Michael Mandelos: Alright, good afternoon, (or good morning depending on when you are watching this). Thank you so much for joining us today. My name is Michael Mandelos, and I am the Director of National Accounts here at Miller/Howard Investments. I am joined today by my colleague, Adam Fackler, who is one of the portfolio managers on the investment team. Adam is responsible for our Infrastructure portfolio, as well as our Utilities Plus portfolio. So, Adam, thank you for joining us. How are you doing today?

Adam Fackler: Hi Mike. Happy to be here.

Michael Mandelos: Alright, great. So Adam, over the last couple of years, we’ve talked quite a bit about the growth of renewable energy—and more specifically, we’ve talked about utility-scale renewable energy. Recently there’s been some interesting points given the growth of renewables. Can you tell us what you and the portfolio managers are seeing in the space?

Adam Fackler: Sure. The proliferation of renewables has long been a point of interest with our investors, and at this point, the trend is really undeniable. Earlier this year, the EIA (US Energy Information Administration) projected electricity generation from renewables would surpass coal in the coming years. That inflection point really has seemed pretty inevitable since last April when monthly power generation from renewables surpassed coal for the first time, although in all fairness, that was due in part to seasonality. It is also worth pointing out that last year, total US energy consumption from renewable sources exceeded coal.

Taking a little longer view, the EIA also estimates that nearly 75% of US power generation will be from the combination of cleaner-burning natural gas and renewable by 2050. To reach that threshold, renewables will essentially double their share. That’s largely at the expense of coal, which has been declining for most of the last decade.

The bottom line is, the coal-to-natural gas and renewables switch still has a lot of runway, and is a significant growth opportunity for utilities.

Michael Mandelos: That’s interesting. Let’s dive a little deeper. Can you talk a little bit about what’s driving this growth? Is it the utilities themselves that are driving the growth, or is this more of a grassroots demand push?

Adam Fackler: It’s really a bit of a combination, Mike. The growth trajectory is reinforced by public opinion and regulatory support (which is clearly important):

• 26 states have greenhouse gas emissions targets—those states make up roughly 65% of the US population
• 29 states adopted the Renewable Portfolio Standard
• 11 states have a 100% clean energy goal or mandate—and a lot of those are long-term targets, typically ranging years from 2040-2050

While commitment levels and timetables vary, we think, in aggregate, these initiatives will provide a tailwind for the utilities space.

Michael Mandelos: That all sounds like a promising growth trajectory. Given the set of opportunities available to utilities today, how do you think the capital is going to be deployed? And more importantly, as I was listening to you, I couldn’t help but think I just paid my electric bill, and the financial advisors who are listening to this probably just paid their electric bills. I am hearing your thoughts and I am wondering to myself, we going to see a huge increase as utilities add new investments? Are our clients going to see a huge increase in their electric bills?

Adam Fackler: It goes without saying that the second part of your question resonates with all of us. To your point, clearly, this transition will require significant capital deployment, and as a result utilities will have to balance that development against the impact on consumer bills. As a reminder, in the utility model, rate-base growth puts upward pressure on consumer costs. But at the end of the day...a deep bench of growth opportunities is still an enviable position for any utility to be in. We expect this will be a multi-year, and perhaps multi-decade growth story.

Michael Mandelos: Alright, great. Adam, I appreciate you walking us through this today. It is really important for us to get the message out about this growth trend for utilities. I would encourage the financial advisors who want to learn more about our outlook for utilities to go back and read our most recent quarterly report. You can always find our more about Miller/Howard, our people, our process and our strategies on our website. That’s at www.mhinvest.com. You can also always reach our Miller/Howard sales professionals at (845) 679-9166 (that is our home office line). I would also encourage you to follow us on Twitter and LinkedIn. We're constantly partnering with our marketing team, as well as our portfolio managers, to bring a lot of our value-add content to you as quickly as possible, so I would encourage you to follow us on those mediums.

So, Adam, again, thanks so much for joining us today, and we look forward to speaking to you again soon.

Adam Fackler: Alright. Thanks!

Michael Mandelos: Thank you! See you later.

Sources: US Energy Information Administration (EIA), Annual Energy Outlook 2020, and Monthly Energy Review May 26, 2020; UCLA Luskin Center for Innovation; Center for Climate and Energy Solutions; Miller/Howard Research & Analysis

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