping us on track to replace all cast iron and bare steel over the next 15 years. We're also continuing to develop plans to invest in additional system improvements, including a gas transmission renewal project to be completed in 2021 to support the growth, integrity, and reliability of our system in northern Michigan.
This new program, along with our Main Renewal Program, firms our commitments to provide safe and reliable service to our customers. Continuing to make progress on our commitment to reduce methane emissions from our gas business by 80% by 2040. Overall, we are looking forward to another strong year from our gas company. Now I'll turn it over to our non-utilities on slide 10. Our Gas Storage and Pipeline business completed three acquisitions and two organic expansions in 2019. We significantly increased our ownership in Link, we acquired a Generation Pipeline, and we completed the acquisition of the Blue Union and LEAP pipelines in the Haynesville Basin. With LEAP, construction teams were mobilized in December and are currently clearing the right of way along the pipeline route, and I would say construction is progressing on plan and on schedule.
We expect this pipeline to be in service in the third quarter this year. This is a 150-mile, 36-inch pipeline delivering into Southeast Interstate systems and the Gulf Coast LNG export markets. For the Blue Union system, we're on track with our financial goals. As we acquired these assets, we discussed how much due diligence was done to confirm that all of these assets were highly accretive, connected to large demand centers, and supported by strong resources, contracts, and credit. These assets provide contracted long-term growth and they'll deliver compelling value to our shareholders. Along with these acquisitions, we also executed an expansion at Millennium and continue to build out our Link asset in an accretive way. Recently, we have been getting questions about the low gas prices and how this will affect us. There has been a softening in the market, and we have planned for that in 2020.
We also have the benefit of diversification through a portfolio of businesses allowing us to weather different business cycles. Let me reassure you, 85% of GSP's revenue is covered by fixed demand-based revenue contracts and flowing gas. Our producers are significantly hedged in 2020 with attractive pricing. As a matter of fact, our producers are 80% hedged in 2020 at an average price of $2.75. We review their credit and cash flows weekly and feel good about their condition. Most importantly, we go into every year with contingency, and lean and invest plans across our whole portfolio of companies. The development of these plans has provided us a history of consistent success. This year is no exception to our conservative nature when it comes to planning. Going forward, we have significant contracted growth in the portfolio and are focusing on additional organic growth around these assets.
Now let's talk about our Power and Industrial business on slide 11. As we mentioned on our earlier calls, we acquired three industrial energy services projects and two RNG projects in 2019. Particularly proud of the progress we've made in the RNG space. One of our RNG projects in Wisconsin was named Dairy Project of the Year by the American Biogas Council. Work is important to continue down the path toward a cleaner environment on multiple fronts. RNG is an attractive source of pipeline-quality gas from renewable resources that benefits customers and the environment. Along with RNG, cogeneration is the other main focus of our P&I group. This business is attractive to our customers in times of rising electricity rates and low natural gas costs. We have been successful in growing our cogen business due to our ability to find and secure long-term projects and contracts with repeat customers.
Going forward, we'll continue to develop additional utility-like RNG and cogeneration projects. I'm feeling great about the progress we're making on all of our business lines. 2019 was strong. We have many successes to be proud of. I sat with my team last Friday, as I do every week, to review in detail the opportunities and risks in our 2020 plan. I came away feeling confident that we're going to nail our 2020 goals. Also the quality of our workforce and our leadership team gives me great confidence in our ability to deliver this high growth on our utilities and non-utilities with a goal of 5%-7% EPS growth or better. Our track record has been better. With that, I'm going to turn it over to Peter to share our financial results.
Thanks, Jerry, good morning, everyone. Before I get into the financials, I always like to give an update on my Detroit Tigers. First update I'd like to give is that this year's winning Super Bowl quarterback was drafted by the Tigers. That gives me hope that the Tigers know how to pick a winner. As has been over the past few years, this is the best time of year for my Tigers, with the start of spring training just a few weeks away. Although my Tigers finished in last place this past season, I still have hope for the future, as this year will be a turning point in the rebuilding process, with top prospects finding their way to the Major League club. Unlike my Tigers, DTE has been very consistent in delivering strong financials, 2019 was no exception.
I will start the 2019 review on slide 12. Total earnings for the year were $1.166 billion. This translates into $6.30 per share for the year. You can find a detailed breakdown of EPS by segment, including our reconciliation to GAAP reported earnings in the appendix. Let me start my review at the top of the page with our utilities. DTE Electric earnings were $716 million for the year. This was $47 million higher than 2018, largely due to the impact of new rates implemented in May and 2018 items not repeated in 2019. This is partially offset by rate-based growth costs and cooler weather in 2019. As you remember, we experienced a significant amount of weather favorability in 2018, and much of this favorability was reinvested system reliability. DTE Gas operating earnings were $22 million higher in 2019.
The earnings increase is driven primarily by the implementation of new rates in the fourth quarter of 2018 and colder weather in 2019. This was partially offset by rate-based growth. Let's move down the page to our Gas Storage and Pipeline business on the third row. Operating earnings for our GSP segment were $213 million for the year, which is right on top of the midpoint of guidance for 2019. In 2018, GSP experienced higher earnings related to AFUDC at NEXUS and higher-than-planned volumes across the portfolio. 2019 has normalized earnings at NEXUS and volumes were on plan. As a result, 2019 is down $20 million versus 2018, which was contemplated in our 2019 guidance for this segment. On the next row, you can see our Power and Industrial business segment operating earnings were $133 million.
Earnings were $30 million lower than 2018, which, like the GSP business, was contemplated in our 2019 guidance. This decrease is due mainly to the REF Tech equity transaction that occurred in the fourth quarter of 2018. As we communicated previously, we entered into equity partnerships in our REF unit and accelerated cash flows to support other projects. On the next row, you can see our operating earnings at our energy trading business were $30 million. Earnings were $10 million lower in 2019 compared to 2018 due to realized results in the gas portfolio. Our trading company had another solid year in 2019 with strong accounting and economic income. The appendix contains our standard energy trading reconciliation, showing both economic and accounting performance.
Corporate and other was favorable, $15 million in 2019 compared to 2018. This was due primarily to lower taxes and one-time items in 2018, offset by higher interest expense. Overall, DTE earned $6.30 per share in 2019. Let's move to slide 13 to wrap up before we open the line for questions. 2019 was a strong year financially and operationally. We are planning for another strong year in 2020. Going forward, we'll continue to target 5%-7% EPS growth, with 2020 guidance as the base for that growth. Our 7% dividend increase for 2020 demonstrates our confidence in the company's performance and long-term strategic plan. The 2020 operating EPS midpoint of $6.61 provides 7.5% growth from our 2019 original guidance.
This high growth rate is driven by strong performance at all of our business units, healthy growth at our two utilities, near-term EPS accretion from our GSP acquisitions and organic growth, continued business development at P&I. We're committed to maintaining the strong balance sheet and credit profile that investors have come to expect from DTE. Finally, we remain committed to a business mix of 70%-75% utilities, with a good portion of our non-utility earnings coming from regulated or long-term contracted businesses. With that, I'd like to thank everyone for joining us this morning. Operator, we can now open the line for questions.
Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. Our first question will come from Shar Pourreza with Guggenheim Partners. Please go ahead with your question.
Hey, good morning, guys.
Morning, Shar.
Morning, Shar.
Let me just touch a little bit on the non-utility. The recent acquisition you guys did kind of highlighted $2 gas as still being economical, and obviously we're continuing to trend below this. Can we just get a little bit of a status on your thinking there, given weakening fundamentals? Really more importantly, is there any impact with your prior guided, like, $2 billion-$3 billion incremental accretive growth opportunities you highlighted for this segment in, let's say, a prolonged weak gas price environment, especially for sort of the opportunity that you guys highlighted in the past as being in early to mid phases? Could we see some of that capital being diverted to other areas?
I'll say this, that for 2020, our forecast for Indigo is right on top of our fixed fee charges and demand charges. We are highly confident delivering 2020. Also, as we mentioned prior, our growth on this asset is also contracted at about a 90% level for the first three years. We're really confident in the growth that we're forecasting with this asset.
Got it. I guess the question is just more of a longer term. You've allocated some, obviously, accretive or incremental growth opportunities for just the gathering and the storage and segment. I'm just curious, like, the $2 billion-$3 billion that could be incremental opportunities that are sort of in the early phases of spend in a weakening gas price environment, is there a potential that you could redeploy capital somewhere else, or even projects that are in the early phase will continue?
All of the projects that we planned for this year, we're confident they're going to continue, Shar. Longer term, as we look at our assets, multiple platforms here in the Northeast as well as the Midwest and Louisiana, we feel they've got a great resource behind those pipelines and extremely well connected to markets. The one thing that we do know is that supply and demand are currently rebalancing. We saw this happen in 2015 and 2016, and that's happening now. Longer term, with demand growth in the natural gas sector, which continues at a pretty robust clip, we see that our pipelines are well-positioned with these resources and markets to deliver on our growth. We're not seeing anything right now that long-term would give us pause, in terms of growth of our assets in this space.
Okay, perfect. That was the first question. Then just second, can we just shift to the regulated and talk a little bit about the IRP and sort of the recent ALJ recommendation, how we should sort of think about the generation needs there, maybe from a framework perspective?
Sure. I would say that the Staff position in the IRP has been quite supportive. I would also say that most of our assets are in flight to deliver on our five-year plan. I would say the bulk of our renewable asset build has been approved already by the Commission. Of course, our combined cycle plant has been approved by the Commission and is well under construction. It's 40% complete. In addition to that, the heavy investment that we're making in our wires business is getting very good support from the Staff and from the Commission in the last rate case, and also signals that they're sending with their testimony in this rate case.
Terrific. Thanks, guys. Congrats.
Thank you.
Thank you. The next question will come from Michael Weinstein with Credit Suisse. Please go ahead with your question.
Hi, guys. Hey, just to follow up with Shar's line of questioning there. I understand 2020 seems pretty locked in with hedging at Indigo at $2.75. Going forward, beyond that, how far out are they hedged above $2 or in that $2.75 range that would support them supporting the contracts that they have with you?
Michael, I'd say several things. One is the producers are hedged beyond 2020 in a significant way that we're dealing with. In addition to that, our contracts are solid with them in terms of 85% of our contracts moving forward in the five-year time horizon are 85% fixed fee and demand charge. We also look at their credit, and we're monitoring their credit on a regular basis, which we've always done, and looking at their liquidity. We feel at this point, based on their current hedges, that they've got the ability to furnish on those contracts.
Great. On the P&I business, the three projects that are under construction on the RNG side, is that the origination that you need for this year to achieve the $15 million? Would there be additional origination?
We're in the process of originating an incremental $15 million this year, and we have some really good prospects. The $15 million you referred to was what we brought in the house last year. We've got three years in a row now where we've locked in $15 million years of net income growth. We've got a total of about $45 million new net income that's been already originated, and we're looking to originate an incremental $15 million this year with good prospects in and around the boat, if you will.
Great. The California plan or California's rules that support that program, are there any changes contemplated there at all, or?
That's been a really robust program. There's really high confidence through 2030 in that construct, and it's providing a really solid basis for the unlevered IRRs in the RNG space for us. We're feeling real good about California.
Terrific. Also, just remind me, when are they supposed to give you a final approval on the IRP?
In February. Early this month.
February 20th.
February 20th is the date we're targeting in.
Gotcha. Okay, great. Thank you very much.
Thank you.
Thank you for the question. The next question will come from Julien Dumoulin-Smith with Bank of America. Please go ahead.
Hey, good morning, team.
Morning.
Morning, Julien.
Excellent. I want to come back to some of the earlier utility commentary. You talked about nailing it this year. I suppose coming off of two years of strong weather, being at the upper end of the range on 2019, how do you think about trends even within the utilities for 2020? More specifically, as you think about being able to do some of the O&M work ahead of time given some of the weather trends we've already seen, just could you elaborate as to sort of the positioning beyond just quote, nailing it?
Julien, as I mentioned, we look at our financial condition, both opportunities and risks every week, and we've been doing that for about seven or eight years. I would say that in early last year, we were already working on building contingency for 2020. We entered 2020 with a significant amount of contingency that positions us to deliver on our results. That's how we deliver on our results each and every year. If we see any of that contingency being threatened, we immediately start to work on tactics to hold that contingency and deliver it for our shareholders at the end of the year.
When I say nail it, that's the reason I feel confident that we're going to nail it, is because of all the work that we do weekly at a very senior level, and we walk through every line item of opportunity and risk, and the goal of those discussions is to seize the opportunity and kill the risks. We've done that quite well in the past and confident that we're going to do that in the future.
If I just expand on what Jerry Norcia is saying, and you mentioned the weather. We are seeing warmer weather here first quarter, but we go into each year with three plans. One thing I've learned in my career here is that weather normal usually doesn't happen. We have a plan around lean if weather comes in a little bit lighter. We already are deploying those plans as well as we came into the year with really good contingency levels, as Jerry Norcia mentioned.
All right. Excellent. A little bit of a cleanup on the last couple questions, if you don't mind. The non-utility side, just long-term targets unchanged. I know you kept the consolidated numbers, you reaffirmed. Just want to make sure on the GSP segment that's indeed the case. Also to elaborate just quickly on the other question on the IRP, just the process, if you could elaborate a little bit more on the last question there as well.
Yeah, for the non-utility, our capital guidance hasn't changed from DTE. We have the whole portfolio is $19 billion, $15 billion of that's going into the utility, so $4 billion is going to the non-utilities. There was questions on the midstream segment, the $2 billion or $3 billion. Just a reminder, $1 billion of that is tied to the Indigo and the Haynesville acquisition milestone payment, as well as kind of building out that system there. We're still feeling really good with the prospects, the add-on to the existing platforms in midstream. As Jerry Norcia mentioned, we've been nailing our $15 million per year origination goal in P&I, and we're feeling good around continuing to deploy capital in that space as well. On the integrated resource plan.
Really in the final stages right now. It's really ripe with the ALJ decision. It's going to be ripe for an order. There's a commission meeting on February 20th. That's when we're expecting. We're expecting a constructive outcome actually from that. It's been a great process. Part of the 2016 legislation was to do this. All the stakeholders got their voice in that process. As Jerry Norcia mentioned, we don't really have capital tied to this program. It really goes through our renewable energy plan as well as the certificate of need that we had at our gas plant. We're looking forward to having a constructive order from our IRP.
Excellent. Thank you all. Best of luck.
Thanks.
Thank you for the question. The next question will come from Greg Gordon with Evercore ISI. Please go ahead.
My first one is it going to be a bounce-back year next year for the Red Wings, too?
We hope so. With Yzerman in town, we hope so.
Yeah, Yzerman, I'm feeling good.
They make the Rangers look like Stanley Cup champions, which is hard to do. I'm sorry to beat a dead horse on the GSP segment, but it really has been an intense focus for investors. First, that 275 number, that was across all your counterparties, not just Indigo, when you talked about where they're hedged? I just wanted to clear that up.
That's correct, Greg.
Okay. I think you've been pretty clear that the Indigo relationship has not just demand payments, but minimum volume commitments related to 90% of your expected financial outlook. I think the concern is also in the Marcellus, on the Link and Bluestone systems and on throughput on Nexus. You talk about having contractual protection, but do you also have volumetric protection as you look out past 2020 into 2021 and 2022? If you don't, and volumes were to fall short of your baseline forecast, given that, Jerry, that you're very proud of how you model for contingencies in your five-year plan, what might be the contingencies you could fall back on to still achieve the remarkable success you've had over the last 10, 15 years of being at the high end of your earnings guidance?
I'd say start with this, Greg. First of all, our fixed fees and demand charges across our whole portfolio for 2020 and beyond are at approximately 85% of our revenues in our plan. That would give you an indication of the quality of the contracts that we have for the medium term and long term on our assets. That gives us good comfort. We also, in many of our contracts, have credit provisions that help secure those payments as well. As I mentioned, we look at the quality of credit liquidity on a very regular basis. We feel real good long term where we stand with the quality resources that our pipelines are connected to. Of course, we are going through a readjustment between supply and demand.
The last time that happened in 2015 and 2016, it was about a nine-month process before it corrected itself, and I think we're in the middle of that now. We planned for that for this year conservatively. I think we described that in our past discussions. I feel real good about 2020. Long term, I feel that our pipes are well-positioned against the resources and the markets that they serve, with the quality of contracts that we have being 85% fixed fee and demand charges.
Yeah, I get that. If you're wrong, and I'm sure you probably do some contingency planning around what would happen if you were wrong on those assumptions, are there other areas in the business where you could pivot? Is the RNG business potentially larger than what you're currently budgeting? Where are the opportunities in the plan?
Well, the value-
if things stay really pear-shaped on the E&P side for longer?
Sure. That's a great question, Greg, and the value of our portfolio is that we've got really strong utilities that have very strong growth prospects, and I think we mentioned at EEI, we've got capital sitting on the sidelines that we're working on every day to get into the plan from an affordability perspective. Opportunity there for sure. Our P&I business is also ripe with many opportunities, and I still feel confident that we've got really strong opportunities inside our GSP business. We're working smaller, highly accretive transactions inside GSP each and every day. When you take our portfolio in total, and in addition to our conservative contingency planning each and every year, I feel real confident that we're going to deliver our five to seven going forward.
Thanks, Gerry.
Thanks, Greg.
Thank you. The next question will come from Chris Turner with JP Morgan. Please go ahead.
Good morning, guys.
Good morning.
I know it's a smaller part of your business, but could you give us some color on maybe the end of 2019 performance for the trading business, what you're thinking for your 2020 guidance, kind of what's underlying that? Just remind us of the maybe geographic profile and customer profile of that business.
Yeah. Our trading business had a really solid year. I know we had performance. We really measure that on economic income. Economic income and contribution was $40 million. That translated into $30 million of operating. We do typically target $30 million-$40 million of economic contribution every year. We're feeling really good with that. We do plan a bit conservatively in terms of operating guidance because a lot of this
The economic contribution will flow sometimes in the current year, sometimes in future years. We always come into the year in terms of our guidance being a little more conservative, so we do have a midpoint of guidance of $20 million for 2020.
Okay. No kind of color there on the current state of the market and how things have trended in recent years?
No, we make our money there across a portfolio of businesses. We have FTRs contracts that we do. The trading company supports our GSP business, in terms of marketing those as well. We also have a credit renewable business line within that as well. We have between power and gas renewables and supporting our midstream business. We have a lot of products. It kind of creates some stability of earnings year-on-year out there.
Yeah. We rely on the trading business really for steady cash flow. We generate between $30 and $50 million a year of cash from that business. The fact that it supports our pipeline business as well as our RNG business, we view it as strategic in that way, but we don't count on it for growth going forward.
Okay. Switching gears to the balance sheet, the $100 million-$300 million of equity this year, I think is all internal programs. Can you remind us of how you're thinking about pension contributions here, and then maybe, if you're disclosing this, a share count or FFO expectation for 2020?
Our disclosure has not changed since the EEI. We're really planning on issuing $100 million-$300 million of equity here in 2020. They'll be internal sources. A lot of that is through our pension contributions. We are planning on over the next probably three to four years to be fully funded there. Next year, $100 million-$400 million. That'll probably be a good portion of that through our pension contribution as well. We do target an 18% FFO. That really positions us well in terms of our current credit ratings with S&P, Moody's, and Fitch.
Okay. You think you can hit that FFO this year, or is that more of a target into next year?
It's a target, but we do hit. Even in 2019, we achieved 18% FFO. That's our target, and we have been able to achieve that year in and year out.
Great. Thank you guys very much.
Thank you. The next question will come from Jonathan Arnold with Vertical Research. Please go ahead.
Good morning, guys.
Morning, Jonathan.
Morning.
Quick question on the CapEx guidance for 2020, where you give the $1.2 billion-$1.4 billion for non-utility, which I think is a new disclosure. Could you break that down a little bit for us between pipelines? I believe a good chunk of it for the expansion projects and then the P&I.
Yeah. Close to $1 billion of that is GSP, and it is tied to the milestone payment. We have a $400 million milestone payment and $600 million of capital to build out the LEAP system as well as the gathering system down there. Good bulk of this is the midstream, then the remaining amount will be on the Power and Industrial, and really is tied to the origination of the $15 million per year goal that we have there.
A billion GSP is the right ballpark.
Right. There may be some incremental of one above that, maintenance type of capital, another potential origination. The bulk of that's going to be the new acquisition, the $1 billion.
Perfect. Thanks very much, Peter.
Thanks.
Thank you. The next question will come from David Fishman with Goldman Sachs. Please go ahead.
Good morning. Thank you for taking my call.
Morning, David.
Morning, David.
Sorry to repeat a little bit here, but I just wanted to get a little more context. I believe you said a nine-month correction process in the natural gas sector. I just wanted to know kind of broadly, what does that look like for the Haynesville or the Northeast in 2020 kind of versus your multi-year production growth expectation?
Well, the reference I made to the nine-month process is what we saw happen in 2015 and 2016. I mean, every cycle will be different, of course. It's hard to predict what it'll look like, but the correction has started to happen where we've seen producers start to slow activity, and we think that's the beginning of a correction to better balance supply and demand. Demand continues to grow, as I mentioned. As it relates specifically to our portfolio, 85% of our growth is contracted going forward. With good contracts, good resources, strong resources that will dispatch at the front end of that dispatch stack to bring incremental supply to the market going forward. We're also connected to really good markets. That's what gives us confidence in the GSP growth for the long term.
Okay. Thinking a little bit more longer term and maybe to Haynesville, but I guess broadly speaking, when you mentioned being kind of the front end of the dispatch stack there, so if Indigo or another producer was unhedged and you were to have a situation where maybe the Haynesville was flat or even slightly down, would it put a substantial amount of financial distress or would it be something that they could do economically to continue to grow in line with the NBCs, even in a situation where the broader basin isn't growing?
Well, when we looked at their drilling plans for the long term, I think what we saw was that they had very economic resources at the $2 price range for over a decade. We modeled that as well as the three independent reserve consultants that looked at that with us because we got on the inside of what Indigo is able to do. Very high-quality resource that's dispatchable obviously in a significant way at $2 and above with strong contracts. They also have now a very strong balance sheet. They've met all their commitments to deleverage their balance sheet, and there's a significant milestone payment tied to further deleverage where they'll have one of the best balance sheets in the industry, if you will, going forward. We feel good about the contracts, feel good about the resource, and feel great about the markets that they're connecting to.
One of the advantages they have from a market perspective is their proximity to one of the largest, fastest-growing markets, which is the industrial and chemical complex in the Southeast and the Gulf region, as well as the LNG export markets. The proximity and cost to get to those markets matters, and they're in really good position with us to do that.
Okay. That makes sense. Thank you. Still at GP&P, but just kind of a broader question. I think in the past, in 2019, you'd mentioned potential opportunities with laterals with natural gas power plants in the Northeast, Ohio area. I think you've done Pennsylvania in the past. I was just wondering, since a number of things have actually kind of changed with Ohio subsidies, the expanded MOPR, there's been PJM auction delays, and now much cheaper natural gas in the region. I was just wondering how some of the conversations with some of these power plant developers may have evolved over the past six months.
The conversations continue in earnest. Because natural gas is readily available and really economically priced, there is incentive in the Midwest to convert to natural gas from coal. We're still seeing continued conversion opportunities in and around all our assets. That's positive. We're working on several expansions on our Link assets. We're looking at connecting the Generation Pipeline through Nexus. That's progressing. We're also looking at unique optimization opportunities with our Vector asset and our Bluestone asset. Lots of activities, all small, but nicely accretive. Exactly where we'd like it.
Okay, that makes sense. Then, sorry, just one more on the regulated side. I was just wondering if you could kind of frame the near-term versus medium-term growth rate, especially when looking at kind of the recent gas rate case filing, where the rate base figure over two years was double digits, kind of in the context of your recently raised from 8%- 9% net income growth at that segment, how that kind of looks near term versus the medium term, five years.
Over the next five years, we're highly confident in the growth rates that we've projected for both our gas utility and electric utility. The gas utility is in and around 9% income growth, and we've got 7%-8% at our electric company. There's lots of good capital that will drive improved reliability and efficiencies and safety for our customers, all pointed at that.
In near term, David, I think maybe you're seeing an Electric segment, a little bit higher growth. We have a renewable investment, significant renewable investment year-over-year. 2020 is close to $550 million more. A lot of those are some new projects that we have coming in and have been pre-approved, part of our Renewable Energy Plan. We are seeing kind of near-term higher growth rate, but we are confident long-term to 7%-8% at the Electric Company and the 9% for our Gas Utility.
Okay, great. Thanks. Have a good day.
Thank you for the question. The next question will come from Gregg Orrill with UBS. Please go ahead.
Yes, thank you. Good morning.
Morning.
Morning.
was wondering if you could touch a bit more on the development backlog for the RNG business beyond 2020 and how you think about committing capital around that.
Sure. We've provided a forecast over to five years in terms of growth for the RNG space and the cogen space. We're seeing a lot of activity on both fronts. We are looking to originate $15 million in new net income each and every year going forward. Feel that the last three years we delivered on that, and we've got a nice portfolio of opportunities that gives us confidence to deliver on that for this year. Every time we deliver $15 million in new net income, that travels across the next five years, and each year we keep continuing to bring that forward. Good prospects both in RNG and cogen with the low gas price environment and electricity rates continuing to march up slightly across the Midwest and other parts of the U.S. The cogen business is very active as well.
Thank you.
Thank you. That is all the time we have for questions. I'll now turn the call over to Jerry Norcia for closing remarks.
Well, I'll wrap up by thanking everyone for joining the call. As we already mentioned multiple times, we had a great year in 2019. I feel really good about the position we're in to continue our solid track record of delivering premium results for our shareholders. We've got one of the highest historical growth rates in the industry at 7.5%, and we'll deliver a growth rate of 7.5% this year, 2019 over 2020, and have great confidence that this will continue into the future, and deliver at the 5%-7% EPS growth in the future as well. Thank you very much. Look forward to providing you updates as we move through the year, and look forward to talking to you or seeing you soon.
Thank you, ladies and gentlemen. This concludes today's event. You may now disconnect your lines.