Good morning, everyone. It is my pleasure to welcome our next presenter, Williams Companies. From Williams, we have Alan Armstrong, CEO.
Thank you, Theresa, and good morning, everyone. It's a great time to be here in New York City, even with finally some of the heat we've been having in Oklahoma being shared with New York finally. I've got a lot of comments to make this morning that's going to start off with what we've accomplished financially from a track record standpoint, then get in a little bit of the fundamentals that are driving our business, and then looking at the kind of growth opportunities that we have that are off the backs of those fundamentals. So, let me start with... First of all, you know, our growth has been pretty extraordinary here. This is looking back the last five years. You can see a lot of different metrics that we have on here.
The 17.5% return on invested capital that we produced, and by the way, that absorbs... that's not just looking at project to project to project, that's looking at our entire portfolio. So that's projects, and also offsets the decline of the business. So very healthy ROIC. And it's something we pay a lot of attention to as a management team, partially because we're compensated on our ROIC for the business and our growth in ROIC, and so it's something we pay a lot of attention to. But that number is pretty impressive in a mature business, but I can tell you it's about to get stronger even than that, as we've got a lot of projects that are coming on here over the next couple of years that are very low capital intensive project with very high returns.
So we're really excited about that particular number. You also see here that we've had now 30 quarters in a row over on the predictability side, 30 quarters in a row that we've met or beat our consensus estimates, and we haven't gotten there by lowering guidance. In fact, through that period, we've been raising guidance, annual guidance through most of those years. And so we've continued to have a very predictable business. And the good news is, I would tell you, that we have a lot more of this growth to go on and a lot more of the return. So if we study a little closer, the financial metrics that we've been able to produce, this is a look back five years, and you can really see the signs of a very healthy company here, with a lot of great growth.
23% CAGR on our EPS has been pretty impressive, and as well, though, real health across the board, including very strong improvement on our credit metrics for the business. And probably one of the things that I think sometimes is most undervalued is the kind of coverage that we've continued to build on a growing dividend. So we've grown our dividend at a 6% CAGR over this period, but you can also see the coverage has continued to expand during this period as well, giving us a lot of opportunities to return value to our shareholders.
And we've done what this has really accomplished with all that help has been the amount of free cash flow generation that we've done during the same five-year period, and you can see the kind of value that this business is producing. And now, as we've gotten to a point where credit metrics are in line, you're gonna see even more free cash flow generation growth here in our business because our returns in our business are, believe it or not, even though they've been pretty good, they're, as I mentioned earlier, they're actually getting higher. And this is a look at how, why our business has been so predictable. So this is our base business. So this does not include Sequent, it does not include our E&P business. This is 92% of our business on a 2023 guidance basis.
This is 92% of our business. The thing that I really, this is one of my favorite slides to explain our business and our company, because if you look at how we trade, a lot of times we trade with commodity price, and you can see there's hardly any correlation there of EBITDA with price on either gas or oil. The tight correlation you can see there is the capacity on our systems, on our big transmission systems, as well as the gathering volume, and that's what you see in orange, is the annual or the quarterly average volume and the capacity that we have to sell and the sold-out capacity on our transmission system.
So if you want to be a long-term investor, this is what you ought to pay attention to, is what drives this, and it is natural gas demand and demand for capacity. I'm going to get to that point here in a minute, but it's not just an annual average volume of gas that we sell, we sell capacity. So for instance, on our transmission systems, we really don't care what the renewable generation is in a market that we serve because the utilities have to buy the backup capacity to be able to back that up.
So while we've actually seen demand continuing to grow, as we can see on this slide, this is a picture in the blue bar there is the average annual demand for gas or power generation alone here, and you can see the blue bar showing how that's continued to grow at a 6% clip. Sorry, 6% here in 2022 versus 2023, but also the peak. So peak day demand is growing. It grew, it was about 50 Bcf/d of peak last year, and everybody was kinda really impressed by that, and we did have a very hot summer in the heavily populated areas last year.
This year, we actually, even though you hear all the talk about heat, the heat within the markets, that really have a lot of population, like here in New York City, really has been a pretty mild summer. And that's, you know, leaving out this week. But so far, in terms of what's producing these numbers, it really, we really haven't had that hot. But yet we had a 53 BCF a day in this year, and we've actually seen five days so far over 50 BCF a day. So, pretty impressive setup. Another point to be made from this slide, though, is the fact that the forecasters have continued to miss this. The EIA that continued to show, and you can see that in the dots there, that that's their year-ahead forecast, and they've consistently missed this.
Frankly, it is almost all on the backs of expectation for more power generation from renewable capacity that hasn't shown up, has been the primary reason that they've continued to miss this. It's not, and it's not that it's not getting installed, it's just the utilization rate of the capacity that's being installed that's been missed and as we've gone through and studied these numbers. So, good news, I would tell you, for our business and for natural gas demand, and this is really before the current wave of electrification takes hold. There is so much money being spent right now at ports, at airport, all in grant money from DOE to electrify all kinds of equipment in and around. That's just going to continue to drive more and more, both annual average demand for power, as well as peak demand for capacity.
Natural gas is gonna be, and particularly, pipelines and storage capacity are gonna be the beneficiaries of that continued electrification. The other area that will affect this on top of electrification is a shift from gas to coal, and this just looks at the power plants within the states that we operate and the areas that we have an opportunity to serve. You can see here 74 coal plants that have a net capacity of 79 gigawatts, and that is about 4.6 BCF per day of natural gas capacity. Just to put that in perspective, our Transco system today is right at 20 BCF a day. So pretty nice growth, and we are seeing a lot of this conversion.
Duke IRP that just came out here a couple of weeks ago calls for a lot more gas capacity in their areas they convert from coal, and we certainly are seeing the response to that for gas in the open seasons that we've been operating in the Mid-Atlantic region and down into the Carolinas and Georgia. The other area of obvious growth, and this isn't so hard to predict because it's such a long lead item, is the LNG side. And so we today that comes to about 12-13 Bcf/d of active projects that are going, but there's 26 Bcf/d of both current active projects or facilities, as well as those that are in execution now. And we are extremely well-positioned to serve a lot of this.
We already serve four of the existing operating plants, and we are in negotiations on several others to continue to serve LNG, and particularly finding ways to get both Haynesville gas and Marcellus gas into these markets. In addition to that, though, there's another 15 Bcf/d of new supply. So the fundamentals now are better than they have ever been for gas. I know that doesn't fit a lot of people's narrative around what's really going on, but the truth is, we've really kinda capitulated. Everybody's been wanting something else to happen, some other solution, some other technical solution as a backup for renewables.
But the point is, we've kinda gotten to the point where there really isn't too many alternatives, and we're gonna have to start really building out the capacity and relying on natural gas to back up our power generation. And obviously, the LNG will put demands on our systems as well. So Transco is... You know, we have three major pipelines. We operate Transco, Northwest Pipeline, and we own half of Gulfstream with Spectra. And you can see here, the Transco is by far the most valuable pipeline in the U.S. And just some stats on that, 44% more throughput than the next largest natural gas pipeline. That's pretty impressive in terms of its size and scale, and it's continuing to rapidly grow.
You can see the five-year EBITDA CAGR at 13%, and that's really impressive when you realize that we have a rate case that we've just started the test period for here recently. A lot of the capital investment that we've been making on emission reduction project has not yet been captured in that earnings growth, and we're coming on the tail end of a rate case. We've got another step up in earnings coming from the rate case for that business as well. Then in addition to that, we've got two BCF a day that'll get us to 21 BCF a day here in by 2025. That'll be about 20% of the nation's natural gas capacity in one pipeline system. It also is fully contracted.
A lot of people think sometimes that we would be impacted by whether it's hot or it's cold. The truth is, these, these pipelines are completely sold out, 100%, and so very predictable cash flow. You know, the thing you always have to count when you're accounting for the current year, you just have to remember how many days there are in that quarter, because that's kind of the variability in that business. So it's a pretty, pretty steady business for us. This is, though, a picture of the growth that we have ahead. So we've talked about our track record, we've talked about the strong fundamentals that set us up for the future.
This is the projects that we have coming online, and you can see here the ones in blue that are going to be completed here in either 2023 or early 2024. That will give us a lift in 2024, and then you can see in 2025. And I will tell you, a lot of these projects in 2025, that are supported in 2025, are very large-scale projects. Some of them are not requiring a lot of capital because the producers are putting the capital in, in places like the Deepwater Gulf of Mexico. But our deepwater EBITDA from this will double through 2025. And in fact, with the projects that we have coming online, we're probably going to exceed, because we've had a few more projects come on recently.
So the Deepwater's got a lot of growth for us with pretty limited capital investment required on our part. And then you can see a number of transmission projects there in the purple that will come on towards the end of next year and into 25, that are Transco expansions. The good news is, I'll tell you, there are more projects to come. So those are projects in execution. This is the pipeline ahead of us, and if you've followed us closely, you've seen this number of 30 projects be there for a long time, and you might say, "Well, you guys are ever going to move any of those into execution?" The truth is, that we've been moving about nine over of this list.
If you went back and looked at the last couple of years and two years before that, two years, we're moving about four to five projects a year off our pipeline into execution. And we've had a really good track record of moving these projects from potential projects into execution. I would also say, though, that the fundamentals that we're seeing are actually just now showing up, and I expect this portfolio, given the number of things that we're pursuing with customers right now. I actually expect for the first time in quite some time for this pipeline of projects to actually expand a bit on us, just given the number of requests for services that we're getting, particularly on the pipeline side of our business.
And so we also have been able to grow the business with bolt-on expansions. And I would just tell you, you can't look at our acquisitions and find one that we haven't had some very strong competitive advantages. In other words, we're not out just looking for what the cost of capital in the market is. We're looking to make some outsized returns, and in each of these cases, we have some very strong competitive advantages that we knew about going into the transaction. And I'm proud to say the team's done a fantastic job of executing on those opportunities.
In the case of Mountain West, which we just did earlier this year, that, that is showing up with a lot more growth already, and some projects we've already executed, fully executed projects that were not even in our upside case for that project originally. So a lot of demand going on out West, particularly in coal conversion. So if you look in Wyoming, you've got a couple of very large PacifiCorp plants out there that are now converting from coal to gas, and we will be serving those projects as well. So a lot of, a lot of great growth showing up.
The storage assets that we bought in and around the Dallas area, part of that project was we through our Sequent operation already held about 30% of that capacity, and we realized it could be priced up pretty substantially versus what we were paying for it, and we would still be willing to pay it. So we bought that. We've been able to almost double the rate across the business there that was on for re-upping contracts. And in addition to that, we've now built a new transmission project that we're in the process of commissioning as we speak, and so that'll come online here in the third quarter, and so that's a transmission line that'll bypass some of the local pipeline systems and go directly into the power generators in that area.
So it's a really high-margin project for us on that as well. And then on the Trace Midstream deal, we've always had a big relationship with Chevron, and we knew they had a pretty large package of gas to the south of the Trace system that we thought we could win with the addition of this asset, and we've been able to do that. And so we've now contracted that acreage and are expanding that by 400 million today. And in addition to that, we got a large commitment to using an Energy Gateway from Rockcliff, the producer on Trace system. So really, it's hard to look at any deals that we're doing that don't have not something that we bring to the table that adds value over and above what that value would be....
So, you know, we always get questions about our capital allocation, and I would tell you, I think the questions will get louder on this, frankly, because this free cash flow is starting to pile up, and we all, you know, we continue, we continued over the last several years just to let our credit mix drift lower. We're at a point where we're trading like we're triple B plus on our debt, and we really don't see a whole lot of value of going a whole lot lower than that.
So that bucket has gotten pretty full, balance sheet strength that we've been pursuing, and we're right now, for the first part of the year, we're at 3.5, and we've got guidance at 3.65 for the entire year. That's frankly kind of right where we want to be. We don't think there's a whole lot of value in going much lower than that, given the predictability of our cash flows and given where our debt trades today. On the dividend side, we have maintained, you know, we've said for a number of years now, probably five years now, we've said that we thought the $1.5 billion-$2 billion of capital would generate about 5%-7% of growth for us.
Obviously, that has the bigger numbers going on with it, and 5%-7% gets larger. But the good news is we've gotten better and better return on our projects, and so that 5%-7% growth in EBITDA remains. And we've been able to raise our dividend right in line with our core business, and the value on top of that, being our EP business has driven that number, just EBITDA growth even higher than that. Excuse me. On new investments, you know, I'm happy to tell you that we have a number of good investment opportunities. We high grade these all the time. At the very lowest part there on item number four is our emissions reduction project. So let me explain that very quickly.
Our within our Transco and our Northwest Pipeline systems, we have plenty of room in our, in the rates that we charge, our regulated part of our business in that, that we charge our customers. We have plenty of room to keep investing at about a 12.5% return on a cash-on-cash basis before tax. And so that's, that's very much just like a lot of utilities that you would otherwise invest in. That investment's allowed to us. That is at the bottom of the barrel for us in terms of return, but it's a very large, opportunity for us. And so when we get to the bottom of this stack and we have something left, we continue to use that, because that's not an opportunity that will escape us.
It's an opportunity that sits there, and so that's a place for us to invest excess capital, and we are investing pretty heavily right now in our emission reduction project investments, which will drive a very successful rate case outcome for us in 2025. So that – and by the way, the test period just started. We'll have a case period, and then we'll be filing rates in March 2025. Couldn't be a better time to go in for a rate case with debt costs coming up across the sector, equity price up against the sector, inflation in costs, easy to argue that that will continue, and those are the kind of things that drive a successful rate case that we'll be up against. So we're pretty pleased with the timing that we're going to be getting from.
Then finally, on the financial flexibility, we have been doing—we've done about—we've got a $1.5 billion buyback approved, stock buyback approved by our board, and we've got about $130 million this year of buybacks. And the way we think about that, like, we haven't overcomplicated this, we've been delivering this 6% figure on dividend growth. And so when our—and we at our, the bottom of barrel of returns for us is around 12, 12.5% on that rate case, which is a very low risk investment. And so when we hit a yield plus growth with a 6, assuming a 6% growth, when we hit a 6% yield, that's the point that we've been opportunistically buying in the market.
You know, while that number will change as we raise our dividend, it's pretty easy math and really the way we think about where and when we buy shares back. Then finally, you know, I would just tell you, we continue to have our eyes out for bolt-on transactions that we can do, much like the ones that we've done, and we're very happy with today. Some of the things that are for that today are a lot of private equity shops have got a lot of floating rate exposure, and so there's getting to be a pretty big spread in cost of capital between the private equity side that holds assets in and around some of those with us, frankly, so we know the assets very well.
So being very patient, and letting those opportunities come to us at a price that we're excited about. And so we do have some remaining opportunities that we think we can pick up at very attractive prices. So, certainly, you know, we would only do that if it winds up being better than that rate case investment opportunity at 12.5 level. So, with all that, I would tell you, it is a great time to be continuing our strategy that we've been on for quite some time. We believe natural gas has so much to bring to the table to solve some of our most critical problems, both here at home and around the world.
And we are really happy as a company to be a part of the solution and be a part of, of driving down emissions in a dramatic fashion with the use of natural gas, taking out heavier fuels. We've been on this strategy for quite some time, and it is really paying off very well for us, as you can see. And the good news is, is I really think we've got even better days ahead for us right now, as really the markets have run itself into a situation where it doesn't have very many alternatives if you want to lower emissions, and you want to have reliable, energy source.
There's just not very many options left on the table for us, here in the U.S. and, and around the world, and we're excited to be in the position we are to provide the infrastructure to help deliver that gas. With that, I will open it up for any questions you might have.
We have time for a few questions. Mic's coming around. Sure, please.
Thank you. Alan, can you comment on yesterday's acquisition announcement, Enbridge buying Dominion's DISCOs? Were those assets that you looked at? Could we see gas DISCOs in your portfolio at some point?
Yeah, you know, I would just say that from our perspective, we always have to look at a deal like that and weigh how our currency is valued against our discounted cash flow of our own operation. And I would just say that when we would look at asset like that, the use of equity in a transaction like that just really wouldn't make much sense for us, just 'cause we've got such good growth that is undervalued as a currency there today. And we have this rate base that's investable at a higher return than those LDCs offer in terms of incremental returns. So just, that kind of lower return doesn't make a whole lot of sense for us. So... And I'm not knocking it at all, you know, it probably makes a lot of sense for Enbridge.
Yes, yeah.
Just two quick ones, Alan. Can you comment on the impact that MVP could have on Williams? And the second question is, you know, given the outlook for LNG exports, and everybody's talking about the Permian, Haynesville supporting, you know, most of that, what do you think needs to happen, or do you think will happen to unlock the potential of Northeast gas to fill more of the LNG exports than perhaps people are-
Yeah
-forecasting now?
Yeah, it's a great question. So first of all, as to MVP, if you think about MVP, we own a lot of the gathering. We're, we're the largest gatherer by far in the Marcellus and Utica, so we own a lot of the gathering business. And so as that market opens up, and that takeaway capacity opens up, that'll mean incremental volumes flowing out on the upstream side for us, where it's very high margin. But in addition to that, we just had an open season here about a month and a half ago, that meant really kind of surprised us. And we don't get surprised very often because we usually kind of know who the targeted customers are, and we kind of have a prearranged understanding of who's stepping into the open season.
In this case, the Open Season was oversubscribed by multiples, not by percentages, but by multiples of the capacity we had to offer. And it is because people knowing that there's going to be low-cost supplies available at $1.65, and so that Open Season really showed the power of bringing those new supplies into Transco and our ability to now serve a lot of that, Mid-Atlantic and Carolinas market, with that low price Marcellus gas. Now, so people get very fixated on, you know, physical molecules and how they flow and where they flow. And the truth is, Transco is a very large header, so that's going to be another supply point, just like Station 85 is a supply point today. We have 2.5 Bcf a day today.
Even without all these expansions that you saw from that area, we have 2.5 Bcf a day of capacity north, we have 2.5 Bcf a day of capacity south, and we have 700 million a day of physical capacity on the Virginia Lateral that goes east towards the coast in Virginia. And so, we have plenty of physical capacity, but we don't have the ability to deliver for all of the growing market there in, particularly kind of in the Duke and the Carolinas market area. We've been fighting hard to get MVP approved.
It's such. Even though we don't own it, it's such an important project for unlocking gathering volume potential for us in West Virginia, Ohio area, and as well, a new capacity that we are going to be able to make very high return projects off of, because we were going to have to build all the way from northeast PA and serve those markets. Now, the pricing level that the customer pays is the same. So in other words, these aren't not. Everybody always thinks, "Well, it's a regulated pipeline, so how good could it be? Just get a regulated rate of return." That's not the way it works. Nobody can force us to do an expansion, so we're pricing up against the avoided cost. So the harder it is to build projects, to build new expansion projects, the more valuable our capacity is on that expansion.
So our ability to expand along our existing lines is going to allow us extremely high returns, and previously it was going to be big projects, but lower returns. We're going to have a lot of projects that are going to be extraordinary high returns. So MVP is a very positive thing for us, and we're really excited to see it finally get approved.
Thank you very much.