NorthWestern Corporation
Q1 2010 Earnings Call Transcript

Published: 23 Apr 2010

[Operator:]

Welcome to the NorthWestern Corporation's first quarter 2010 financial results conference call. (Operator Instructions) I would now like to turn the conference over to our host, Mr. Dan Rausch. Please go ahead sir.

[Dan Rausch:]

Good morning and welcome to NorthWestern Corporation's March 31, 2010 quarter-end financial results conference call and webcast. NorthWestern's results have been released and that release is available on our website at www.northwesternenergy.com. We also filed our 10-Q after the market closed yesterday. Joining us today on the call are Bob Rowe, President and CEO; Brian Bird, Chief Financial Officer; David Gates, Vice President of Wholesale Operations and Kendall Kliewer, Controller. This presentation contains forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon our current expectations and speak only as of this date. Our actual results may differ materially and adversely from those expressed in our forward-looking statements as a result of various factors and uncertainties, including those listed in our annual report on Form 10-K, recent and forthcoming 10-Q, recent Form 8-Ks, and other filings with the SEC. We undertake no obligation to revise or publicly update our forward-looking statements for any reasons. Following this presentation, those joining us by teleconference will be able to ask questions. A replay of today's call will be available beginning at Noon Eastern Time today through May 23, 2010. To access the relay, dial 1800-475-6701 and then access code 152578. With that I'll turn it over to President and CEO, Bob Rowe.

[Robert Rowe:]

Thank you as always Dan. As we end another quarter we are pleased with where we are and I think that puts us in a good position looking forward to the balance of the year. Our net income improved to $28.7 million for the first quarter of 2010 as compared with $22.8 million in the first quarter of 2009. The improvement in net income was approximately $5.9 million or $0.16 per share. We announced our second quarter dividend of $0.34 per share payable on June 30 of this year for shareholders of record on June 15th. During 2009 our quarterly dividends were $0.335 per share each quarter. Also, just two weeks ago we were added to the Standard and Poor’s small cap group of 600 stocks. The inclusion is a good signal of the market’s appreciation for our going forward prospects. Last week, Fitch upgraded both our secured and unsecured senior debt. As a result our senior secured is now rated low A by Moody’s, S&P as well as by Fitch. Our unsecured senior is rated at least BBB by the three ratings agencies I just mentioned. Finally, and I will come back to this, Forbes.com has included us on their list of the 100 Most Trustworthy Companies which is a huge testament to the integrity of our employees and our board. Brian is now going to discuss our 2010 financial results in more detail. I would suggest the theme is that the good actions we took in 2009 have put us in a strong position for 2010 even as the economy is only beginning to turn around. With that I will turn it over to Brian.

[Brian Bird:]

Thanks Bob. We reported diluted earnings per share of $0.79 per share during the first quarter of 2010 compared to $0.63 per share in the first quarter of 2009. Our earnings increased $0.16 per diluted share on a year-over-year basis. Let me give you a quick overview of the largest drivers. The carryover benefit of the repairs tax deduction increased net income by about $0.09 per share compared with the first quarter of 2009. Reduced labor and benefits including post-retirement benefits and pension costs contributed about $0.06 per diluted share compared with the first quarter of 2009. A decrease in insurance expenses primarily due to lower claims added about $0.05 per diluted share compared to the first quarter of 2009. Offsetting those increases to the first quarter 2010 earnings was a decrease of about $0.05 per fully diluted share in our gross margins due primarily to a decrease in natural gas volumes due to mild weather in Montana and decreased electric volumes from lower industrial demand related to the weaker economic conditions. As you can tell from our press release and our 10-Q filing there were other increases and decreases to earnings year-over-year but these were the largest drivers. Now let me talk about our 2010 earnings outlook. We are reaffirming our diluted earnings per share for 2010 in a range of $1.95 to $2.10 per fully diluted share. From that let’s move to the balance sheet. We have total liquidity of approximately $215 million with cash of $7 million and $208 million availability from our revolver. Total debt at March 31, 2010 was $954 million compared with $987 million at December 31, 2009. The company maintains a long-term debt to total capitalization ratio of approximately 54% at March 31, 2010 which is back within our stated rate range of 50-55%. Though not in the first quarter of 2010 just last week we priced the refinancing of our $225 million first mortgage bonds through private placement at an interest rate of 5.01% and pushed the maturity date from 2014 to 2025. We expect to close on this refinancing around the end of May. The interest rate is 86 basis points lower than the previous rate and will reduce our interest expense on that portion of our long-term debt by about $1.8 million annually. In addition, the company will now have no significant long-term debt maturities until 2016. With this refinancing and over the last five years we have reduced our weighted average coupon approximately 200 basis points to about 5.6% and at the same time extended our average debt maturities from 10 years to approximately 12 years. Moving to the cash flow statement, cash provided by operating activities totaled $106.3 million for the three months ended March 31, 2010 as compared with $65 million for the three months ended March 31, 2009. This increase in operating cash flows is primarily related to contributions of $43.2 million to our pension plans during the first quarter of 2009. By comparison, we haven’t yet made any contributions to our pension plans in 2010. Because of our substantial payments in 2009 to our pension we expect future pension contributions to be about $10 million annually in 2010 and beyond. Cash used in investing activities increased by approximately $39.6 million as compared to the first quarter of 2009 due primarily to increased property plant equipment additions related to the Mill Creek Generating Station project. Cash used in financing activities totaled approximately $45.7 million in the first quarter of 2010 as compared with cash provided by financing activities of approximately $25 million during the three months ended March 31, 2009. During the first quarter of 2010 the company made debt repayments of $33.4 million and paid dividends on common stock of $12.2 million. Now let me turn it back over to Bob.

[Robert Rowe:]

Thank you Brian. This week we held very successful annual and board meetings at our operation center in Huron, South Dakota. This was the first time the board meeting had been held in Huron since 1998. As part of the week’s events we were joined by the governor of South Dakota, the Lieutenant Governor, a member of the South Dakota PUC and other dignitaries. One real treat for me was being joined by the former CEO of NorthWestern Public Service, Al [Schmitz] who retired leaving behind a very strong company in 1990. It was a great opportunity to recognize our employees and retirees and really to strengthen our ties with our entire South Dakota service territory. Earlier I mentioned we made the Forbes.com list of the 100 Most Trustworthy Companies. This is something given the challenging environment I think really means quite a lot. If you are not familiar, the Forbes [audio break] independent company named Audit Integrity and they use a quantitative analysis to reach their list. Audit Integrity was founded in 2002 to develop risk management tools based on the statistical analysis of corporate integrity. Audit Integrity’s evaluation penalizes companies for unusual or excessive executive compensation; for high levels of management turnover; for substantial insider trading relative to their corporate peers or for high levels of short-term executive compensation which encourages management to focus on short-term results. They go on to say that good housekeeping practices leave companies better prepared to handle an economic downturn especially one as severe as what we are experiencing now. In conducting the analysis the absence of negative events counts as much as the existence of positive events in getting businesses on the list. So to create the list Audit Integrity scans more than 8,000 companies traded on the U.S. exchanges every three months. It assigns each company an accounting and governance risk score (NYSE

[Operator:]

(Operator Instructions) The first question comes from the line of Ryan Rosenthal – Sidoti & Company.

[Ryan Rosenthal:]

My question concerns the drivers of the specific reductions in your operating costs. Concerning your operating cost trends and the favorable trend we saw year-over-year could you discuss your assumptions for the remainder of the year? Do you see that trend continuing?

[Brian Bird:]

We have mentioned that we have reduced some pension costs and some other post-retirement costs. We expect that will continue through the year. We gave some thoughts if you will for the year in terms of where we thought some of those costs were going to go. I think it would continue to trend based upon what we have seen through the first quarter.

[Ryan Rosenthal:]

Turning to energy demand it looks like year-over-year you continue to see declines in both the electric and gas utility. Could you discuss your outlook for both the residential and commercial volumes for the remainder of 2010?

[David Gates:]

I would just simply say it is a function of weather and what you expect typical weather to be. We would plan for normal weather.

[Brian Bird:]

I would say what happened in the first quarter we were off about $2 million as you know from milder weather on the gas side of the business. That was weather related. Haven’t seen much of an impact on volume other than that. On the electrical side our residential volumes were pretty much right on line except for our industrial load which was off by 12%. We did mention that the Smurfitt Stone closure impacted about half of that change. We do expect some of that industrial decline to continue into the year.

[Ryan Rosenthal:]

Concerning electric transmission at the beginning of the year you were looking for a slight rebound in the earnings stream from transmission capacity. Is that something you are still looking for in the remainder of the year?

[Brian Bird:]

I would say in that regard we expect some of that to be more of a second and third quarter impact is where we expect to see some of that.

[Operator:]

The next question comes from the line of Chris Ellinghaus – Shields & Company.

[Chris Ellinghaus:]

Can you give us a little more detail on the compensation item other than pension?

[Brian Bird:]

Sure. There were a couple of things in that. Headcount was lower than we expected for the year. We did have lower severance costs also. Those were the two biggest drivers for compensation.

[Chris Ellinghaus:]

What was the electric reclamation settlement?

[David Gates:]

Is this on the coal recovery?

[Chris Ellinghaus:]

It is just from your line item on your changes for the quarter.

[David Gates:]

That was the settlement of the Western Energy Co. royalties issue. We settled that at about $900,000 for us, $600,000 some in cash this year with the remainder coming in 2011.

[Chris Ellinghaus:]

Can you give us a little more detail in terms of your RFPs for wind and what your expectations are and when you think we might hear something about them?

[Robert Rowe:]

We expect to have outcomes within the next several months particularly on the Montana side but we are working through right now again a short list on both sides is particularly the tradeoff between rate base and the other alternatives. Again, we are looking at good, solid proposals on both sides.

[Chris Ellinghaus:]

You are hoping for turnkey arrangements?

[Robert Rowe:]

Not necessarily but certainly a good possibility.

[Operator:]

The next question comes from the line of Brian Russo - Ladenburg Thalmann & Co.

[Brian Russo:]

Could you comment maybe on the quarterly dispersion of the tax benefits you expect in 2010? I guess $0.09 in the first quarter and I guess maybe $0.21 or $0.22 for the entire year?

[Brian Bird:]

I would tell you as you know we didn’t make any tax adjustments until third quarter last year. So on a year-over-year basis the $0.09 is a continuation if you will from the 2009 adjustment in September. Obviously it had a year-over-year impact. I would think as you look at a full-year basis for tax I would just assume around a 30% effective tax rate for the year.

[Brian Russo:]

Right but as to the quarterly dispersion. You got $0.09 for the first quarter. Should we expect an additional tax benefit in the third quarter or should we spread out that scale for the following three?

[Brian Bird:]

I would do this. You are going to have a benefit again in the second quarter. Again it depends on our income of course for the second quarter which is a lower quarter than the first. So you have to take that into consideration. The third quarter you should actually have a negative variance because we had such a large impact in the third quarter last year if that makes sense.

[Brian Russo:]

Looking at the 2009 to 2010 earnings bridge you laid out I guess last quarter versus some of the drivers you reported in the first quarter it looks like your lower labor benefit of plus $0.06 in the first quarter 2010 it looks like that has exceeded your $0.01 to $0.02 full-year impact if I am reading this correctly. It looks like the same goes for the lower insurance claims which was a $0.05 benefit in this first quarter versus your $0.02 to $0.04 for the full-year. Can you comment on that?

[Brian Bird:]

You are spot on from the insurance reserve perspective. I will start there and tell you there is one item in there, $0.01 we would deem as kind of a one-time item but you are right in line with our full-year expectations from the insurance reserve standpoint. You are spot on there. I think we are better than we had thought particularly on the labor side. We knew about the pension and the other benefit savings but labor has been better than we anticipated.

[Brian Russo:]

In terms of the new projects and the renewable you are pursuing can you give us a timeline if you were to build or purchase? What timeframe are we looking at in terms of contribution to your portfolio?

[David Gates:]

As we mentioned on our short list we had hoped to have agreements negotiated sometime this year. Then probably in service in 2011.

[Brian Russo:]

The potential upgrades for the Big Stone coal plant. Could you remind or reiterate what you said earlier in terms of the timing? I think you said by June 15, 2011?

[David Gates:]

No the Big Stone emissions control air quality systems will be in service some time in 2015. It is about a five-year project. The study work is ongoing right now.

[Brian Russo:]

The South Dakota peaker plant. What is the procedural schedule or the approval process you need to keep that consistent with your commercial operation date?

[Robert Rowe:]

That would be a traditional regulatory process. What we will do in South Dakota as we do consistently is visit with the Commission, talk about timing options for rate recovery. We are mindful of customer impacts and have a good relationship with the South Dakota Commission so I think we are relatively comfortable there. There are a number of options we are looking at in terms of how you could layer in rate adjustments. In fact I started visiting with one of the South Dakota Commissioners about that subject yesterday.

[Brian Russo:]

It is my understanding this peaker plant is to replace an existing contract that is expiring?

[Robert Rowe:]

That is correct. We have a current capacity contract with Mid American that expires in 2012. So this plant would be online and in service for the summer of 2013. We would anticipate getting it completed in 2012 such that it would be in a 2012 [test year].

[Operator:]

The next question comes from the line of James Bellessa – D.A. Davidson & Co.

[James Bellessa:]

The Q talked about your annual interest expense for 2010 being comparable with 2009 due to an increase in AFUDC. Also on the narrative today you indicated you refinanced $225 million at a lower rate of expense. So are you still holding to the fact that 2010 should be comparable to 2009 in interest expense?

[Brian Bird:]

I would tell you I think the statement as a whole still holds true. We do expect our interest expense to come down. We will get a partial year benefit of course from this refinancing. I think all in all it is relatively going to be close.

[James Bellessa:]

Was it anticipated you are going to get the favorable arbitration decision on some type of insurance issue?

[Robert Rowe:]

No. We didn’t certainly implant it in our guidance if you will. We didn’t know what the outcome would be and we don’t typically include those things in our guidance.

[James Bellessa:]

Did you say it was $0.01? The full amount was $0.05 for the insurance swings.

[Brian Bird:]

That is a good catch. That particular item for insurance reserves was $0.01. The other $0.04 was associated with the prior year we had some claims in the first quarter we didn’t have this year.

[James Bellessa:]

In your guidance statement you removed the assumption you would get some benefit from a rate case in Montana but you didn’t change your guidance. Some of the things you saw in the first quarter, the strength of the first quarter’s earnings is that filling in for the removal of the rate case benefits that may or may not occur in 2010?

[Robert Rowe:]

On that point when we put out our guidance, you may not recall, since we don’t know what the outcome was there we did not include any rate case in our guidance. So this delay doesn’t impact our guidance.

[James Bellessa:]

Smurfitt Stone. You mentioned that coming out. There was talk at one time you might be considering a biomass activity at that existing site. Is that still something that is reasonable or is it way out of probably and just a low probability of occurrence?

[Robert Rowe:]

I really can’t comment on Smurfitt Stone specifically. What I can say is we are exploring the feasibility of biomass as a part of our overall portfolio and we certainly have taken a look at Smurfitt Stone and we will continue to do so if the opportunity might present itself.

[Operator:]

The next question comes from the line of Laurie [Dunstone] – Pacific Life.

[Laurie [Dunstone]:]

I was wondering if you could talk about your outlook for industrial demand for the rest of the year? I was wondering if you were expecting it to continue to be as weak as it looks like it was in the first quarter and what you see for the rest of the year?

[Robert Rowe:]

Starting out I think it is important to emphasize both on the electric side and particularly on the gas side we are relatively heavily weighted towards consumer and commercial. On the Montana side we are of course a distribution provider to the industrial, not a supply provider. So we have pretty good buffer between ups and downs on the industrial side. Across the system we actually monitor the large customers really one by one and I would say it is kind of a question of puts and takes. We are not making unrealistic or rosy assumptions going into the year. By coincidence I met with the economic development offices across our entire South Dakota service territory on Monday and they were really surprisingly upbeat about the level of activity including large scale commercial and light industrial they expect to see over the next several years. We are being cautious but we are not as affected by ups and downs on the industrial side as many of our peers.

[Operator:]

The next question comes from the line of Jonathon Reeder – Wells Fargo.

[Jonathon Reeder:]

Could you remind us under the current schedule, at least in Montana, when the intervener testimony is or was due?

[Robert Rowe:]

The schedule has been suspended and that was part of the discovery process. Discovery issues have been resolved and that information now is going interveners. It will be under a protective order if necessary based on that we expect to see under the reinstated schedule we expect to see intervener testimony in the relatively near future.

[Jonathon Reeder:]

At that point your interim rate increase will be addressed? Is there an actual decision made on it or they either choose to take it up or just kind of ignore it?

[Robert Rowe:]

Typically what will happen is as soon as the Commission staff has had an opportunity to look at the intervener testimony they will bring a recommendation in to the Commission to make a decision.

[Jonathon Reeder:]

Will we actually get a decision on it or there could just be no decision as their decision?

[Robert Rowe:]

No there will be a decision.

[Jonathon Reeder:]

How might I guess the push back or the potential push back in the Montana rate schedule potentially intertwine with the Mill Creek interim rate request? Is there any chance to kind of roll those together or anything?

[Robert Rowe:]

No. We have had good discussions with the Commission staff about how best to process Mill Creek. As we have discussed before, the Commission has an independent consultant that is helping them with the evaluation going forward. I don’t see other than a scheduling matter a process of setting dates for hearings and decisions, I don’t see a direct relationship between the rate case schedule and the Mill Creek schedule.

[Jonathon Reeder:]

So you wouldn’t anticipate the potential push back in the Montana rate case could I guess cause a delay in the Mill Creek portion beyond the January 1 expected?

[Robert Rowe:]

No. They are separate dockets. Separate processes.

[Jonathon Reeder:]

Could you discuss what sort of milestones we might look for during this open season process for MSTI and the collector system? I think there are kind of like two parts to the open season? Like what sort of data points might we get as we are going along as to the level of interest you are seeing?

[David Gates:]

We have as you mentioned two data points throughout this process where potential shifters will have to make staged commitments. From a practical standpoint as far as moving forward with the project it will probably be later this year when they have to sign transmission service agreements that will give us the best surety of what the market demand is. It will probably be at that point we would be able to make some further refinement on schedule for those projects.

[Jonathon Reeder:]

Can you kind of discuss what you are hearing from the potential end demand users, Western Utility customers of that nature, as far as what their thinking process is with the bit of demand reductions due to the economy as well as I guess RPSs in the state where they stand there and I guess the uncertainty at the federal level regarding renewable legislation and/or carbon?

[David Gates:]

Sure. I should mention we had all of the expected participants in the informational meetings plus a couple of others. Related to the demand for renewable energy again the RPS standards haven’t changed in the west. Again, irrespective of conventional demand or economic discretion they still have to provide RECs and clean energy. The decision in California is there is a slight downside to the story is that it is uncertain what California PSC intended with their most recent order related to tradable RECs and some of the provisions of that bill. It hasn’t slackened the interest from what we have seen on our projects at this point.

[Robert Rowe:]

To add to that, we have become increasingly active in the west with various other utilities and in direct discussions. What we are seeing, we talked about this before but we continue to see increased interest in the project from others in the western United States who view it as part of a potential solution to some of the supply problems they are facing. There certainly as a market proof of interest in the projects.

[Jonathon Reeder:]

I know previously you had discussed you weren’t wanting to go ahead with the open season until you felt really comfortable. You didn’t want to incur those costs. Is it fair to assume the fact you are moving forward at this time you feel pretty comfortable the interest level is sufficient out there?

[Robert Rowe:]

Striking the balance you talked about of uncertainty of around where Federal policy might go but striking the balance between all of the factors this was a good time to move ahead. I want to say one thing about David Gates and his team. They got feedback at their informational meeting the approach we are taking in working with potential customers is very positive compared to what they might have seen in some other cases.

[Operator:]

The next question comes from the line of Timothy Yee - KeyBanc Capital Markets.

[Timothy Yee:]

One more on the incremental renewable investments you are considering. Are there any type of recovery mechanisms in place for those investments or is that something you would have to file for?

[Robert Rowe:]

Are you talking about on the state side?

[Timothy Yee:]

Yes.

[Robert Rowe:]

In Montana we do have the advanced pre-approval statute we are using with Mill Creek. We expect on something where in fact there is a meaningful project lead time we would be able to do the same thing on a project such as this. That has the twin advantages of dealing with regulatory risk or uncertainty as it did at Mill Creek but also with the problem of regulatory lag. We are in exploring with the Montana Commission ways to eliminate lag probably by using an interim approach to begin earning as soon as it goes online. There isn’t that kind of a formal process in South Dakota but the South Dakota Commission does a very nice job efficiently processing dockets. As I have mentioned previously we’re already talking to the South Dakota Commission and staff about what we see coming up over the next several years.

[Operator:]

The next question comes from the line of John [Holly – Company Unknown].

[John [Holly:]

If you could give me what some of the drivers are for the peaking plant in South Dakota?

[David Gates:]

The need for the peaking plant in South Dakota is we have a summer demand capacity that far exceeds our current owned generation in South Dakota. We meet that need today, that growing need, by a capacity contract with Mid American that expires in 2012. But the peaking unit is being designed to meet that need to replace that contract and then just as an aside will be designed such that it would be expanded for other uses out in time.

[John [Holly:]

Do you have recovery for that without any general rate case?

[Robert Rowe:]

We would have to file for recovery. That is the subject that in fact we did just discuss. We started to talk to the South Dakota Commission about investments over the next several years but we would have to go in and file for recovery.

[John [Holly:]

In a rate case setting, not a single issue?

[Robert Rowe:]

Depending on what else we have going on in South Dakota we would have to make that decision but there are probably a number of options.

[John [Holly:]

If you could give me an idea for the size and timing of the natural gas reserves you are talking about investing in?

[Robert Rowe:]

It is difficult to say much given that we are talking to the counter parties and size, timing and price would all depend upon those specific negotiations.

[John [Holly:]

Understood. Maybe just generally a little more color about what you are thinking there? I know you are not going to get into [E&D] but what stage of the stream do you want to be involved in?

[Robert Rowe:]

We are interested in acquiring proven reserves that would be put into rate base and we earn a regulated return on those reserves. That would be a way to partially meet our overall Montana obligations.

[Operator:]

The next question comes from the line of Leon [Deball] – Capital Management.

[Leon [Deball]:]

You pointed to a couple of projects that might be above and beyond the CapEx you laid out in the most recent presentations. Can you talk about funding for some of these? Would you need additional equity or would all of this be done with debt?

[Robert Rowe:]

Our general thinking we can cover maintenance CapEx and the primary near-term projects without issuing additional equity. MSTI does assume equity. Other projects that might taken together require equity would include some of the ones we haven’t assigned a dollar figure to and that would include, for example, distribution system investments beyond what we have identified currently. It could include gas supply investments and things of that nature.

[Brian Bird:]

I would add to that obviously we want to maintain on a long-term basis our 50-55% debt to cap. So that gives you an idea of what kind of things we would want to see.

[Operator:]

The next question comes from the line of Chris Ellinghaus – Shields & Company.

[Chris Ellinghaus:]

As a follow-up to the gas discussion, I just want to get a clarification or enhancement. You are talking about producing properties not just reserves, right?

[Robert Rowe:]

Correct.

[Chris Ellinghaus:]

Can you say have you talked to MDU given they are the largest reserves in Montana?

[Robert Rowe:]

Probably shouldn’t say who we have talked to.

[Chris Ellinghaus:]

Can you elaborate a bit, you have had some additions to what your CapEx needs might be including Big Stone I and things like that. Are you starting to push the envelope at all in terms of equity needs for all of these miscellaneous smaller projects?

[Brian Bird:]

Big Stone particularly could be an impact but I would tell you the capital associated with Big Stone it is going to be lumped into the latter three years for 2015. Again, it is going to depend on what happens with MSTI to a great extent.

[Chris Ellinghaus:]

So the timing might sort of coordinated with MSTI needs anyway?

[Brian Bird:]

Right. That is one of the issues for some of these projects. Again, not knowing the timing and the amount. As Bob pointed out if some of those were to break through and don’t show up in our capital plans in the materials you have seen publically then we should be okay. But if they do happen and are of significant size we could be issuing equity even without a decision on MSTI at that point in time.

[Chris Ellinghaus:]

One more clarification on gas, do you have any kind of timeframe you would like to have some type of accomplishment on that front? Does it need to be of real substance or would you consider just dipping your toe into something smaller just to get some experience with it and maybe show the legislature a little bit of success on that front?

[Robert Rowe:]

Two points. First, on the Montana side we have a tremendous amount of experience. Montana Power Company was one of the few LDCs in the country that actually did own substantial gas properties and of course we already have significant storage on the Montana site. As to the size, what we did initially was sort of a broad screen different kinds of projects, geographic location, looked at size. There isn’t a particular size we are looking at now and we could again over time incrementally increase the amount of gas production we own just as over time we are incrementally increasing the amount of electric distribution. There isn’t a particular size we are focused on.

[Operator:]

There is no one else in queue at this time. Please continue.

[Robert Rowe:]

If there are no further questions. Thank you as always. As I have said we are very pleased with the steps we have taken today to put us in a good solid position for 2010 and we always appreciate your interest and support.

[Operator:]

Ladies and gentlemen this conference will be made available for replay after 12 p.m. today running through Sunday, May 23, 2010 at midnight. You may access the AT&T Executive Playback service at any time by dialing 800-475-6701 and entering the access code of 152578. That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference Services. You may now disconnect.