Tag Archives: construction

Alterra Power’s (MGMXF) CEO John Carson on Q2 2015 Results – Earnings Call Transcript

Executives Ross Beaty – Executive Chairman Lindsay Murray – Interim Chief Financial Officer John Carson – Chief Executive Officer Paul Rapp – Vice President, Wind and Geothermal Power Jay Sutton – Vice President, Hydro Power Asgeir Margeirsson – CEO, HS Orka Analysts Marin Katusa – KCR Fund Jonathan Lo – Raymond James Mike Plaster – Salman Partners Alterra Power Corp. ( OTCPK:MGMXF ) Q2 2015 Earnings Conference Call August 12, 2015 11:30 PM ET Operator Good morning, ladies and gentlemen and welcome to the Alterra Power Corp Second Quarter Results Conference Call. At this time all lines are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. [Operator Instructions] I would like to now remind everyone that this call is being recorded on Wednesday, August 12, 2015. I would now like to turn the conference over to Ross Beaty. Please go ahead. Ross Beaty Thank you very much operator and welcome ladies and gentlemen to our second quarter conference call of our financial and operational results for Alterra Power Corp. I am pleased to be here in Vancouver with our senior management team and I’ll let John Carson our CEO introduce some when it comes time to that. I would welcome everybody. We’ve all have questions out there and remind everyone as well that we will making a number of forward looking statements today. We see Safe Harbor for these, we have a disclosure statement in our website and in our, all of our materials and I would direct your attention to those. The web presentation that we usually accompanies us is there and we can’t seem to find it ourselves, it’s just been put up and you can go into our website alterrapower.ca to follow along with presentation today as we provide it. So I’m going to turn things over right now to John Carson who will be referring to the web presentation, you can look at simultaneous with presentation as, both his material and our operating and financial team today and just go straight check it out. So John over to you. John Carson Thank you, Ross. It’s been a quarter for us. We did close the Shannon wind project financing this quarter; we’re very excited about that. We have two large projects under construction and so you’ll hear a lot about those projects as we go through the call today. I’d like to introduce the members of senior management that are here with me. You’ll hear first from Lindsay Murray our Interim CFO, then you’ll hear from Jay Sutton, our Head of Hydro, Paul Rapp, our Head of Geothermal and Wind. Also with me today is our General Counsel, Shannon Webber and also on the phone from Iceland is our CEO of the business there Asgeir Margeirsson. So with that, I’d like to proceed into the presentation and turn it over to Lindsay. Lindsay Murray Thanks, John. As you all have seen from our financial statement and MD&A release yesterday, Q2 is another busy quarter for Alterra, with the advancement of construction at the Jimmie Creek and Shannon projects, execution of project financing, partnership and tax equity agreements at Shannon and strong operating results. Although, there has been a lot going on at Alterra during the quarter, Shannon had the biggest impact on our financial statement presentation. On June 30th, we successfully closed at $287 million credit facility and concurrently partnered with Starwood Energy Group, which resulted in both parties owning 50% of the project. Shannon has been recorded as an equity investment in the June 30th financial statements, where previously it had been consolidated into our results. As you all have seen in our financial statements, we have deconsolidated the assets and liabilities of Shannon, recorded our equity investment at $62.7 million and received a $750,000 construction management fee, $1.5 million developer fee and will continue to manage the project. The completion of both the financing, partnership and tax equity agreement further demonstrates the strength of our company and executive team, as we were able to obtain new equity and financing partners from key players in the market, adding to our great partners on our existing projects. As for the project, construction is well underway at site and I will Paul Rapp, our VP of Wind to provide you with an update on construction. However, I’d like to highlight that following completion of the construction loan and equity contribution, the company does not expect to make any further equity contributions towards the project. Moving on to our operating results and for all of you following along the analyst presentation, I refer you to slide four. At June 30th, we continue to consolidate the results of our geothermal facilities in Iceland owned by our Icelandic subsidiary HS Orka of which we own 66.6%. EBITDA and gross profit increased 17% and 44%, respectively as a result of increased retail sales and decreased costs at HS Orka, increased revenue at Toba Montrose and foreign exchange. Foreign exchange had a significant impact on our results during the quarter as both the Canadian dollar and Icelandic krona weakened. Our consolidated revenues decreased $3 million against the comparative quarter and due to the sale of Soda Lake in January 2015, as well as, foreign exchange as revenues in ISK were up quarter-on-quarter. Consistent with the comparative quarter, our income statement fluctuated significantly due to the non-cash movements and foreign exchange. In the current and comparative quarter, such non-cash movements were due to movements in the company’s holding company bonds and derivatives as well as the gain on the deconsolidation of Shannon’s net assets. Consistent with previous reporting presentations, the company continues to monitor the performance of our operating results on an interest rate basis. Net interest reflects our ownership percentage at June 30th being 66.6% of HS Orka, 40% of Toba Montrose and 25.5% of Dokie 1. During the quarter, the company benefited from strong fleet generation achieving 103% of budget. Both Toba Montrose and Dokie 1’s generation increased over the comparative quarter due to strong water and wind, respectively resulting in increased revenue and EBITDA. In fact, our statements don’t give a true picture of the exceptional performance of Toba Montrose in the quarter as foreign exchange almost entirely offset a 10% increase in generation. Although, HS Orka’s revenues declined quarter-on-quarter, this is entirely due to foreign exchange. Lastly, development and head office costs decreased due to lower reoccurring costs and fluctuations in foreign exchange. Turning to the balance sheet, total assets decreased 6% to $586 million, since December 31st. This is in part due to the sale of Soda Lake, repayments of loans and foreign exchange, which on average decreased 8% since December 31, 2014. The company’s working capital available cash and liquidity has decreased against December, primarily due to cash spend on Shannon coupled with debt repayments and spend on plant and equipment at HS Orka. However, it should be noted that the company has a $20 million Canadian revolving credit facility available to fund its working capital needs and received distributions from Toba Montrose and Dokie 1 of C$8.1 million subsequent to the quarter end. The final slide I will talk to is slide eight. This slide provides details of all the long-term debt held by the company on a net interest basis, including debt service paid in the quarter. You will see the addition of the Shannon construction loan in the quarter, which is short-term and expected to be repaid in late 2015 or early 2016 when tax equity investors will fund $219 million to the project and repay the loan. The key point to highlight is the company’s operating projects continue to pay down their debt. That concludes my presentation, I now hand back to John. John Carson Thanks, Lindsay. And Lindsay we’re happy to have here as our interim CFO, our regular CFO Lynda Freeman is on temporary maternity leave, but Lindsay has done a fantastic job this quarter, especially logging the addition of the Shannon project. So with that I’d like to turn our attention to operations and for that I’ll turn it over to Jay Sutton and Paul Rapp. Jay? Jay Sutton Thanks, John. So referring to slide nine, TMGP had a very successful second quarter of 2015, producing 270 gigawatt hours of energy versus our forecast of 229 gigawatt hours. A warm spring and hot summer resulted in continued higher than forecast inflows and as a result, we achieved on 118% of our forecast generation in Q2 and our 118% of forecast generation year-to-date. Our strong generations continue into our third quarter and we achieved 99% of the forecast for the month of July and are currently at 95% of our provided forecast for the month of August. As we stand all four units are currently running and operating – generating just under 200 megawatts. In the second quarter we did make some further improvements to settlement exclusion at our Montrose plant that will result in reduced annual outage time and further reduction in our long-term operating costs. Our crews continue to operate and maintain the plant safely and according to our environmental commitments and there are no significant operating issues at either of the facilities. That’s all I have for Toba. Over to you Paul. Paul Rapp Thanks, Jay. Over for everybody to slide 10 for the Dokie 1 highlights. The Dokie wind farm performed slightly below plan in Q2, it produced about 61.6 gigawatt hours of electricity or 90% of the budget. The production was negatively impacted by low wind in May, which was seen throughout the region at all our neighboring wind farms as well. Production recovered well and exceeded plan in both June and July and we’re tracking at plan through August as of this morning. Production overall is at 95% of the year-to-date plan. The Dokie facility continues to operate well, we have no safety or environmental issues, no equipment issues and we’re exceeding our availability targets. Moving on to slide 11 for highlights at our Iceland operations, at Svartsengi and Reykjanes, both plants performed well in the second quarter and production was at 97% of plan for the quarter and 98% of the plan year-to-date. Focus up in Iceland right now is on capital works, for operational improvements at our Svartsengi plant. We’ve completed setting surface casing for two planned production drill holes, adjacent to the Svartsengi field; drilling in the two holes will commence in September, one hole is a makeup to provide additional steam to the plant and the second hole is an exploratory hole as we look to expand the field. At Svartsengi, we’re also continued to work on a new fluid disposal pipeline and we’ve commenced construction of the outlook works to the sea and construction of the pipe alignment. This pipeline will allow better control of fluid discharge at the plant and will allow for increased power production at the plant. At Reykjanes the main capital work continued to focus on construction of a pipeline from the plant, which will transport geothermal fluid from power production to the previously addressed ability for the Reykjanes plant. I’ll hand it back over Jay and talk about some of our active construction projects. Jay Sutton Thanks, Paul. So referring to slide 12 now. Jimmie Creek continues to make great progress. At a high level, we are expecting to complete civil work on the project by the end of this year and then focus on the electrical and mechanical insulations through the winter to the spring, we’ll begin our commissioning. Up at the intake, we are more than 65% completed the concrete for the intake in rubber dam and is scheduled to divert the flows back into our new intake structure in late September. The river and tributary diversions have functioned well through the high summer flows and the intake is on schedule to be complete by the end of the year. Down the penstock construction, the contractor continues to make great progress with nearly 80% of the penstock installed both in backfilled, including the bifurcation in pipe bridge sections. We expect to complete the installation of the penstock in October of this year. Then as you can see on the photo, we’ve completed the construction of the steel superstructure and bridge crane for the powerhouse. And we are now working on the control room and electrical balance of plant inside the powerhouse. Construction of the switchyard foundation is complete and we are ready for the delivery of the transformer which is scheduled for later this month. Members of our engineering team are wrapping up their site visits for the factory acceptance tests of electrical and mechanical equipment and we’ve been very pleased with the quality of the equipment being supplied. So all of the key components have now been shipped with the exception of the nozzles that are currently being assembled for shipment at the end of August. So early September, everything will be in shipment or on-site. We’ve got a great project team and great contractors performing the work and we extend our thanks to them for keeping this project on schedule and on budget. So it’s all that for Jimmie Creek, Paul, back to you. John Carson Great. Thanks, Jay. Let’s start off with Shannon, just talking about the financing, which is just closed on June 30. We did close a $287 million U.S. construction credit facility that was provided by affiliates of Citi, Santander and RBC. With that we also closed a commitment to tax equity of $212 million, could move up a little bit from of Berkshire Hathaway and Citi affiliates. So we’re very pleased that after a long process of getting really a global class financing done for a large wind farm in Texas with great participants. We’re going to hold these assets in a 50% partnership with Starwood. We’ve known them corporately for a lot of years and we’re very happy to have this deal completed with them. We expect strong cash flows and EBITDA about $7.5 million of EBITDA out the gate and close to that in cash flow from the project. So this is a very positive project for us, we’re excited about it to hold with our partners with Starwood. With that, I’m going to turn over to Paul, and to give an update of the construction activities. Paul Rapp Sure. Thanks, John. Construction activity has been ongoing since December as we reported in the last quarterly call and ended strongly prior to financial close. So to date we have completed construction of all site roads, all the wind turbine foundations, the underground collector system, the overhead transmission line and the project substation. The project main power transformer has been delivered and it’s ready for energization. Energization of our project substation from the Oncor interconnection substation is scheduled to be completed this month. Wind turbine erection is in full swing and as of yesterday, we had a total of 14 wind turbines fully completed and a further of 34 in progress. Wind turbine deliveries are well underway and the photo on slide 13 shows one of the wind turbine rotors being installed earlier this week. Our construction contractor Margeirsson is doing a great job and has a very high quality crew on site and they’re really getting efficient in their turbine erection as we’re really getting into full swing. Project is expected to reach commercial operations in late 2015 to early 2016. John Carson Thanks, Paul. With that, I’ll refer you to slide 14, which is the last slide we’ll speak to today. This is just a bit of looking ahead in brief. The big thing that I’m looking forward to personally is something I’ve been involved with for years and Ross Beaty, our Executive Chairman even longer, as our South American asset in Chile, the Mariposa field, where we own a fantastic prospect there with our partner Energy Development Corporation. We are going to commence drilling there in a couple of months, we think in October, maybe November, but depending on the weather. So we’re very excited about this, it’s the big opportunity for us. It will be funded by our partner and we couldn’t be more excited about the prospects. We’re also looking at multiple wind opportunities in the USA and other places, so you’ll be hearing more about these hopefully in the coming days. We’re working very hard initially on a 20 megawatt solar opportunity in Chile in a different region from our Mariposa asset. There were also, as you heard last time working on several early stage hydro projects both in Canada and in Iceland. Right now we’re very active on 90 megawatts in our larger portfolio with many more megawatts is behind those after we get these earlier stage once done we’ll be able to focus hopefully more on those. In meantime, as Paul has emphasized we’re continuing our asset optimization plan, we’re working on the Reykjanes field and expanding the Svartsengi fields. You’ll be hearing more about that later and our hopes and plans for continued increase in generations there in Iceland. With that Ross, its back to you, that’s our quarter. Ross Beaty Thank you very much, John and everybody here today. My final comments here are involving more of the macro space. I think we’ve had quite a year this year in the renewable energy business in North America and the world. Renewable energy is now a mainstream form of power generation and growing very, very rapidly outpacing all other forms of electricity generation in the world. I think with the announcements by the G7 that they are going to drive to phasing out fossil fuel use by the end of the century and particularly the announcement by President Obama last month, said he was going to aggressively push phasing out of coal-fired electricity regeneration in favor of renewable energy generation. We’re going to see continued interest by governments, by communities, by a lot of people to get more and more of renewable energy because it is the ultimate sustainable energy solution for the world. This has helped to drive our own share price up, we’ve outperformed the market. We’ve had a good year so far, but it’s also being the growth that we’ve seen in our own development assets. Jimmie Creek and Shannon particular you’ve seen, we’re hitting our generation targets, we’re really doing well right on, as a company and so it’s very enjoyable time to be part of this company and part of this business. I don’t see that changing any time soon. I still think our stock is very undervalued and I think we’re going to have a continuing good year ahead. So with that, listeners I will stop the editorial here and open the call to questions and we can take questions right now, operator. Question-and-Answer Session Operator [Operator Instructions] Your first question is from Marin Katusa, KCR Fund. Please go ahead. Marin Katusa Hey, guys. Great job. I’ve got a quick question. I couldn’t quite hear the part regarding Shannon. Will the commercial operation be declared for January 1, 2016? John Carson We’re shooting to have it done before the end of the year, but it really is dependent on exactly how the turbine erection and commissioning schedule goes. It’s going to come in either December or January. Marin Katusa Is it on budget right now because with all the floods that happen, I haven’t seen any like, there was no literature on, are we above budget or are we behind budget or –? John Carson Yeah, Marin, thanks. We’re just approximately about $2 million over-budget due to floods that we’d had, some rain events in the year. We’d hope to make those savings back before the project is done. But yeah we’re just slightly over budget due to delays that were caused by heavy rains in the area, which were well publicized. Marin Katusa My final question is a reiteration from the last call. Just wondering if there has been anything on the board level regarding a dividend or what Ross’ and the board’s opinion is on that? John Carson Thanks for that, it’s Carson, Marin. We constantly talk about when, not if we’re going to be able to pay a dividend. We’re looking at all sorts of different scenarios right now. I would say let’s give us another quarter to come up with more definitive discussion about that subject. Operator Thank you. Your next question is Jonathan Lo, Raymond James. Please go ahead. Jonathan Lo Hi, thanks. Just two questions. First one, the cash, the net interest cash declined quite a bit. Is that from the Shannon investment? Lindsay Murray It would be from the Shannon investment as well as, repayment of debt at HS Orka. We were also doing capital projects at HS Orka which would have decreased our cash. Jonathan Lo For reinjection wells at Reykjanes, do you have an idea of the expected impact those will have on the generation there? Paul Rapp Yeah, the intent for those that provide pressure support to keep the field at its current output. It’s the typical, I guess, evolution of a geothermal field is as it matures, you need to provide reinjection support for the fluids you’re extracting, so that’s the intent here. It’s to try and provide pressure support to maintain the existing output. Jonathan Lo Thank you. Operator Thank you. Your next question is from Mike Plaster, Salman Partners. Please go ahead. Mike Plaster Hi, thanks very much. I guess, just sticking with HS Orka. We’ve seen aluminum prices coming off a bit this year and the value of the krona coming down. Just wondering if that’s put any pressure on the local market power prices. I know previously you were saying they’re fairly strong, is that still the case? Ross Beaty Yeah, it’s continuing strong and we don’t see that changing. Mike Plaster Okay, great. Now there has been some talk of potentially lifting the capital controls in Iceland. Do you think, that could open up some new opportunities there if it brings in more foreign capital? Ross Beaty Yes, we do and we do see that changing, it’s an actively evolving space right now, it’s got lots of issues around it. But absolutely, we think it will be very positive for our business there and other businesses when it ultimately happens. John, do you have any — John Carson No. I think you got it, Ross. Mike Plaster Do you any sort of sense on timing or is there something that could be kind of bogged down in the political process for a while? Ross Beaty Well, we have our Iceland manager with us today Asgeir Margeirsson. Asgeir, do you have any comments on that question. I think you could probably answer that more wholesomely than anyone here in Vancouver. Asgeir Margeirsson Thank you, Ross. There is a master plan in place, it was introduced by the government recently. It was extremely well accepted by the market. It will be a step wise process, but they haven’t put out yet the exact details of it. And bulk of it has to do with a states with fallen backs [ph] and their assets. So there is a master plan in place, we have yet to see more of the details over there. I underline, it’s been extremely well accepted by the markets. So we’re very happy about the progress. Ross Beaty Thanks Asgeir. Mike Plaster Okay. Great, thank you. Just shifting over to BC, we’ve certainly seen lots of forest fires going on in the province right now. Do you see any risks to any of your operations from any of them? John Carson It’s always risk, but so far I’m speaking Jay and Paul, so far we haven’t had any issues and the summer is rapidly drawing to an end here and so we expect to see fall ratings come in when that happens, the issue is going to be behind us. So, so far so good, but it is a constant threat and we have to keep vigilant. Paul Rapp One of the things I’d like to add is last year, we publicized the fact that the Mount McAllister forest fire approached closely to our Dokie 1 wind facility. The fact that it did so, which was a natural occurrence and subsided and did touch the facility actually gives us some additional safety in coming years for a while, since brush and trees et cetera have been the burned down for a bit around and near the plant. So there is safety there at Dokie 1. Mike Plaster Okay, fair enough. And then I guess with Jimmie Creek, if there were any fire related delays, presumably there is insurance for that. Jay Sutton It could be fires, floods, hurricanes, landslides, we got to make sure it’s all out. But let’s hope it doesn’t happen. Mike Plaster Yeah, okay, great. Thank you, that’s it for me. Operator [Operator Instructions] There are no further questions at this time. You may proceed. John Carson Thank you, operator and thank you, all. I think that’s all we need to say today. It was a good quarter once again. The company hasn’t had a good run this year and we don’t see that ending anytime soon. We’ve got some interesting new things we’re looking up and we look forward to reporting on those in the next quarterly reporting three months time. Thank you all for joining us today and we’ll end the call now. Thank you, operator. Operator Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.

Alliant Energy’s (LNT) CEO Pat Kampling on Q2 2015 Results – Earnings Call Transcript

Alliant Energy Corporation (NYSE: LNT ) Q2 2015 Earnings Conference Call August 6, 2015, 10:00 am ET Executives Susan Gille – Manager, IR Pat Kampling – Chairman, President & CEO Tom Hanson – SVP & CFO Analysts Andrew Weisel – Macquarie Capital Paul Patterson – Glenrock Associates Operator Thank you for holding, ladies and gentlemen, and welcome to Alliant Energy’s Second Quarter 2015 Earnings Conference Call. At this time, all lines are in a listen-only mode. Today’s conference call is being recorded. I would now like to turn the call over to your host, Susan Gille, Manager of Investor Relations at Alliant Energy. Susan Gille Good morning. I would like to thank you on the call and the webcast for joining us today. We appreciate your participation. With me here today are Pat Kampling, Chairman, President and Chief Executive Officer; Tom Hanson, Senior Vice President and CFO; and Robert Durian, Vice President, Chief Accounting Officer and Controller; as well as other members of the senior management team. Following prepared remarks by Pat and Tom, we will have time to take questions from the investment community. We issued a news release last night announcing Alliant Energy’s second quarter 2015 earnings and reaffirmed 2015 earnings guidance. This release as well as supplemental slides that will be referenced during today’s call are available on the Investors Page of our Website at www.alliantenergy.com. Before we begin, I need to remind you that the remarks we make on this call and our answers to your questions include forward looking statements. These forward looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters discussed in Alliant Energy’s press release issued last night and in our filings with the Securities and Exchange Commission. We disclaim any obligation to update these forward looking statements. In addition, this presentation contains non-GAAP financial measures. A reconciliation between non-GAAP and GAAP measures are provided in the supplemental slides which are available on our website at www.alliantenergy.com. At this point, I will turn the call over to Pat. Pat Kampling Thanks, Sue. Good morning and thank you for joining us today. I am pleased to report that we had another solid quarter with second quarter 2015 earnings in line with our expectations. Tom will discuss the financial details of the quarter. I am pleased to let you know for the first time in years temperatures did not have a significant impact on earnings per share for the first seven months of 2015. Therefore our year end earnings guidance is trending toward the midpoint of our guidance issued in November 2014. Environmental regulations are in the news again and it is very important to step back for a moment and review the orderly transition of our generating fleet during the past six years. We have been planning for sweeping environmental rules that would impact our industry and developed a strategic plan that would position us and our customers well for that future. We completed many components of that plan, including installing of our 500 megawatts of wind, spending over $1 billion related [ph] emissions controls to our largest and most efficient generating stations and have decided to either close or convert to natural gas several older less efficient coal generating stations. To further diversify our generating fleet, we added natural gas fired generation with the purchase of the 675 megawatts Riverside Energy Center and have another 650 megawatts under construction in Marshalltown, Iowa. And in Wisconsin, we are proposing to build another 650 megawatt natural gas fired generating station. We’ve had a very deliberate plan that transformed our generating fleet to one that is diversified, flexible, has lower emissions but ensuring that we continue to deliver reliable affordable energy to our customers. 2015 is a significant year for our industry in how we utilize and dispatch our generating fleet. We experienced some remarkable performance at our Riverside and Emery combined-cycle natural gas generating stations. During the first half of the year, they achieved capacity factors averaging approximately 45% which is about doubled they experienced in the first half of 2014. Also, our wind generation has remained consistent with capacity factors for the first half of 2015 averaging over 35%. Lastly, our coal units have operated well with the recently installed environmental controls. We have a robust capital expenditure plan for 2015 which totals over $1 billion. Approximately 35% of this year’s capital budget is for improvement and expansion of our electric and gas distribution systems, including bringing natural gas to underserved communities. Approximately 30% of this year’s capital budget is to improve the efficiency and environmental profile of our generating units. Also, approximately 30% of this year’s capital budget is for the construction of the Marshalltown Generating Station. Now let me update you on our large construction projects. In Wisconsin, the installation of a scrubber and baghouse at Edgewater Unit 5 is approximately 65% complete. It’s expected to be in service in the second quarter of 2016. Capital expenditures forecasted for this project are approximately $300 million. At Columbia, comprehensive asset management program to improve the efficiency of the units started with the installation of two new cooling towers completed in 2014 and the remaining projects are expected to be completed by the end of 2017. WPL’s share of the total estimated capital expenditure for these projects is approximately $60 million. We also expect to start construction of the PSCW approved Columbia Unit 2 SCR during the first quarter of 2016. Our estimated capital expenditure for the SCR is approximately $70 million. In Iowa, the Lansing Generating Station dry scrubber has been placed in service at a capital expenditure of approximately $55. As we previously announced, in order to replace retiring facilities and further increase the amount of natural gas fired generation, we are constructing the Marshalltown Generating Station and have proposed the Riverside Energy Center expansion. In Iowa, site construction is well underway at IPL 650 megawatt combined cycle natural gas fired Marshalltown generating station as you can see on Slide 2. Lehmans [ph] delivered the first combustion turbine in June and we expect delivery of the second CT this month. We plan to complete the construction of the gas pipeline to the facility this month and the transmission upgrades are underway. The transition upgrades for Marshalltown are projected to cost less than $25 million. So we now expect the total project to come in over $100 million below the $920 million cost cap. The reduced cost for the transition upgrades will not have an impact on our capital expenditure or rate base forecast since ITC will be funding the transmission. Marshalltown is expected to be in service by the second quarter of 2017. In 2013, WPL announced that it would require several older coal facilities and natural gas peakers. The forecasted accredited capacity loss from this retirement is approximately 640 megawatts. As a consequence, WPL evaluated a wide range of alternatives to meet the long-term energy and capacity needs for its customers. In June 2014, WPL issued an RFP from market-based options. After evaluating all of our options, we concluded that expanding the Riverside Energy Center was in the best interest of our customers. The proposed Riverside Energy Center expansion located at our existing Riverside site near Beloit, Wisconsin is approximately 650 MW highly efficient natural gas generating facility at an estimated cost of $750 million, excluding AFUDC and transmission. This past April, WPL applied for a certificate of public convenience and necessity or CPCN with the Public Service Commission of Wisconsin for the proposed expansion. During a recent prehearing conference, questions arose over Wisconsin Electric Power Company’s intervention and whether WEPCo will be allowed to propose for the first time a short-term PPA as an alternative to Riverside. Later this morning, the commission will decide WEPCo’s intervention request. Our competitive RFP and alternative analysis with diligence, and we believe Riverside is and will be found to be in the best long-term interest of our customers. The current procedural schedule for the CPCN is provided on Slide 3. The proposed Riverside Energy expansion includes an approximate 2 MW solar on the properties. We also have several other solar projects under development. We’re doing them for us to gain valuable experience on how to best integrate solar on a cost-effective manner into our electric system. We will own and operate the solar panels at the Indian Creek Nature Center in Iowa as well as our Madison Corporate Headquarters which are our two projects currently under development. These solar projects were part of the capital expenditure guidance we provided in November 2014. In July, IPL announced a settlement with EPA, the Sierra Club in the state of Iowa and Linn County in Iowa to resolve potential Clean Air Act claims and to avoid unnecessary delays and ongoing uncertainty associated with litigation. The terms negotiated in the settlement were consistent with our long-term plan for cleaner energy and most of the projects included in the settlement have already been completed or at plan. The EPA meetings earlier this week issued its final rule to reduce carbon emissions from electric utilities. This rule is widely referred to as the Clean Power Plan. We understand that this is just one more step on what will be a long process that includes legal challenges and the development of compliance plans. As we work with our state regulators to develop strategies to comply we will continue to take the approach of doing what was best for our customers. We are fortunate that we operate in states that have a long history of energy efficiency programs, environmental stewardship and support for renewable energy. How we spend our capital dollars and the pace of our capital spend is focused on ensuring we manage costs, use our resources responsibly while providing energy services and solutions to our customers. As we plan for future rate cases and work with stakeholders in developing the state clean power plants, these goals will be top of mind. Let me summarize the key messages for today. We had a solid first half of the year and are well-positioned to deliver on this year’s financial and operating objectives. Our plan continues to provide for a 5% to 7% annual earnings growth objective and a 60% to 70% common dividend payout target. Our targeted 2015 dividend increased by 8% over the 2014 dividends paid. And we continue to successfully execute on our capital plans, completing projects on time and at or below budget. We will continue to work with our regulators, consumer advocates, environmental groups and customers in a collaborative manner. We will continue to manage the company to strike a balance between capital investment, operational and financial discipline and cost impact to customers. And finally, I must acknowledge and give thanks again to our dedicated workforce which not only provides reliable energy to our customers but also delivers the financial results we are discussing today. At this time, I will turn the call over to Tom. Tom Hanson Good morning everyone. We released second-quarter earnings last evening with our adjusted earnings from continuing operations of $0.67 per share. Second-quarter 2015 adjusted earnings are $0.11 higher than second quarter 2014. Comparisons between second quarter 2015 and 2014 earnings-per-share are detailed on Slides 4, 5, and 6. The adjusted or non-GAAP second-quarter earnings from continuing operations exclude a charge of $0.06 per share from the sales of IPL, Minnesota electric and gas distribution assets. The premium over the property, plant and equipment book value was more than offset by the elimination of the applicable tax related regulatory assets resulting in the charge recorded in the second quarter. We estimate the second quarter 2015 temperature impact on sales when compared to normal temperatures resulted in lower earnings of $0.03 per share. This was $0.05 lower than second quarter 2014 temperature impact of a positive $0.02 per share. On a temperature normalized basis, Alliant energy’s residential electric sales were flat whereas commercial and industrial sales increased approximately 1% quarter over quarter. Taking into consideration the first half results, we are currently forecasting modest increase in temperature normalized sales of approximately 1% for IPL and WP&L when compared to 2014. The 2015 EPS guidance range factors in retail rate based settlements at IPL and WP&L. These settlements reflect rate-based increases at both utilities, offset by a reduction of energy efficiency cost recovery amortization at WPL and the elimination of the Duane Arnold Purchase Power capacity payments at IPL. IPL will credit customer bills by approximately $25 million ratably over 2015. By comparison, the billing credits in 2014 were approximately $70 million and occurred from May through December. Also included in WP&L’s rate settlement was an increase in transmission costs related primarily to the anticipated allocation of SSR costs. As a result of a FERC order issued after the settlement, the amount of the transmission costs billed to WP&L in 2015 will be lower than what was reflected in the settlement since the PSC approved escrow accounting treatment for transmission costs. The difference between the actual transmission costs billed to WP&L and those reflected in settlement will accumulate in a regulatory liability. We estimate that this regulatory liability will have a balance of approximately $40 million at the end of 2016. We view this regulatory reliability as another mechanism we can use to minimize future rate increases for our Wisconsin retail electric customers. During 2015 IPL will provide tax benefit rider billing credits to electric and gas customers of approximately $72 million compared to $82 million in 2014. As in prior years, the tax benefit riders have a quarterly timing impact but are not anticipated to impact full year 2015 results. The IUB has approved a second tax benefit rider. Like the first tax benefit rider, we will accumulate benefits from two accounting method changes and a regulatory reliability which will then be passed through to customers as billing credits. The total expected billing credits are approximately $75 million. These accounting method changes are still subject to final IRS approval. We propose a credit customer bills with the second tax benefit rider after 2016 which is when the regulatory reliability related to the first tax benefit rider is expected to be fully utilized, and when we expect to file our next electric rate case in Iowa. Drivers to the difference between the statutory tax rates for IPL, WP&L and AEC, and the 2014 actual and 2015 forecast effective tax rates are provided on Slide 7. The consolidated AEC effective tax rate for 2015 is forecasted to be 16%. Turning to our 2015 financing plan. Cash flows from operations are expected to be strong given the earnings generated by the business. We also expect to benefit from not making any material income tax payments in 2015 and 2016. These strong cash flows will be partially reduced by IPL tax benefit riders and customer billing credits. In our 2015 financing plan, we anticipated issuing approximately $150 million of new common equity. In March and April of this year, we issued approximately 2.2 million shares of new common equity with proceeds to $135 million through the at-the-market offering. We plan to issue the remaining approximately $15 million of new common equity through our shareowner direct plan throughout the remainder of the year. In June, IPL retired $150 million of long term debt. The 2015 financing plan assumes we are issuing up to $300 million of long-term debt at IPL. We may adjust our financing plan as deemed prudent, if market conditions warrant and as our debt and equity needs continue to be reassessed. We believe that with our strong cash flows and financing plans, we will maintain the appropriate targeted liquidity, capitalization ratios and credit metrics. The 2015 financing plan assumed the sales of our Minnesota electric and gas distribution assets which were completed last month with proceeds of approximately $145 million, including working capital adjustments and a $2 million promissory note. Turning now to the ROE complaint filed against MISO transmission owners. In December 2014, FERC ordered formal proceedings to begin. To-date, various parties have filed testimony with FERC. A final decision from FERC on the complaint is currently expected in 2016. Year-to-date impact of the anticipated reduction to APC’s authorized ROE has lowered earnings by $0.02 per share. We have summarized our planned regulatory dockets of notes on Slide 8. In Wisconsin, we anticipate receiving a decision on the 2016 fuel monitoring level in the fourth quarter of this year and we anticipate receiving a decision on the Riverside expansion CPCN in the second quarter next year. We very much appreciate your continued support of our company and look forward to meeting with you throughout the year. At this time I’ll turn the call back over to the operator to facilitate the question and answer session. Question-and-Answer Session Operator [Operator Instructions] We’ll go first to Andrew Weisel of Macquarie Capital. Andrew Weisel Good morning guys. Couple questions on the generation fleet. First, I know the governor of Wisconsin is certainly making a claim against the EPA as part of his presidential bid. Any thoughts on how the CPP might impact your specific portfolio and CapEx plans? Pat Kampling Good morning, Andrew. This is Pat. The CPP rule is very different than the one that was originally proposed. So we’re still analyzing this and I can’t speak on behalf of our governor of course but we come from a state that has had always very good environmental rules, renewable and energy efficiency standards. So we will work with our states to make sure that we get implementation plans that work for us but right now we really need to spend the time understanding this new rule because it’s very different than the proposed rule. Andrew Weisel Then the second question is on coal to gas switching, I mean in the short term, not the long term, I understand your gas plants have been running very efficiently at very high capacity factors year to date. What kind of impact does that have in terms of the near term and longer term dispatch plans and financials? Pat Kampling No, it really doesn’t impact anything whatsoever. As you are aware, the transition on our smaller coal fleet to natural gas and keep in mind we actually had natural gas already located at those sites. It’s really a transition for us to get us through the next few years as we talked about. That’s not a long-term solution. The long-term solution is to add new combined cycle generating facility to our fleet. Andrew Weisel Then one other question on the load growth, I appreciate the high level of detail but maybe just an update on the trends in your local economies, especially the Wisconsin industrial side. Tom Hanson Andrew, this is Tom. If we kind of look at it more broad-based we continue to see a modest number of additional residential customers being added to our system but recognizing we are seeing residential use each go down. But we are seeing some expansion in the industrial sector of our business. So that gives you kind of a sense of where we’re at. So as I stated, we are anticipating about a 1% increase in sales year-over-year. Operator [Operator Instructions] We’ll go next to Paul Patterson of Paul Patterson of Glenrock Associates. Paul Patterson Just sort of circle back on Riverside. I guess what the question I sort of had is first of all, I mean this is more of a question for Wisconsin electric. But with the merger, it seems that they are saying that they are now coming up with a lot of extra capacity and that – as you indicated previously in the call, that they can replace Riverside. But I guess what my question is – what is it in Wisconsin that prevents utilities who were not merged from engaging this kind of what would seem to be a savings methodology, do you follow what I am saying? I mean this could have been done without a merger and I am wondering just in general how we should think about that. Pat Kampling Paul, we’ve been very deliberate in our process to make sure we have the lowest cost long-term solution for our customers. And I cannot speak on what WEnergy is thinking right now. And all we really know is what they filed at the Wisconsin Commission, believing that they have a short-term solution to offer to us which we have not seen, where they provided no details. So this is just a very new news and we’ve got to work through the process here and Wisconsin Commission is going to rule later this morning on if they’re allowed to be involved in the case with another proposal. Paul Patterson I mean I guess, basically get interviewed in the cases [ph] I wouldn’t – I mean is that fair to give a utility in the neighborhood – I mean how much of a gating factor should we look at that being in terms of what their proposal is. I don’t get it. I mean that means that their proposal is unlikely to – but I mean in general though, I mean assuming that they are giving it, how should we think about that? Pat Kampling Yes, and Paul, it’s common that other utilities get interviewed in the status in the cases, that’s just very common as you follow the cases. So that’s not unusual. The unusual thing here is that at the 11th hour they want to provide another proposal and they were not part of the RFP process, they did not reply to any — they did not provide any offers when we did the RFP. So this is a little unique. Paul Patterson Now you said that you’ve – just to clarify this. You did say that basically you looked at all these things and this is the cheapest cost. What about this idea of combining with the utilities I guess is what I am sort of wondering here now, like it seems kind of that Wisconsin with the merger with WPL was able to come up with some savings. I am just wondering, is there something that doesn’t allow utilities to cooperate in that manner without a merger? Pat Kampling Paul, just to be clear they merged with WPS. Paul Patterson I am sorry, WPS. I apologize. Pat Kampling That’s okay. No but they were – and again I prefer that you address this with WEnergy but we are not part of their IRP planning process. Paul Patterson But I am just wondering – generically, I am sorry to harp on this. I am just speaking generically. Is that something that you guys look at and when these plans are put forward, the idea of partnering with – Pat Kampling Now our IRP relates to our Wisconsin customers, Paul. We’ll talk to you later on this if you want to follow up. End of Q&A Operator Ms. Gille, there are no further questions at this time. Susan Gille With no more questions this concludes our call. A replay will be available through August 13, 2015 at 888-203-1112 for US and Canada, or 719-457-0820 for international. Callers should reference conference ID 8244179. In addition, an archive of the conference call and a script of the prepared remarks made on the call will be available on the Investors section of the company’s website later today. We thank you for your continued support of Alliant Energy. And feel free to contact me with any follow-up question. Thanks. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com . Thank you!

American States’ (AWR) CEO Bob Sprowls on Q2 2015 Results – Earnings Call Transcript

American States Water Company (NYSE: AWR ) Q2 2015 Results Earnings Conference Call August 5, 2015 2:00 PM ET Executives Eva Tang – Chief Financial Officer Bob Sprowls – President and CEO Analysts Jonathan Reeder – Wells Fargo Operator Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company Conference Call discussing the company’s Second Quarter 2015 Results. This call is being recorded. If you would like to listen to the replay of this call, it will begin this afternoon at approximately 5 p.m. Eastern Time and run through August 12, 2015, on the company’s website, www.aswater.com. After today’s presentation, there will be an opportunity to ask question. [Operator Instructions] This call will be limited to an hour. As a reminder, certain matters discussed during these conference call maybe forward-looking statements intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. Please review a description of the company’s risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. At this time, I will turn the call over to Eva Tang, Chief Financial Officer of American States Water Company. Eva Tang Welcome, everyone, and thank you for joining us today. On the call with me is our President and CEO, Bob Sprowls. I’ll start with our quarterly financial result. For the second quarter of 2015, diluted earnings were $0.41 per share, compared to $0.39 per share for the same period in 2014. While earnings at our Water segment remained flat for the quarter, earnings for the Electric segment decreased by $0.01, earnings at our Contracted Services segment increased by $0.02, and our parent company’s earnings increased by $0.01. I will now discuss major items impacting the comparability of the two periods. For the quarter Water revenue increased about $1.3 million to $87.6 million as compared to the same period in 2014. The increase is primarily due to the third year rate increases and increases generated from revenue recovery on capital projects approved through advice letter filings. These increases were partially offset by an $842,000 decrease in surcharges during the quarter to recover previously incurred costs approved by the California Public Utilities Commission or the CPUC. Most of these surcharges were implemented in 2013 and expired during 2014. The decrease in revenue from these surcharges is offset by a corresponding decrease in operating expenses, largely in administrative and general expense, resulting in no impact to pretax operating income. As a reminder, a change in build consumption, which decreased 13% during the second quarter as compared to Q2 last year, does not have a significant impact on the company’s revenues or Water gross margins due to the CPUC authorized Water Revenue Adjustment Mechanism or the WRAM. The WRAM mechanism is in place for all of our Water service areas, excluding the effect of surcharges our Water gross margin approximately authorized Water margin approved by the CPUC. We expect Water consumption to continue decreasing during the remainder of 2015 as compared to the same period last year, because of mandatory Water conservation and rationing, which Bob will discuss in more detail later. Again, any continued decrease in Water consumption will not impact our earnings significantly because of the WRAM. For the second quarter of 2015, revenues from Electric operations were $7.9 million as compared to $8.3 million for the same period in 2014. The decrease is primarily due to a change in the monthly allocation of the annual base revenue requirement as stipulated in the CPUC’s November 2014 final decision on our electric general rate case. Differences in the monthly allocation of the annual adopted revenue for 2015 versus 2014 are expected to reverse during the year. Revenues for our Contracted Services business, American States Utility Services, or ASUS, decreased $1.9 million to $19.1 million for the second quarter of 2015. This decrease was due to lower construction activities, as compared to the second quarter of 2014, due largely to the completion of several large capital projects during 2014, which did not recur in 2015. These decreases were partially offset by higher construction revenues during the second quarter of 2015 due to favorable changes in cost estimated for certain capital work in progress. These new capital upgrade projects and cost estimates are continuously evaluated and revised accordingly. Revenues for these projects are recognized based on the percentage of completion method of accounting. There was also increasing monthly operation and maintenance revenue due to successful price redeterminations in September 2014. Our water and electric supply costs were $27 million for the second quarter of 2015. Any changes in supply costs for both the water and electric segment as compared to the adopted supply costs are tracked in balancing account, which will be recovered from or refunded to our customer in the future. Administrative and general expenses for the second quarter of 2015 were $20.5 million, as compared to $19.4 million for the same period in 2014. Excluding surcharges which has no impact on earnings, A&G for our utility segment increased by $1.2 million during the quarter. The increase was due primarily to higher legal and other outside service costs related to condemnation and drought activities at our water segment. We will continue to incur legal costs to defend our water systems from condemnation actions. Furthermore in connection with our efforts to meet California Governor’s orders to use overall water usage by 25% as compared to 2013, Golden State Water has been authorized by the CPUC to track incremental drought-related costs incurred in a memorandum account for possible future recovery. Such incremental costs are being expensed until future recovery is approved by the CPUC. Despite higher A&G at water segment for the second quarter, on a year-to-date basis the aggregate A&G, other operations and maintenance expenses were lower in 2015 than for the same period in 2014 after excluding surcharges. In addition, A&G expenses for contracted services increased by $482,000 for the three months ended June 30, 2015 primarily due to a shift in labor and other indirect costs to A&G related activities in support of various functions for all military bases. This increase was largely offset by a decrease in such costs included in construction expenses as compared to the second quarter of 2014. ASUS construction expenses decreased by $3.4 million to $10.4 million during the second quarter of 2015, as compared to the same period in 2014, due primarily to the completion of large capital projects and programs in 2014, which did not recurred in 2015. In addition, as just discussed, there was a shift in labor and other indirect costs incurred as A&G activities. While in Q2 of last year, a higher year percentage was incurred for construction activities. Income tax expense decreased by $728,000 to $9.5 million as compared to the same period in 2014, driven by an overall decrease in the effective income tax rate. Although very effective tax rate at Golden State Water’s company was due to differences between book and taxable income that are treated as flow-through adjustments. The effective tax rate at ASUS was lower as a result of the state income taxes which vary among the jurisdictions in which it operate. There were also favorable permanent differences, not just the tax deduction related to the introduction and construction activities, which also impacted the effective tax rate this quarter. AWR’s consolidated effective tax rate was about 38% for three months ended at June 30, 2015 as compared to 40% for Q2 last year. Let’s moving on to — move on to the liquidity and capital resources. Net cash provided by operating activities decreased by $27.9 million to $63 million for the six months ended June 30, 2016. The decrease was primarily due to a decrease in cash generated by contracted services due to the timing of billing and cash receipts for construction work at military bases during the six months ended June 30, 2015 as compared to the same period in 2014. During the first six months of last year, significant cash payments were received at ASUS with completion of several large capital upgrade project that did not recur in 2015. Cash flow from construction activities may fluctuate due to timing differences of when the work is being performed or when the cash is received for payment of the work. There was also decrease in customer water usage resulting from conservation efforts, which lowered customer billings for Golden State Water. These decreases in the consolidated cash flow from operating activities were partially offset by lower income taxes payment made during 2015, due in large part to the implementation of the new tax repair regulation in the first quarter of 2014. In regards to Golden State Water’s capital expenditures, we spend $32.5 million in company funded capital expenditures during the six months ended June 30, 2015. We expect to invest $85 million to $90 million in capital project due in 2014. For additional details on our second quarter and year-to-date performance, please refer to our earnings release and Form 10-Q issued yesterday. With that, I will turn the call over to Bob. Bob Sprowls Thank you Eva. I appreciate everyone joining us today. The company delivered solid earnings in the second quarter. During the quarter, we implemented water conservation measures and through the month of July, all of our service areas are meeting the mandated reductions. In addition, we continue to support our positions in the general rate case application that we filed with the CPUC for the water segment of Golden State Water. We also recently received the CPUC’s approval to acquire all of the operating water assets of Rural Water Company. Let me address the drought situation in California. As you’re aware, on April, 1st of this year, the Governor of California issued an executive order, directing mandatory conservation measures to achieve a statewide 25% reduction in urban water use as compared to 2013 levels. State Water Resources Control Board adopted emergency regulations in early May of this year to meet the governor’s executive order. The State Board also set reductions, which vary by area, depending on the historical per capita water use for the area in order to achieve the 25% reduction goal. In June 2015, Golden State Water filed updated drought response actions with CPUC for each service area to meet the new mandates. In July, the CPUC approved the filings. As a result, all of our water service areas have implemented our mandatory water conservation and rationing plan, which outlines restrictions for outdoor irrigation for water customers. If these restrictions are deemed insufficient to achieve the water use reductions, water allocations and additional mandatory rationing maybe implemented. Through the month of July, each of our service areas are meeting the mandatory reductions. During the second quarter, billed water consumption decreased by 13% as compared to the same period in 2014, due to our customers’ conservation efforts. As Eva mentioned, a change in consumption does not have the significant impact on the company’s results due to the CPUC authorized water revenue adjustment mechanism in place for all of our water service areas. The commission has also authorized a drought memorandum account to track incremental costs incurred in promoting conservation and implementing restriction measures for possible future recovery. In other regulatory matters, we continued to work with the PUC on the pending general rate case for all of our water regions and the general office. The rate case will determine new rates for the years 2016, 2017 and 2018. Golden State Waters’ requested capital budgets in the application averaged approximately $90 million a year for the three year period. For 2016, water gross margin is expected to decrease as compared to the currently adopted levels, due in part to a decrease in annual depreciation expense, resulting from an updated depreciation study and other expenses. Hearings for the rate case were completed in June and settlements for certain items and legal briefs were filed in July. A final decision on this rate case is expected by the end of 2015, with new rates effective January 1, 2016. Now moving onto other regulated business. As you may recall sometime ago, Golden State Water entered into an asset purchase agreement to acquire all of the operating water asset of Rural Water Company. This transaction was subject to commission approval. In June of this year, the commission approved the acquisition, including recovery of the purchase price through customer rates. A confirmation of the transaction, contemplated by the purchase agreement is subject to customary conditions, including, among other things adjustments to the $1.7 million purchase price for changes in utility plant since entering into the agreement in 2013. On completion of this transaction, Golden State Water will serve approximately 960 customers in the City of Arroyo Grande in the county of San Luis Obispo, California, which is near Golden State Water, Santa Maria customer service area and Coastal California. Under the terms of the purchase agreement, Golden State Water will take over operations 30 days after remaining conditions to closing are satisfied. Turning to our contracted services business at American States Utility Services, or ASUS, we continue to work closely with the U.S. government on the remaining price redeterminations. Just last week we received final resolution on the third price redetermination for Andrews Air Force Base in Maryland. We expect the second price redetermination for Fort Jackson in South Carolina and the second and third price redeterminations for the military bases in Virginia to also be completed during the third quarter of 2015. Filings for these price redeterminations, requests for equitable adjustment, and contract modifications awarded for new projects provide ASUS with additional revenues and margin and the opportunity to consistently generate positive earnings. We also continue to work closely with the U.S. government for contract modifications relating to potential capital upgrade work as deemed necessary for improvement of the water and wastewater infrastructure at the military bases. In addition, we are actively engaged in new proposals and expect the U.S. government to release additional bases for bidding over the next several years. We remain optimistic about the future of our contracted services business. I would like to turn our attention to dividends. On Tuesday of last week, our Board of Directors approved a third quarter dividend of $0.224 per share on the common shares of company, a 5.2% increase. We are pleased with our Board’s decision to once again increase the dividend, which reflects their ongoing confidence in the company while balancing the need for continued investment in our systems for our customers. American States Water Company has paid dividends every year since 1931, increasing the dividend received by shareholders each calendar year for 61 years. Given American States current payout ratio compared to the companies that we compete with for capital and our high shareholders equity ratio as a percent of total capitalization, there is room to grow the dividend in the future. Additionally, pursuant to the first stock repurchase program approved by the Board in March 2014, we have completed the repurchase of 1.25 million shares of AWR stock on the open market. On May 19th, 2015, our board approved a new stock repurchase program, authorizing the repurchase of up to 1.2 million shares of our common stock from time to time. We have repurchased 387,000 common shares on the open market through June 30th under this program. The repurchase programs are intended to enable the company to achieve a consolidated shareholder’s equity ratio as a percentage of total capitalization that is more reflective of appropriate equity ratios for Golden State Water and ASUS. As of June 30, 2015, our current equity ratio is 59%. Before I close with my prepared remarks, I’d like to thank you for your interest in American States Water. And I’ll now turn the call over to the operator for questions. Question-and-Answer Session Operator [Operator Instructions] The first question comes from Jonathan Reeder from Wells Fargo. Please go ahead. Jonathan Reeder Good afternoon, Eva and Bob. With the WRAM in place to protect your margins at the utility, I was just wondering if you could give us a little bit of guidance how we should be thinking about the distribution of GSWC’s adopted gross margin throughout 2015? Such as maybe what percentages fall in each quarter? Eva Tang Jonathan, we usually just look back three to five years history to determine that allocation. So if you look through the quarterly sales in the past few years and average those out, that should give you pretty good allocations for the quarter. Jonathan Reeder Do you have any idea like roughly what percentage of the margin, I guess, remains for Q3 and Q4, is it 50% greater than that? Eva Tang We think more than 50% because the third quarter is our highest sales quarter in summer. First is the lowest usually and then… Bob Sprowls Third will be greater than the second, and fourth will be greater than first. So it’s more than 50% of the last half of the year. Eva Tang Half of the year, yes. Jonathan Reeder Okay. Fourth is greater than the first still. Okay. That’s helpful. And then have your expectation for ASUS increase the bid now for 2015 due to these favorable changes in the cost estimates for the projects, or are we still thinking about maybe $0.26 or so, I think that’s what you cited last, Bob, kind of for the full year expectation? Bob Sprowls Yeah. We think that $0.26 is still a pretty good number for the entire year. And you will recall we got to that $0.26 by taking last year’s $0.31 and backing out about a nickel fourth of sort of items that were not perspective but were impacted by prior year as well. But we had a retroactive price, re-determination for instance that contributed I believe $0.03. Jonathan Reeder Correct. Yeah. Okay. And then just kind of last question. On that front with the projects that I guess, you booked those favorable changes, were those like — at all those multi-year large projects, were they some of the projects that were awarded? I think it was at the end of September of last year. When did those projects kind of get completed just kind of wondering a little more detail on that? Eva Tang Jonathan, I think majority of our current projects are not multi-year projects. We finished quite a few multi-year projects last year. So most of the projects, we are currently working on is probably 12 to 18 months project I would say. Jonathan Reeder Okay. And then the next kind of update on, where you stand with the projects we should be thinking Q3, that’s when the government I guess kind does the budget. Bob Sprowls Yes. That’s usually in sort of that September — late September timeframe, early October, the amount of additional capital work that we can do, sort of through the next 12 months, next 12 to 15 months. Eva Tang And we usually work with them, what kind of projects and we can do on the base and September 30 is really when funding comes down that we would know which paths to go forward. Bob Sprowls Yeah. I mean that’s consistent with the government’s budget. I’m sure there is more dollars being asked more than we’re going to get but it’s usually a very sizable chunk. Last year, I think we got $27 million, yes. Jonathan Reeder Okay. And then are there any — I guess, kind of large multi-year project somewhere to the three that you recently completed that might be in the near future or nothing you are aware of at this point? Bob Sprowls Yeah. Nothing we are of at this point. There are a lot of small projects that we are working on and that should keep a good solid revenue stream. Jonathan Reeder Okay. Great. I appreciate the additional clarity. Thanks. Bob Sprowls Thank you, Jonathan. Eva Tang Thank you. Operator [Operator Instructions] This concludes the question-and-answer session. I’d now like to turn the conference back over to Bob Sprowls for closing remarks. Bob Sprowls Thank you, Danielle. Again, thank you all for your participation today and for your continued interest and investment in American States Water Company. Everyone have a good day. Eva Tang Thank you. Operator Thank you. This concludes today’s American States Water Company Conference Call.