Good day, and welcome to the DTE Energy Q3 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Barbara Tuckfield. Please go ahead, madam.
Thank you, and good morning, everyone. Before we get started, I would like to remind everyone to read the Safe Harbor statement on Page 2 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.
And now, I'll turn it over to Jerry to start the call this morning.
Thanks, Barb, and good morning, everyone, and thanks for joining us today. This morning, I'm going to give you a recap of our performance for the Q3 of 2019, a business unit update and provide the overview for the 2020 early outlook and early thoughts on our long term growth. At EEI, we'll provide a deeper review of our long term growth plans and strategies. And then finally, I'll turn it over to Peter, who will provide a financial review of the quarter, updates to cash, capital and equity, and the details on our 2019 guidance and 2020 early outlook. Then I'll wrap things up before we take your questions.
So let's start on Slide 4. We continue to make great progress on a number of key fronts. Our Q3 financial results are solidly on track with our plan. Given the strength we have experienced in the 1st 3 quarters of the year, I am announcing an increase to our 2019 operating EPS guidance. We are increasing our 2019 guidance midpoint $0.03 to $6.23 This represents EPS growth from original guidance in 2018 to 2019 of 8%, which is quite impressive at this point.
This increase is due to the strong performance at all of our business segments and the fact that we will have continued to build contingency that will carry us through the Q4. Peter will provide more details on that front in a few minutes. Today, we're also providing the 2020 early outlook for operating EPS guidance with a range of $6.47 to $6.75 I'm pleased to say that this is a 7.5% increase over our 2019 original guidance and includes the impact of the recent midstream acquisition we announced earlier this month. Longer term through 2024, we are using the higher 2020 early outlook as a new base for our 5% to 7% operating EPS growth rate. I'm also pleased to announce a 7% dividend increase that was just approved by our Board.
The new annualized dividend per share is $4.05 up from $3.78 This continues DTE Energy's consistent dividend history having issued a cash dividend for more than 100 years. This increase reflects the company's strong performance and ability to consistently achieve our goals. The Board's approval at increase signals confidence in the Company's performance and long term strategic plan. Turning over to the business update, all of our businesses have accomplishments to note this quarter. AT Electric recently announced our goal to achieve net zero carbon emissions by 2,050.
This bold new goal sets the framework to go beyond our existing commitment to reduce carbon emissions 50% by 2,03080% by 2,040. DTE Electric's medium and long term plans align with the scientific consensus around the importance of achieving carbon emission reductions. We are fully committed to dramatically reduce carbon emissions. This is the right thing to do for our customers, our business and the environment. We are doing as much as we can as fast as we can to provide our customers and the State of Michigan with clean energy that is affordable and reliable.
Additionally, DTE Electric is progressing on its voluntary renewable energy program. Over 400 megawatts have been committed by commercial customers including Ford, General Motors, University of Michigan and most recently the Detroit Zoo. Additionally, nearly 10,000 residential customers have committed to a portion of their monthly bills to renewable power. Along with our carbon reduction plan, our natural gas plant, Blue Water Energy Center is also progressing on plan. We broke ground last year and received all the necessary permits.
The plant is a little over 30% complete with the turbines already on-site and an expected in service date of the spring of 2022. Moving on to our gas company, we are continuing to progress with our accelerated main renewal program. We have already renewed a significant number of miles this year and we will complete 180 miles by year end. We are also continuing to develop plans to invest in additional system improvements, including a transmission renewal program that supports the growth, integrity and reliability of our system. This new program along with our main renewal program showcases DT Gas' commitment to provide safe and reliable service to our customers.
These projects will be described in more detail in our rate case filings later this fall. Now I'll turn over to our non utilities. On our gas storage and pipeline business, we recently announced the acquisition of midstream assets in the Haynesville Basin. These assets include an existing gathering system and 150 mile gather pipeline that is currently under construction. This set of assets complements our GSP portfolio and provides a new platform for value creation, which will enable strong growth opportunities for years to come.
It has a strong strategic and financial rationale delivering compelling value to our shareholders. It is underpinned by high quality resource as well positioned on a North American gas supply stack. We believe that natural gas will play an increasingly important role in meeting energy demand as we all seek to mitigate climate change in the coming years. The economics are sound and the transaction is EPS accretive, accelerating achievement of our 5 year growth plan while maintaining a strong balance sheet and credit profile. And this transaction is one of the drivers of the 7.5% increase in our 2020 outlook.
As we mentioned on the call, we are committed to maintaining a 70% to 75% utility mix. At EEI, we will provide you details on how this fits into our 5 year plan. Now let me turn over to Power and Industrial. We also had some major milestones this quarter. In September, our P and I business announced the opening of its first combined dairy RNG processing and interstate injection facility.
The site processes raw biogas from nearby partner farms into renewable natural gas. Pipeline quality is then injected directly into an interstate pipeline. Converting raw biogas to RNG is a win win both for dairy farms and the environment. Capturing this gas reduces the overall greenhouse gas footprint, provides the farms with another revenue stream and help creates a clean, sustainable vehicle fuel that displaces fossil based gasoline or diesel fuel. We've made great progress in the energy space over the past few years, which will enable P and I to achieve its long term goals.
So I feel really good about the progress we're making in all of our business lines. Now moving on to Slide 5, I will discuss our 2020 early outlook and long term plan. Today, we are providing the 2020 early outlook for operating EPS guidance with a range of $6.47 to 6.75 This is a 7.5% increase over our 2019 original guidance and includes the as I mentioned the impact of the recent midstream acquisition we announced earlier this month. Longer term, we are increasing our base and growing from the higher 2020 early outlook through 2024. This will be the new base for our 5% to 7% operating EPS growth rate.
We believe growing off the new base provides shareholders with incremental near and long term value. We'll provide additional details by segment when we see you at EEI. With that, I'm going to turn it over to Peter to share our financial results and give you more details on our 2020 early outlook.
Thanks, Jerry, and good morning, everyone. Before I get into the financials, I always like to give an update on my Detroit Tigers. My Tigers did come into last in the last place this year. But the good news with that last place finish is they get a 1st draft pick next year. And I'm hoping they find another Justin Verlander.
So overall, I'm looking to the future and feeling pretty good about it. Unlike my Tiger, the financials are consistently strong here for DTE. Let me turn your attention to the financial results and I will start the review on Slide 6. Total earnings for the Q3 were 351,000,000 dollars This translates into $1.91 per share for the quarter. And 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 $307,000,000 for the quarter. This was $3,000,000 higher than 2018, largely due to the impact of new rates implemented in May, offset by rate base growth costs and cooler weather in 2019. As a reminder, the Q3 of 2018 was one of the hottest quarters on record in our region. CT Gas operating earnings were $10,000,000 lower than last year.
The earnings change is driven primarily by rate based growth and higher O and M expenses. This is partially offset by rate implementation. But keep in mind, only a small portion of this new rate was attributed to the 3rd quarter as a result of typically low volumes in the Q3. Let's move down the page to our Gas Storage and Pipeline business on the 3rd row. Operating earnings for our GSP segment were $60,000,000 for the quarter.
Last year, GSP experienced higher earnings related to AFUDC at NEXUS and higher than planned volumes across the portfolio. This year we have normalized earnings at Nexus and volumes are on plan. As a result, this quarter is $4,000,000 lower versus the Q3 of 2018. GSP is performing according to plan through the Q3 and we will continue to see the benefit in the remainder of the year from the volumes on length that continue to ramp up and the impact of the recent expansions and acquisitions. On the next row, you can see our Power and Industrial Business segment operating earnings were $49,000,000 Earnings are $14,000,000 lower than the Q3 of 2018 and this decrease is due mainly to the REF tax equity transactions that occurred in the Q4 of last year.
As we communicated previously, we entered into equity partnerships in our RAF units and accelerated cash flows of around $100,000,000 per year for 3 years to support our growth projects. This lowers earnings this year around $40,000,000 versus 2018. Our Energy Trading business had a strong quarter with operating earnings of $18,000,000 Earnings are higher this quarter compared to the Q3 last year due to the higher power portfolio earnings. Our trading company is having another solid year. Year to date economic earnings are on plan and in line with guidance.
The appendix contains our standard energy trading reconciliation showing both economic and accounting performance. And finally, corporate and other was unfavorable 15,000,000 dollars this year compared to the Q3 last year and this was due primarily to the timing of taxes. So overall, DTE earned $1.91 per share in the Q3 of 2019. Let's move on to Slide 7. Jerry mentioned we are increasing our 2019 earnings guidance.
As you remember, we increased guidance at both DTE Electric and DTE Gas on our second quarter call. So this is the 2nd increase we provided this year. We're experiencing favorability in all the segments with particular strength in the electric segment, Power and Industrial and Energy Trading. DTE Electric is benefiting from warmer than normal weather. P and I is favorable due to the optimization of REF units and energy trading earnings came in strong in the Q3.
We feel really good about how strong 2019 is coming in, so we are confident in achieving the increased guidance range. Now I'll transition to 2020 to discuss our early outlook. On the right side of that slide, we are providing 2020 EPS early outlook midpoint of $6.61 per share. The midpoint of this early outlook provides 7.5 percent EPS growth from the 2019 original guidance. On the next two slides, I'll be going over the early outlook for our 4 largest business units.
But before I move on to those slides to discuss the year over year drivers, I'll mention that Energy Trading's 2020 operating earnings range of $15,000,000 to $25,000,000 which is the economic contribution range we typically target for this business. Also, our corporate and other segment grows in 2020 with the interest on the equity converts and this returns to a lower steady state when they are converted to equity. So now let me move on to Slide 9. And I'll start on the left hand side of the page. Our 2020 early outlook Bitcoin for DTE Electric segment is $766,000,000 This provides earnings growth of 8.7% over 2019 original guidance.
The early outlook includes distribution and generation investment growth. Longer term, the electric segment will continue to grow by 7% to 8%. Moving to the right hand side of the page, at our DTE Gas segment, the 2020 early outlook midpoint is $189,000,000 The 2019 original guidance midpoint was $175,000,000 The early outlook provides earnings growth of 8% over the 2019 original guidance. So this year over year increase is in line with our long term growth target for DTE Gas and is driven by the continuation of our accelerated main renewal program. Longer term, we expect the gas segment to grow at the higher end of our 8% to 9% growth rate.
Now I'll move on to Slide 10 to review our early outlook for our non utilities. Again, starting on the left hand side of the page of our gas storage and pipeline business, our original guidance for 2019 for this segment was $213,000,000 and increases to $285,000,000 in 2020. This represents an increase of 34%. That increase is mainly due to the acquisition of the midstream asset and the prolific Haynesville Basin. And previously, we said the annual increase to our GSP segment earnings would be approximately 12%.
So we've essentially accelerated growth into 2020. As GSP had an active year in 2019, acquiring Generation Pipeline, an additional 30% stake in the Link SGG and of course the Blue Union and LEAP assets. All these will contribute to what we expect to be another strong year at GSP in 2020. We have been planning carefully in 2020 given the market conditions we're seeing and these new platforms will allow us to build growth objectives and rebase the whole company at a higher growth rate. Now moving to the right side of the page, our P and I segment is $14,000,000 higher in 2020 versus 2019.
This segment continues to drive earnings and value for the company. This earnings increase is from the work we've been doing over the last few years as we originate new projects and income to replace REF when it fully sunsets. We have secured additional REF units that will generate strong cash flows for the next 2 years, reducing equity needs. As we look out to when REF sunsets at the end of 2021, we remain confident that the backfill REF will occur between these 2 non utility segments and the total portfolio. And we'll be well within our target of 70% to 75% utility mix.
As you can see, these 2 non utilities are bringing a good lift of earnings here in 2020. We will be providing a detailed update at EEI in a few weeks. Now on to Slide 11 to cover the balance sheet. We expect to issue a total of $500,000,000 in equity here in 2019, including $300,000,000 of acquisition equity financing and $200,000,000 that has already been issued through internal mechanisms. For the 3 years 2020 to 2022, we'll be issuing $1,500,000,000 to $2,000,000,000 of equity, including convertible equity units related to the acquisition.
And in 2020, we'll be issuing $300,000,000 of equity using internal mechanism. For 2019, we are increasing our cash and capital guidance for the year due to the investment in our new midstream assets and you can find the updated cash and capital guidance in the appendix. We have a strong credit rating at all three agencies, which is very important to us. S and P is a strong BBB with an excellent business risk profile and Moody's and Fitch are 1 notch above S and P. We have reviewed our recent midstream transaction with all agencies and expect to maintain a strong credit rating.
S and P has indicated that we will hold a strong BBB and also our excellent business risk profile, so a great outcome there. Rich and Moody's did take some action on their current rating. Moody's has revised the rating to a Baa2, which falls in line with S and P. We will have plenty of balance sheet cushion with the ratings of both agencies. Our goal is to continue to maintain a strong investment grade credit rating.
That wraps up my section on 2019 earnings guidance and the 2020 early outlook. Now I'm going to turn it back over to Jerry to wrap things up.
Thanks, Peter. I'll wrap up on Slide 12 and then open up the line for questions. 2019 is shaping up to be a strong year as evidenced by our guidance increase. So we expect and continue our pattern of exceeding original guidance for over a decade. You can tell from our 2020 early outlook that we are planning for another strong year next year.
The 2020 operating EPS midpoint of $6.61 provides 7.5% growth from our 2019 original guidance. The site growth rate is driven by strong performance at all of our business units with healthy growth at our 2 utilities, continued business development at P and I and the near term EPS accretion from our recent GSP Midstream acquisition. 2020 GSPS growth is more than double what we had anticipated. Going forward, we will continue to target a 5% to 7% EPS growth with 2020 outlook as the base of that growth. Our 7% dividend increase for 2020 demonstrates our confidence in the company's performance and long term strategic plan.
Our utilities continue to focus on necessary infrastructure investments, specifically for investments to improve reliability and the customer experience. Our non utilities continue to position us for long term growth. Finally, I feel great about our ability to continue to deliver the premium total shareholder returns we have delivered over the past decade. And with that, I'd like to thank everyone for joining us this morning. And Sergey, you can open up the line for questions.
Thank you, sir. Our first question comes from the line of Praful Mehta of Citi. Please go ahead.
Thanks so much. Hi guys.
Good morning. Good morning.
Good morning. So maybe just first starting with the equity that you pointed out on Slide 11, the $1,500,000,000 to to $2,000,000,000 $20,000,000 to $22,000,000 I'm assuming in 2022, you're including the approximately what $825,000,000 of mandatory converts?
They do include the mandatory converts. It will be approximately $1,000,000,000 related to the acquisition, but the $1,500,000,000 to $2,000,000,000 does include those converts.
Okay, got you. That's helpful. And the 2020 guidance that you provide, all that includes is an additional $300,000,000 of equity in 2020. So just wanted to understand the share count that you're using for that 2020 guide.
Yes. We have $300,000,000 that we will be issuing next year in 2020. And here in 2019, we'll be issuing the $500,000,000 that we previously disclosed.
Got you. And just finally, just want to stay on the credit theme, I guess. You mentioned that a couple of the agencies clearly expressed some concern. Do you see any scenario where there is additional need to issue equity in a particular business? I guess how the business kind of moves forward from here?
Do you expect any need to issue additional equity to kind of satisfy the rating agency concerns?
No, I do not. The S and P rating in particular are strong BBB and excellent business risk profile. We were really targeting that. So we were very happy with that outcome. It gives us as we have a lot of cushion even within that current rating and profile.
And Moody's did fall in line with S and P. A part of the issue with Moody's is they do not recognize the converts as equity. So that was one of the reasons behind the action they took. But with their new rating, we have a lot of cushion as well. So we're feeling really good where we're at with the rating agencies at this point.
All right. Great. Thanks so much, guys.
Our next question comes from Julien Dumoulin Smith of Bank of America Merrill Lynch. Please go ahead.
[SPEAKER JULIEN DUMOULIN SMITH:]
Hey, good morning team. Hey, Julien. Good morning.
Howdy. Perhaps if I can come back to just the transaction last week, help clarify just a quick follow-up here. I mean, as you think about that $0.45 and the organic growth of that business, just again to come back to off of the run rate 21, 22, 10 times multiple. How do you think about that? That's a how do you think about the growth to the 5 year outlook first off just to reconcile that?
And I got a follow-up.
Well, I think Julian the first thing is that the transaction supports the 7.5% growth 2019 over 2020. And as we mentioned, we reestablished 2020 as the base for the 5% to 7% growth going forward long term. So we view this transaction not only as providing a lift 2019 over 2020, but certainly provided an uplift long term as well in the plan and filled all the growth needs that we have at GSP.
I think just to add on as well as this segment in particular, we're feeling really good with the growth rate going forward. We will be talking more in detail at EEI about this. I can tell you though that we have a previous disclosure out there of 2023, we're going to be more than achieving that.
Got it. Okay. But just from a planning perspective, as you think about the other investments that have been talked about before, the NEXUS laterals, link expansion capital, perhaps generator and connections, what are you thinking about? And I know we're getting ahead of the GSP disclosures perhaps coming up here in a couple of weeks, but I just want to clarify what else are you thinking about out there on GSP?
Well, Julian, again, I'll repeat that it certainly supports the 7.5% growth 2019 over 2020. And if you lock in that growth and then grow 5% to 7% from there, this transaction as well as the other investments in GSP and let's not forget that the bulk of our investment is going into our 2 utilities. Those high growth rates from our utilities, high growth rate from GSP as well as the strong growth off the P and I base will support that 5% to 7% growth over the new 2020 base. Yes. And then And we'll provide a lot more detail by business segment at EEI.
Yes, we will. And in this segment in particular, we have some great growth platforms now. So we're not looking for any big new acquisitions. So we have a lot of opportunities. You mentioned a few just in your question there.
So between Link and DEXIS and now this new Blue Union and LEAP asset, we're going to have a lot of organic growth opportunities, but we'll give more updates here at EEI.
Got it. And if I can clarify quickly the early 2020 outlook, I mean, it looks like it implies even ex the latest transaction a pretty healthy degree of growth off the 2019 base for GSP. Can you talk about what's driving that? I mean, as you say, it seems like a 12% type growth number.
Well, two things. The transaction, as we mentioned, is providing significant accretion next year. So it is filling a portion of the growth objective of GSP. But I can tell you we're also planning very carefully for the balance of the platform at GSP in light of market conditions.
Thanks, specific though. Net for next year?
Net for next year. Net for next year, correct. So we're working very closely with all the producers. So our plans reflect that, we'll be in very careful. Got it.
All right. Well, I look forward to seeing you guys and hearing more in a couple of weeks. Cheers.
We will now take our next question from Michael Sullivan of Wolfe Research. Please go ahead.
Hey, good morning.
Good morning. Good morning.
Yes. So first, I just wanted to follow-up on that last question. So is there any more detail that you can give us as to how the base midstream business is growing sort of ex the transaction you just did and then I think also the upping the stake in Link and Generation Pipe, just kind of what the base business is doing and how that stacks up to what you were previously anticipating?
Well, what
we can say is that, if you look at all those investments and that drives a 30% 34% growth year over year in the GSV segment and overall allowed us to lift our corporate growth to 7.5% year over year and sets us up really nicely long term to meet our 5% to 7% growth corporately along with our growth at our utilities. So we typically don't describe each platform. But what I can tell you and repeat is that the balance of our platforms, we are planning for it very carefully next year in light of the market conditions. So the 34% reflects that and supports our 7.5% growth year over year.
Okay. Thanks. And then switching over to P and I, can you just give any color around the recently acquired ref units that you mentioned? How much of a contribution that was towards 2020 and when those will roll off?
Yes, we did acquire some new units here in the late summer and we did redeploy those at existing sites where with some units we're sun setting. So REF is flat. The way to think about it is REF is flat year over year. So the growth we're seeing is really around the origination that we've been doing over the last few years. These additional units in REF will contribute about $30,000,000 over the next couple of years which is a really nice chunk of cash and it really helps reduce equity needs over the next 3 years.
Okay. And when do those roll off, the new ones that you just acquired?
Yes. The new ones as well as all the existing at the end of 2021. They all sunset at that point in time.
Great. Okay.
Thank you very much.
Our next question comes from Andrew Weisel of Scotia Howard Well. Please go ahead.
Hey, good morning everybody.
Good morning. Good morning, Andrew.
Just one quick one, obviously a nice dividend increase today. My question is going forward, is there any chance that the dividend policy given the mix shift with about 35% of next year's earnings coming from the non utilities and all the credit updates that you talked about earlier. How do we think about the dividend policy going forward?
Well, typically we have said and continue to maintain that we'll grow dividends in line with our earnings growth, but we'll be able to provide a little more color and detail on that at EEI as to how will it look going forward. But certainly it will be in line with
our earnings growth. Yes, we have really changed that philosophy, Andrew.
Okay, great. That's all I had. Thank you.
Our next question comes from Shahriar Pourreza of Guggenheim Partners. Please go ahead.
Hey, guys.
Hey, good morning, Shahriar. Good morning.
I apologize, I jumped on a second late. The comment that you made just around planning in light of market conditions, so like the 33.8 percent includes that. Is that can you just elaborate what you mean by that? And is that tied to a specific asset in the producer? So I'm kind of curious if you can just touch a little bit on what you mean by that?
J. Rice:]
Well, we're looking at all our platform share and certainly we're operating in a low price environment. So as we continue our conversations and discussions with our partners, we are forecasting earnings growth of 34% in this business line in light of these market conditions. If the market conditions improve, things could change, but certainly we're planning carefully for this business segment at this point in time. In addition to the balance of our portfolio, which we feel very comfortable will help us deliver to 7.5% growth year over year.
So this isn't really tied to credit quality or financial conditions of the actual producers, but more of a pricing environment, which
More pricing and production.
Yes, that's correct.
And
then just as you guys look at the contracts, what remains with NEXUS, there's a portion of it obviously that's still under short term contracts. Is that are these market conditions, do they continue to dictate that you'll remain within that kind of a tenor of these contracts? Or is there an opportunity to actually contract longer term?
Sure. We have started to see interest in terming out longer than we've seen in the past. So we find that as an encouraging signal from the market that there is desire to contract somewhat slightly longer term. And so we continue to move our contract portfolio on NEXUS in that direction. So we are seeing some positive signals there.
Got it,
got it.
And let me just ask you one last one. Is the signals that you're seeing as far as longer term contracts, is that predicated on the delay of 2 existing pipe projects?
Certainly, we think that could be having an impact. And of course, production continues to grow in the Appalachia at this point in time. So we believe that it's a combination of those factors that's creating more interest.
Perfect. Thanks guys. Congrats.
Thank you. Our next question comes from the line of Angie Storozynski of Macquarie. Please go ahead.
Good morning. So most of my questions have been asked and answered, but I have a question about your renewable natural gas type of plants and investments. I mean, we've seen this sharp decline in the RIN prices. And I'm just wondering if you guys have a view where those prices will go and how it's being depicted in your 2020 guidance?
So thank you for that question. The bulk of our returns from RNG asset investments are in the dairy sector and most of the value from that comes from the low carbon fuel standard that exists in California that displays essentially diesel and gasoline in the CNG markets. We have seen a decline in the Noren pricings, but we have seen it also start to recover recently. But it forms a small portion of our forecast for these assets and these investments, which with the LCFS, they still remain very attractive assets and very attractive returns. Our outlook, you asked how do we feel about how it's looking.
Feel that the EPA will issue a volume obligation that will be more in line with the supply that's available. And I believe that's why we're starting to see somewhat of whatever recovery in the pricing for the RINs.
Great. Thank you.
Our next question comes from Sofia Karp of KeyBanc. Please go ahead.
Come back real quick to the Midstream segment and the $0.15 accretion that you talked about on the call earlier when you announced the deal. Is this fair to think about the 2020 as $0.15 for the growth comes from that and the rest from other organic opportunities at this time?
Yes, that's actually a good way of thinking about it. Yes, the 15% part of that 7.5% includes that 15%, for sure.
$0.15 you mean?
Yes, dollars 0.15 yes.
Okay. And then I wanted to dig a little more into the utility earnings. So being roughly flat year over year in the DTE Electric, right? And I understand there's been weather volatility last year and this year, but sort of the way you describe it, if we strip the way the weather impacts completely, would that have grown in line with your kind of long term rate that you're projecting? And is there something within the rate implementation growth cost that is unusual this year?
Yes, that's correct. We had last year was one of the hottest we've had here on record here in Michigan in the region. So you take that away and normalize weather this year. We had positive weather this year of 27,000,000 dollars but last year was much higher than that. It was over $60,000,000 That when you take that away, kind of look at the rate base growth, it is being in line with the 7% to 8% that we expect from the segment.
All right. Thank you.
Our next question comes from David Fishman of Goldman Sachs. Please go ahead.
Hey, good morning.
Good morning.
Just going back to the Haynesville acquisition and thinking about the $600,000,000 of growth CapEx, I was just wondering and I apologize if you said this on the call a couple of weeks ago, but when you think about the $600,000,000 I know part of it's related to the lead growth, but is there something that effectively guarantees that growth happening? Or is that just based on your expectation for expansions based on Blue Union and where you think demand will
be? Ashley, all of the growth is fully contracted with Indigo. And so the 600,000,000 dollars plus the other $400,000,000 that we talked about, approximately about $1,000,000,000 is fully contracted growth over the next 18 to 24 months.
Okay. So that's something you already have the contracts in place for and that will be achieved?
Yes, that's correct.
Okay. And then, going back to the equity guidance. So I think you discussed this a little bit, but it's $1,500,000,000 to $2,000,000,000 and then $1,000,000,000 of that is the convert. Internally. Is that are you able to do that kind of level every year of $200,000,000 to $300,000,000 of equity internally to getting you to around the midpoint or higher end if needed?
Yes, David. For the next few years, we should be able to do $100,000,000 There's a lot of that is going into the funding of our pension, which we're a few years away from doing that.
Okay. And then my last question, I think you're alluding a little bit to NEXUS, maybe there's some other parties who are looking to potentially kind of term out those contracts, which is good. But also just thinking about the generation pipeline and connecting there, could you remind us what those contracts kind of look like? If they're are they 5 years? Or are they in the double digits?
And then also if you were to contract with them, would it likely be the offtaker side or would it be a producer looking to contract on NEXUS?
Well, the generation pipeline, just to remind everyone, is very proximal to the NEXUS pipeline and stands on its own with its own long term contracts and gives us a nice return and nice accretion. The plan is to connect that asset with several miles of pipe to NEXUS and it will provide approximately $400,000,000 to $500,000,000 a day outlet for that pipeline. But again, just to repeat, we do have long term contracts. They are about 13 years in length. So very nicely contracted piece of pipe with demand charges.
Okay, great. Thank you. Appreciate it and congrats again.
Our next question comes from Paul Fremont of Mizuho. Please go ahead.
Hey, good morning guys. It's Anthony Corrado.
Hey, Anthony. Good morning, Anthony.
Hi. You may have addressed this on the actual call maybe 2 weeks ago, but one is just what makes you confident on the competitiveness of the Haynesville? And then second, just if you could help me understand the difference between minimum volume commitment charges and also a demand charge?
So let's start with the competitiveness of the Haynesville. We had the opportunity through this transaction to review all 1700 of their proposed drilling locations and we did that ourselves along with 2 reserve consultants. And we can tell you after that analysis, we felt that the resource is extremely strong whereby there are at least 10 years of drilling available at sub-two dollars prices. So that's 1. Number 2, the pipeline that's being constructed creates great interconnectivity with the Gulf Coast markets, including the industrial power and the emerging LNG markets.
And the proximity to those markets provides a very large basis advantage that other resource basins don't enjoy. So we felt that the quality of the resource, the interconnectivity of the resource with growing markets and 3, the positioning of the resource, which provides it with basis advantage, create a really nice package of high returns and strong cash flows. In terms of MVCs and demand charges, they're essentially the same thing. MVCs are monthly demand charges, just that in the gathering business they call it a minimum volume commitment and in our pipeline businesses, including the pipeline that we're building for this asset, they call it a demand charge, but they are essentially equivalent in nature.
Great. Thanks.
Thanks for taking my question.
Thank you.
Our next question comes from Greg O'Riel of UBS. Please go ahead.
Yes, thank you. I apologize if you've said this already, but how much are you issuing in new converts related to the acquisition
and when?
Yes, we'll be issuing approximately $1,000,000,000 and we're going to finalize the exact dollar amount here shortly, but it'll be about $1,000,000,000
And when would that be?
It will be here in the Q4. We want to close this transaction, early December. So we're going to be looking at the market and market conditions, but it will be between now and then. Thank you, Peter.
Our next question comes from Charles Fishman of Morningstar Research. Please go ahead.
Good morning. I only had one left. On the P and I segment, I didn't hear you talk or give any update on any industrial projects. I think what the last one you had was the Ford complex or is that something you want to wait to EEI for or anything you can talk about now?
We essentially have secured 3 cogens this year. 1, we were 2, we were public about Stelco in Ontario with their Lake Erie Works facility. We signed a long term arrangement with them to develop a cogen facility. And then we also have a commercial customer that we haven't yet disclosed that we signed a purchase agreement with to purchase a cogen facility. And lastly, we signed an operating agreement with Wayne County for their correctional facility to operate their industrial services assets.
In addition to that, we also closed 2 RNG projects in Wisconsin this year. So 3 cogens and 2 RNG projects, which gives us the approximately the $15,000,000 origination target that we are pursuing this year.
So the, I guess, gas price, somewhat bearish outlook that people have, that is a little bit of a tailwind for these cogen projects, correct?
Yes. There's really two factors. One is the fact that gas prices continue to be at low levels and secondly, electric rates continue to rise. So the spread between gas and electric to produce power continues to widen and that creates an attractive opportunity for customers that have 1, a large electric need and 2, are usually typically a steam host as well.
So it's when a customer has that thermal need is where you see the opportunities?
Yes. There's a high thermal need and a large electricity need. Those two factors make cogens very attractive.
Okay, got it. Thank you.
Thank you. And now I would like to turn the call back over to Jerry Norcia for any additional or closing remarks.
Well, I'll wrap up by thanking everyone for joining the call. 2019, again, is shaping up to be another very successful year. We look forward to seeing many of you at EEI in a few weeks where we will describe in more detail our growth strategies and our 5 year outlook for each business line. We'll also describe our financing and dividend strategies in more detail. DTE's story will continue to be a strong one into the future that will deliver premium shareholder returns.
So thanks again for joining us and have a great day.
Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.