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UIL Holdings’ (UIL) CEO Jim Torgerson on Q2 2015 Results – Earnings Call Transcript

UIL Holdings Corporation (NYSE: UIL ) Q2 2015 Earnings Conference Call August 06, 2015 10:00 AM ET Executives Susan Allen – Vice President, Investor Relations Jim Torgerson – President and Chief Executive Officer Rich Nicholas – Executive Vice President and Chief Financial Officer Analysts Andy Levy – Avon Capital Caroline Bone – Deutsche Bank Eric Guo – Gabelli & Company Andrew Weisel – Macquarie Capital Paul Patterson – Glenrock Associates Andy Levy – Avon Capital Operator Good morning. My name is Bobby Jane. I will be your conference operator for today’s call. At this time, I would like to welcome everyone to the UIL Holdings Second Quarter 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Susan Allen. Susan Allen Thank you, Bobby Jane and good morning everyone. Thank you for joining us to discuss UIL Holdings second quarter 2015 earnings results. I’m Susan Allen, Vice President of Investor Relations. Participating on the call is Jim Torgerson, UIL’s President, Chief Executive Officer and Rich Nicholas, UIL’s Executive Vice President and Chief Financial Officer. If you do not have a copy of our press release or presentation for today’s call, they are on our website at www.uil.com. During today’s call, we will make various forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Significant factors that could cause results to differ from those anticipated are described in our earnings release and filings with the SEC. With that said, I’ll turn the call over to Jim Torgerson. Jim Torgerson Thanks Susan. Good morning everybody. Second quarter turned out to be pretty good for us as we have seen from our earnings release, the net income was 15.8 million or $0.28 per diluted share that was compared to the 9.3 or $0.16 diluted share in ’14. Year-to-date, for the first six months, we had net income of 73.4 million, which was $1.28 per diluted share and that was compare to the 64.8 million or $1.13 a share in the first half of ’14. There were a number of one-time or non-recurring items during both 2015 and 2014 merger-related expenses with our pending merger with you Iberdrola had an impact and slight impact in the first– in the quarter, but mainly more year-to-date. And then again in 2014, we have the now terminated proposed acquisition of the Philadelphia Gas Works, which have which had an impact in 2014. We also recognize the reserves related to the transmission, return equity related to the proceedings at FERC and we had booked some charges mainly in the first quarter of 2015, but also found in the 2014 and there was a minor adjustment in this most recent quarter. We also had which is not shown as a non-recurring item and we did have an IRS tax audit adjustments negative about $0.02 a share which Rich will explain, but with all that said after these non-recurring items, not including the tax adjustment, the quarter was actually up $0.03 or about 12% and year-to-date for the first six months were $0.05 a share about 4%. Turning to page six, I’m going to talk about the Iberdrola, USA and UIL merger here are the some of the timelines and what’s been happening. We received a Hart-Scott-Rodino process that was completed, pretty quickly after we filed back in the end of March and on that one. The Federal Communications Commission, we got approval there. FERC approved in early part of June. The Committee on Foreign Investments, the review was completed and early on, so those have all been completed. Connecticut Public Utility Regulatory Authority has aimed you all aware in their draft final order graph decision, denied the request. And so we actually hold the request and terminated that proceeding and then filed a new application on July 31. Now, that is still subjected to the 120-day time frame in order for the PURA to give us a decision. So we would expect a decision in late November. Massachusetts DPU, we filed in the end of March, the DPU really it’s kind of I say suspended the filing that we will be making supplemental testimony that will be filed very shortly that will reflect what we filed in Connecticut, but really on our prorated basis more or less with what we have in Connecticut, reflecting the size of our assets of Berkshire Gas, which is about 5% of total in Massachusetts. We also filed our EBITDA filed the S4 and then our preliminary proxy which is a combined document on July 17. We are waiting comments from the SEC on that pulmonary filing– pulmonary proxy. Once we get through the SEC filings and everything is approved and we can schedule the shareholder vote. I want to go over a few things about this but the new application entailed and some of it in the commitments we made. The start, we have a rate credit. We will be providing the customers that would be $20 million and we are putting three options for the surbs decide on because we didn’t get feedback of their living for long-term benefit. So one of the options is closure, just provider rate credit upfront for customers, second one was to do it all ten years which nominally would be $26 million but the present value is $20 million and also a third option which would be to mimic what would be a reduction in rates something they’ve talked about, amortize that over like a 30 year timeframe. It still comes back to a net present value of $19 million to $20 million. But the rate credit would be like $1.5 million a year over the 30-year time frame. Further value is still the same, but it allows for a little longer term look at and benefits that could be provided to customers. We also put in for suggested distribution base rate freeze be till January 1, 2018 and will be to go into effect for the two gas companies in Connecticut, Southern Connecticut Gas and Connecticut Natural Gas. And for United Illuminating, our electric distribution business, new rates couldn’t go into effect until January 1, 2017. We would make a contribution to the clean energy fund, that would be $2 million a year for over three years of $6 million, and then a contribution to disaster relief of $1 dollar. And we left that up to appear to decide what the entity or agency that could go to, but we did make some suggestions. We also would accelerate our investment in electric distribution system resiliency, and the plan there was to provide [indiscernible] within six months of our closing the transaction. The opportunities we have for investments in realized and resiliency, and these things such as rising of our [indiscernible] period on to flooding and walls are to again prevent flooding, also some things with microgrids, and some cabling that we could replace to help resiliency. What we would contemplate is the first $15 million of this distribution investments, we would not get the equity return on until the projects are complete, which is expected to be around 2019, and then the subsequent rate case would pick that up. In the meantime, we would request to get the debt recovery and the depreciation. We also suggested that we would accelerate the cast iron and bare steel replacement program for selling Southern Connecticut Gas, doubling it from $11 million to $22 million over the three-year subsequent to the closing. And this will provide a benefit to customers by accelerating that. We would then not get that in the rates until we actually filed that rate case that would be talking about, which would not have rates into effect until these January 1, 2018. Those would provide benefits just because of the present value of not recovering from the cost immediately of about $7 million to customers. Then we’re negotiating a consent order with DEEP to remediate English Station. Our English Station is a plant that we sold back in 2000. It’s in New Haven, and there are PCBs at the site or negotiating with DEEP on the consent order, and the Attorney General, the estimates from DEEP as far as the clean-up costs is about $30 million, we would then undertake that. But again, that’s subject to negotiating our consent order. We also agreed to maintain our high levels of safety and reliability, but also improved customer service metrics now for the customer service metrics. Those would be for the average speed of answer abandon calls and appointments captain the agreement would be that we’ve been approved by 5% over the next three years. Also then we wouldn’t want to maintain the safety leak response in the third party damage leak response third party obviously for gas, it’s the high level that we have today and maintain those levels. From a local management commitment and if you read the PURAs draft decision they want to make sure that there was going to be a focus on local management. We would appoint an individual as President of the Connecticut operations who would come from the existing management team of UIL or one of the UIL utilities and then that individual would be headquartered in Connecticut and at the UIL companies would be head quartered there for at least seven years. We said we would not change the day-to-day management operations of any of the Utilities in Connecticut and there we would had no involuntary terminations of employees except obviously for cause of performance for at least three years following closing. We also said we would hire 150 employees or contractors over three years in Connecticut. This will allow us to do a lot of projects that we have on our plate to begin with mainly transmission project that we’re going to need contractors for and we can fill some our existing positions and looking at those attrition occurs. So the 150 employees are contractors we think it’s good for the stay. Ring-fencing protections that we would implement mainly to of provisions to avoid bankruptcy or adverse conditions that could occur in any of the affiliates, other than the UIL companies that would have — could have an impact on the UIL Utilities and this would involve the creation of a special purpose entity with at least one independent director and implementation of an independent, non-economic interest and the special purpose entity they call it Golden Share. What it really allows is that that individual holding that share would have what amount to be if there was going to be a voluntary bankruptcy of any of the UIL Utilities. And then we also would committed to maintain separate corporate existence and the provision against forming with the funds and some dividend restrictions in the event that any of the utility of drop below investment grade which we don’t anticipate. So as you can see we’ve put forth a lot to the peer of and at big proportionate when we do actually filed within it’s our supplement to make sure that we’re addressing all of the concerns that they raised in the draft decision, which again was pulled. Now, moving on to things that are going on with the UIL, as many of you know, we did acquire 2.5% equity interest in the Kinder Morgan proposed Northeast Energy Direct gas pipeline project. This really commits us to an initial capital investment of up to 80 million and again, it depends on the final pipeline configuration and design. It also committed UIL to taking 70,000 dekatherms a day, which actually, we could reduce that under certain circumstances as others come in and want the capacity on the pipeline and we can release that directly to them and reduce our commitment. We also have an option to acquire an additional up to 12.5% of equity under some limited circumstances and the limited circumstances really relates, if we can’t reduce that 70,000 dekatherms by the time the pipeline goes into operation or even later than that, a couple years after that. Then also, if the electric distribution companies, there is a project that they would get capacity on the pipeline, which then they could release to electric generation projects that you’ve heard about the Nesco proposal that was done. These are things that are going on in New England, mainly in Massachusetts and Connecticut and Rhode Island. But as these projects can come on, we’re — the electric distribution companies get capacity, we can then increase our equity interest in the pipeline as the pipeline within the more capacity to serve these needs. The project, obviously, is going to supply the needs to growing residential, commercial and industrial demand for gas, but also for— it could be a very reliable supplier fuel for the power generation, and this would be again probably under that EDC proposal. And it does provide direct access to the Marcellus and the [Utica] shale. The pipeline will extend about 180 miles, which will be new pipeline from New York through Massachusetts and then into New Hampshire. They will be making a filing with FERC at some point and Kinder Morgan can probably give you a little more details on when that will be, but we understand it should be in late fall or maybe even at the fourth quarter of this year. And then commercial operation is expected by the fourth quarter of 2018. Getting to our gas heating customer additions [indiscernible] we had just under 3,900 through the end of June. We believe we’re still on track and to meet the 12,000, we said we’d get this year. Current home heating prices obviously lower than what they had been and the margin that we customers can get as it has often quite a bit but natural gas is still more cost effective and has more benefits, so we are still seeing a number of conversions and we are confident that we’ll have the 12,000 for the year. Turning to page 11 the transmission ROE proceeding is a lot on this chart. Basically you know that comments— the complaints have been ongoing. We have the three complaint periods with different time frames for a refund periods. We’ve been through this before, but basically the 10.57 base ROE is still being challenged in the subsequent complaints and the timing right now is the hearings were held, the end of June and early July. The Administrative Law Judge decision is expected by the end of 2015 so the FERC decision isn’t expected till end of 2016. The one point here in mid-July, the New England transmission are actually filed a petition with the U.S. Court of Appeals for review of the second and third complaint, challenging their first decisions allow hearings on the merits of the second and third compliance. So that will go along with the petition we had to challenge the first complaint. But there was lot of legal activity going on with ROE for FERC. I will turn it over to Rich Nicholas is going to run through the financial results. Rich Nicholas Thank you, Jim and good morning everyone, Thanks for joining us today. On slide 12, we have the tabular results by business segment break out the non-recurring merger and all we reserve it. Jim mentioned earlier and beginning on slide 13 then is the narrative that goes through the various business segments. So looking at Slide 13 and focusing first on the electric distribution, second quarter ’15 earnings kept as compared to the second quarter ’14, it were down about $700,000, but that does include the $1.1 million charge from the IRS audit. By the audit did cover four years from 2009 to 2012, it was a routine audit and those periods are now close and resolved, but it was a of a $0.02 charge in the second quarter as a result from looking year-to-date. Again on electric distribution, a decrease from $25.2 million in ’14 to $21.8 million in 2015 again, which includes the $1.1 million charge from the IRS audit. But higher employee-related expenses depreciation and amortization as a rate base grows and some other operating taxes for things like property taxes, it was offset in part by a rate increase that took place in August of last year was the second year of a two year rate plan for UIL and we so do see some benefit from that. GenConn was up slightly quarter-over-quarter primarily due to billing adjustment, so up above 400,000 quarter-over-quarter. The 12 months rolling at distribution return on equity came in at 9.09% and that compares to our allowed of 9.15%. Turning to the electric transmission segment, earnings there were down as well, both in the quarter and year-to-date. We did recorded additional reserves in the first quarter of this year. To reflect the order run we are hearing from FERC in the first complaint, clarified that the ROE cap was at the project level not at the company level. So on slide 14, you can see the results with or without the reserve adjustments that have been made that’s been the primary driver both in the quarter and year-to-date. Both the reserve and lower ROE now going forward, the 10.57% that came out of the first complete order. Overall excluding the reserves to transmission ROE came in at 11.35% and if you were to include the reserves into 10.98%. Now looking at our gas distribution business, earnings for the quarter $1.4 million compared to a loss of $2.2 million last year and the increase in earnings is primarily due to and we’ve seen lower uncollectible expenses slightly lower corporate charges last year. We had recorded earnings sharing at CNG and we’re not in that position at this point this year. It was offset somewhat by higher O&M expense in the second quarter that we saw, we benefited on the revenue side from the cold weather but as the ground began to thaw and [indiscernible] begin to move we did have additional O&M expense to address leaks in the second quarter and that cost was about to $0.025 a share for the higher O&M. Moving to slide 15, year-to-date for gas distribution increased in earnings certainly benefited by the cold weather in the first quarter. Year-to-date we are almost 13% colder than normal, and almost 3% colder than last year, it was warmer in the second quarter of this year compared to last year, but not big heating degree day loans in the second quarter. So it was actually 16% warmer than normal, didn’t feel like it, but that was the actual data. So the impact of weather, normalized use per customer, customer growth, you can see we’re still benefiting significantly from our customer growth almost $1 million in margin quarter-over-quarter, $3 million year-over-year. Normalized use per customer is pretty stable, actually, a positive 200,000 in the quarter. And you’ll note, particularly on the year-to-date column, there the decoupling adjustment for C&G only with the cold weather in the first quarter, we do have a liability for a refund to customers resulting from that. So the results of all of that on slide 16. Our 12-month average return on equities at the gas companies, Southern Connecticut gas are about 97% to 98% as compared to the allowed 936, and at C&G 945 to 965 as compared to the allowed 918. On a weather adjusted basis, there is no weather adjustment at C&G since we have decoupling, but SCG, as you can see 8.86 to 9.06. The corporate segment where we retained certain corporate costs for interest on Holding company debt, as well as the merger related charges, both from Philadelphia, last year, and for Iberdrola this year are included in the corporate segment. If you were to exclude those merger related expenses, the quarter was essentially flat year-over-year, and year-to-date, we’re actually have $0.03 less of a loss at corporate, primarily due to increased returns on share to capitalize that are held at the Holding company for the benefit of all those subsidiaries. As we look forward now, to the rest of the year, on Slide 17, our earnings guidance, we did reduce the top end of the guidance by $0.05, effectively, reducing the midpoint then by 2.5, primarily result from the higher [indiscernible] then was expected as the gas companies, resulting from the leak repairs due to the cold weather in the first quarter. So if you exclude the non-recurring items, our current guidance is $2.30 to $2.45. And that compares to previously it was 2.30 to 2.50. We did reduce the gas guidance by $0.03 on the upper end. So that it’s now $0.95 to $1.02 versus previously it was $0.95 to $1.05. So with that, I will now hand it back to our operator Bobby Jane for the question-and-answer session. Question-and-Answer Session Operator Thank you very much, sir. [Operator Instructions] We do have one question coming to queue from Andy Levy, Avon Capital. Your line is live. Andy Levy Just a quick question on the merger on the S4, I noticed that you gave 16 guidance and you also gave 2019, I believe our record growth rate out to 19 but I remember if I’m not mistaken that on the original announcement of the merger, you also have 17 guidance as well, but I want to make sure that your reaffirming 17 as well as we did 16 on S4? Jim Torgerson Yes, there’s been no change there. Andy Levy Okay. So it’s 17 is still at 2.59-2.75? Jim Torgerson I don’t have the document from me, but there’s been no change. Andy Levy Okay and then why that was left out of the S4? Jim Torgerson We provided the information that demonstrates the growth rate through the planning period. Andy Levy Okay, thank you and then the other question I had was, just on the makeup of the Board, under the new company. How will that be? Jim Torgerson The event through USA Board there will be two people from the current UIL Board going onto that Board along with me as of CEO and they will retain the people that are there today on the EBITDA USA Board. Andy Levy Was there any change in that when you made your filing, your revised filing in Connecticut is up to same? Jim Torgerson That’s what still it had assets in the agreement. That’s still the same. Andy Levy Okay, got it. Thank you very much. Jim Torgerson Yes, the work Board is the one where we’re going to add one Connecticut person, that’s not the EBITDA US Board though. Andy Levy Okay, I understand. Thank you very much sir. Operator Okay and then our next question comes from line of Caroline Bone, Deutsche Bank. Your line is live. Caroline Bone It’s Deutsche bank but thank you. So I guess I’m wondering if you could talk to bit more about what makes you so confident that you’ll hit that 12,000 customer gas conversion target for the full year. It just seems like you guys are tracking pretty well behind right now. Jim Torgerson Yes, we were looks like July was doing a little bit— quite a bit better. We didn’t release that number yet, but it’s looking better. So think what if we have then we’re having a good enough number of leads going on and a lot of interest in the commercial and industrial, mainly commercial not that not much industrial. Commercial aspects then the main expansions we’ve been doing are moving into other towns that actually we hadn’t even served before like Essex and couple others that [would be] doing some extensive pipeline expansions main expansions that are going to pick up some new customers [indiscernible] one of them. These are all small towns. But we’re hitting some major loads that we can then pick up and pick up some more customers along the way. Mostly commercial, so we’re pretty confident about the 12,000 I mean it’s going to be high, but because of the prices heating on it but our folks seemed very confident right now and I do too. So we had a much better month in July and now we’re getting to the point in the season where people will be looking to convert when they start thinking about their heating for the next winter. Caroline Bone So didn’t have anything to do with that I guess guidance reduction at gas? Jim Torgerson No, the guidance reduction of gas was as Rick said we had to do some maintenance as a result, of the very cold winter. And things spot out we had a bunch, number of gas leaks obviously you have to fixed right away. And that was the charge the other part of the reduction in the guidance was not for gas, but was just really when we look at the $0.02 we had from the federal income tax adjustments. So the other two items. Caroline Bone And I guess just selling gas. I mean I know that utilities in New York City are seeing an uptick in volume of units, people reporting potential gas leak system just in the wake of the Harlem explosion, a year ago and the most recent East village incident and I’m just wondering if you guys are seeing similar trend in your territory? Jim Torgerson We’re not hearing of any more people reporting gas leaks. Obviously, we jump on those as soon as we hear or people call and say that they can smell gas, so that we send people out immediately and we are pretty happy with our results for that we get out there, 98% of the time. We’re there within. You know the minute’s requirement at least 45 minutes in the state. And so we get on that pretty quickly and then we fix all the Class 1 leaks those the ones we have to fix immediately and the Class 2 lakes were getting on those pretty quickly in out too. So we’re not hearing more people calling about it that not than more usual. Caroline Bone Okay that’s good to hear. And then just a minor one on the DC Circuit Court, with regards that they appeal there on the ROE case, when do you guys expect them to rule on that? Jim Torgerson Caroline, I really don’t know. Caroline Bone Okay. Jim Torgerson I wish I did. It still be a while. Caroline Bone Okay. All right, just curious. Well, thanks very much. Jim Torgerson Sure. Operator Our next question comes from the line of Eric Guo at Gabelli & Company. Go ahead. Eric Guo Hi guys, thanks for taking my call. Jim Torgerson Sure. Eric Guo Just trying to get a better idea of the decision process, regarding NED pipeline investment, was this made exclusively at the UIL level or was this decision made with some input from the [indiscernible] guys? Jim Torgerson Well, based on our merger agreement, we — if we’re going to do something that’s outside of what we gave them, the budget, our capital spending plan, we have to get their consent, which we did so we’ve talked to them about it. After our Board then agreed that it made sense, so we did as if we have the consent, but it wasn’t really done not so in concert with them, because as we can’t, I mean, we believe at the [indiscernible] circumstance for making investments that would be significant. Eric Guo Got you. Okay, thanks. And just a second quick question on, did you guys provide — Can you provide some color regarding the earnings sensitivity related to conversions and how much in incremental 100 conversions with [will metered] for earnings are, something along those lines? Rich Nicholas Unfortunately, the quick answer is, it depends, because of the way the regulators have implemented the comprehensive energy strategy. We actually earn our return on rate base on the conversion, so it depends, if you’re on main or off main, how much capital is invested prior to that, we did say on average $250 to $300 of net income per conversion. But again, it’s a broad average and it depends, in particular, how far the main extension has to be. Eric Guo Okay, got you. Thanks. Operator And our next question comes from the line of Paul Patterson, Glenrock Associates. Your line is live. Paul Patterson your line is live. I’m going to the next question. Next question comes from Andrew Weisel, Macquarie Capital. Your line is live. Andrew Weisel Jim, on this Connecticut application, first is the S4 is it fair for me to assume that the numbers in the S4 for future income reflect all of these concessions that you’ve made in the Connecticut application? Jim Torgerson Not really, because what will probably happened as many other concessions are the things that occur, some of them get booked in 2015. Assuming we get the approval before the end of the year and actually before even close. And some of them will be right at year-end. So I would expect that a lot of those will get booked and shouldn’t have a big impact on the future and if you look at even the stuff. Let’s say they do the credit over the 10 or 30 years. As long as we can estimate it and we know exactly what is going to be and we can book it right up front, which is where we want to do. Some of the other things really get to be smaller items that it just — we’re not really loses anything long-term like other than the contribution of book those right away too. So I don’t think you’ll see much impact on the financials under. Rich do want to? Rich Nicholas Fine, under the accounting guidelines, once it’s profitable and estimatable than we’ll book in our crew if you will, and immediately and even if things in great credit by years and we’ll just pump those up against the reserve as we go forward. Andrew Weisel Okay, that’s very helpful. And then in the S4, those net income number you gave, do that essentially reflects earning you’re allowed ROE for all of those years, have quick think better inverse allowed ROEs? Rich Nicholas We haven’t put some of those specific type of assumptions out there. But those are planning forecast of today. Andrew Weisel Okay, fair enough. Next is another question on the Northeast Energy Direct. Could you elaborate a bit more detail the option to acquire additional equity maybe just dig a little deeper into the circumstances and the timing of when we might know more about that? Rich Nicholas Yes. A lot of this is under our agreement with Kinder Morgan but in broad terms, the one area where yet— for example, because we are taking on an obligation for another 70,000 Dekatherms a day to the extent that doesn’t get really say we can’t. No one else signs off on the Kinder Morgan pipeline and it remains at its current level. Then we would have the ability, once the pipeline into operational to increase our equity percentage should our option, because we couldn’t release the 70,000 to any insure people who want to have capacity that’s one; another areas with the assuming is an EDC process for the electric distribution companies, then take on capacity which are allowed the pipeline to expand then in certain states in Connecticut, I think just about every states expect one we would then have the ability, electric distribution companies take on capacity to gain additional equity interest. Now we have to pay for two but that we’ve could have increased our equity interest based on how much is added in the New England state as a result of that and its there is formulas for each state as to what percentage we can add— of people of— that take on additional capacity. So it’s all formula driven and I don’t think much of that’s has been release on just going to— that’s how it works though. Rich Nicholas Andrew we are just to be fact of re-correct. The forecast are as of the date the [indiscernible] was filed July 17. Andrew Weisel Okay, thank you both for those points there. Then just one last one the increase in O&M at gas due to cold winter is there or would it be fair to think of that as pulling forward future expenses. In other words we might this help next year’s O&M or these kind of incremental cost and in next year’s O&M budget would be unlikely to change? Jim Torgerson Right, but you can view that more is incremental cost. Andrew Weisel Okay, thank you very much. Jim Torgerson Might want to say kind of one-time or two. Operator And your next question comes from Paul Patterson, Glenrock Associates. Your line is live. Paul Patterson Can you hear me? Jim Torgerson Yes. We can hear you Paul. Paul Patterson Okay I don’t what happened last time. But anyway, just really quickly and I apologize for this but kind of got slightly distracted when you guys were talking about the settlement process. You mentioned the England station or English station. And I’m just wondering so just to clarify, are you guys in the global settlement discussion right now with the parties in Connecticut and English stations part of that? If you just, if you could, if you don’t mind elaborate a little bit more on that again? Jim Torgerson It’s not really a global settlement discussion. It was, we were having discussions with the, as we said in the application with the Attorney General Department of Energy, Environment Protection in the governor’s office as to looking at things, we could do the application and English station was one area where the city and the state would like to have cleaned up. [indiscernible] we have owned in 15 years and so [indiscernible] said we’ll look at working to get a consent order that would allow the cleanup of that facility and that we were looking at a number of the deep and put out to say that it was that the cleanup was expected, about 30 million that’s really where it went. And then really right now, there are no— we’re not talking about a settlement this point. That was a discussion that we had with the parties before we made the application filing and its really getting some of theirs to what would help gets processed using and get an application that’s hopefully PURA can accept— will accept and [indiscernible]. Paul Patterson And just to sort of understand the new application procedure, you guys have major filing, do we go through the same again or could it be abbreviated, that you can enter into a settlement negotiations, if that’s what you guys intend to do. Sooner than how the normal course of– in other words, there’s a lot of ground you guys have already covered. I would assume that perhaps. And perhaps, inaccurately assumed that maybe you guys could did act faster in terms of working with the other parties in the Connecticut case. This is– how should we think about that? Jim Torgerson Right now, I would assume that it will take the full 120 days that the peer has not decided the case. I think right now, there is no anticipation that it would be accelerated, would hope it would be, because we found a lot of ground already, but– and those parties– and those who have to– they have the right to exercise those and do their investigation and ask questions, and follow their briefs and get their interrogatories in, so I would expect that particularly, the OCC and the consumer council is going to want to go through all that. Paul Patterson Okay, but it means, so I guess, a settlement process if that were to take place, when might that happen? Jim Torgerson Yes, I guess the parties wanted to discuss settlement, and that could happen anytime, but I think in the past, what we’ve seen from the consumer councils, they want to go to all the hearing process and then do their briefs and then talk about it. So it’s not going to– short it, if the units that were to occur, I don’t think it would shorten things very much. [indiscernible] history, Paul. Paul Patterson Well, I appreciate the clarity. Like I said, that’s why I asked the question [indiscernible I was assuming too much that they might — that maybe some of the previous work that’s been done so far might somehow be helpful in making a little bit quicker, but apparently, I’m wrong. Jim Torgerson It might, but I don’t expect that the — even if it’s shortens it, you may be talk in a week or so. So I don’t think, we could count on anything less than 120 days right now. But it will still allow us to have it done before the end of the year. Paul Patterson I got you. And then the supplemental testimony in Massachusetts, that’s going to be filed against relatively soon, and then, after that we’ll get — how much, how long should we expect for interveners respond to them? Jim Torgerson They haven’t put off its full schedule or revised schedule, and so then, really the intervening party is the Attorney General. And there may be a couple of others, but those truly the Attorney but in general in Massachusetts as you know, I would expect that they’ve already given us interrogatories will probably give us more on our supplemental filings. So then the hearing schedule will hearing we were supposed to have hearings this month now is that we pushed off because we are following the supplement. I would guess it’s probably going to be September, October, hopefully we can get an answer shortly after — practically speaking there at all see what happens in Connecticut. And so I would expect to be shortly after that. Paul Patterson Thanks so much. Appreciate the clarity Operator Our next question comes from the line of Andy Levy, Avon Capital. Your line is live. Andy Levy The some fact S4 page 93 of the S4 talks about in preparing the EBITDA U.S.A projections considered by UIL’s management modified the financial forecast by the EBITDA USA management and new kind of know what it does that’s based on like weighted adjustments certain forecast. Could you just describe more the methodology that we use and how that played into coming up with the CapEx numbers that you put out there, particularly main. Jim Torgerson Sure, Andy, this is Rich. Getting forecast on before the long time, food grade agrees of uncertainty that are rounded and so working with our financial advisors. We did make some adjustments to what we thought would be good view of what the future looks like. Andy Levy Okay and have no one have asked about this before but has any of the — I guess it’s really a question for EBITDA, I’m not going to ask you but I guess or just on what’s been identified up with name that’s really question for EBITDA. Jim Torgerson I think that you probably right about that. Andy Levy Thank you. Operator And that was the last question in queue [Operator Instructions]. At this time, there is no further question in queue. Jim Torgerson Okay, well thank you all for participating today. If you do have further questions, please don’t hesitate to contact our Investor Relations people [indiscernible] and thank you all for participating today and have a great day. Good Bye. Operator And this concludes our afternoon teleconference. You may disconnect your line.

Xcel Energy (XEL) Benjamin G. S. Fowke on Q2 2015 Results – Earnings Call Transcript

Xcel Energy, Inc. (NYSE: XEL ) Q2 2015 Earnings Call July 30, 2015 10:00 am ET Executives Paul A. Johnson – Vice President-Investor Relations Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Teresa S. Madden – Chief Financial Officer & Executive Vice President Analysts Michael Weinstein – UBS Securities LLC Travis Miller – Morningstar Research Paul T. Ridzon – KeyBanc Capital Markets, Inc. Anthony C. Crowdell – Jefferies LLC David A. Paz – Wolfe Research LLC Feliks Kerman – Visium Asset Management Operator Good day and welcome to the Xcel Energy’s Second Quarter 2015 Earnings Company Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Paul Johnson, Vice President of Investor Relations. Please go ahead. Paul A. Johnson – Vice President-Investor Relations Good morning, and welcome to Xcel Energy’s 2015 second quarter earnings release conference call. Joining me today are Ben Fowke, Chairman, President and Chief Executive Officer; and Teresa Madden, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team in the room to answer your questions. This morning, we will update you on recent legislative, regulatory, and business developments, review our 2015 second quarter results, and reaffirm our 2015 earnings guidance range. Slides that accompany today’s call are available on our webpage. Please note we have updated our slides to provide more information. In addition, we will post a video on our website of Teresa summarizing our financial results. As a reminder, some of the comments during today’s conference call may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and our filings with the SEC. I will now turn the call over to Ben. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Thank you, Paul and good morning. Today I’m going to provide a business update and discuss our recent legislative efforts in Minnesota and Texas. Later, Teresa will provide more detail on some of our recent regulatory decisions and financial drivers. We reported $0.39 for the quarter, flat with last year. Overall, we’ve had a solid first half of 2015, with results generally in line with our expectations. While we’ve had some challenges from lower than expected sales, unfavorable weather and additional adjustments from the Monticello proceeding, we fully expect to deliver 2015 ongoing earnings within our guidance range of $2 to $2.15 per share. I want to start by saying how pleased I am with the company’s response to recent storms across our Minnesota and Wisconsin service territories. Two weekends ago, intense winds with speeds between 70 to 80 miles per hour knocked out service for 250,000 customers. Our employees in the field responded quickly and effectively, restoring 75% of our customers within 12 hours and 98% within 45 hours. All of our customers were restored to power within three days. This event is yet another reminder of the company’s top-tier storm restoration efforts and illustrates the value of building a resilient system. We also hit several additional operational milestones during the quarter that I wanted to share with you. Beginning with our Monticello nuclear facility, we are very happy to report that this month we received NRC concurrence and reached 671 megawatts of generation. The facility is now fully in service, operating at designed capacity and meets all the requirements of the Minnesota commission to be considered used and useful. Finally, our Cherokee combined-cycle natural gas plant in Colorado successfully completed its first fire on gas and is on time and on budget. Last year we spoke to you about our refocused strategic plan with a key tenet being improving the performance of our utilities and reducing the ROE gap. Our approach was to target the jurisdiction where the gap was the greatest and seek legislation in those states to improve the timeliness and method of cost recovery. Beginning with Minnesota, last month the Governor signed into law a bill that contained several notable enhancements to the regulatory framework. The legislation expands the length of multi-year plans to up to five years, allows for a more formulaic approach to recovering capital investments, provides for the recovery of O&M expense based on an industry index, and allows rider recovery of distribution costs that facilitate grid monetization. We’re now considering how to include these improved mechanisms in our Minnesota rate case filing scheduled for later this year. In Texas, we, along with several other non-ERCOT utilities sponsored legislation that will reduce regulatory lag and provides for improved inclusion of post test year capital additions, more timely implementation of new rates, and greater flexibility and more timely recovery of new natural gas plant investments. The Governor signed the bill last month and while this does not eliminate all regulatory lag in Texas, it does represent an important incremental step towards improvement. We feel the legislation in both Minnesota and Texas strengthens the regulatory compact, helps to close the ROE gap and enhances our ability to meet our long-term earning growth objectives. Moving to Colorado, we anticipate that the Colorado Commission will be scheduling informational meetings to examine the long-term supply of natural gas and approaches to managing prices, including the rate basing of natural gas reserves. We continue to see the value of these types of investments for our customers, particularly when considering the current low-price commodity environment. After the information meetings are held, we plan to make a regulatory filing before year end that will establish a formal framework that incorporates feedback from the meetings. Following the commission’s decision on a preferred framework, we anticipate filing for the approval of potential investments during the second half of 2016. In Minnesota, we were pleased to see, the Minnesota Commission supported our settlement with smaller solar developers, which limits the size of proposed solar gardens to no more than 5 Megawatts. This important policy settlement ensures that Minnesota has one of the largest community solar gardens in the country rather, but also minimizes the impact of the program on our customers’ bills. Xcel Energy continues to be a major advocate of solar and we view it as an important and growing component of our resource mix. However, we want to ensure that it’s done at the most attractive price point for our customers. A couple of recent studies confirm that utility scale solar is far more cost-effective for consumers than smaller applications and we think it’s important that policy be based on these sound economics. So while solar gardens and rooftop solar have a place in our portfolio as an option for consumers, because they require heavy subsidization from non-participants, you will continue to see us advocate that the primary focus be on utility scale solar so that we can keep energy cost affordable for consumers as we move to cleaner energy sources. So I think we’ve made significant progress during the first half of the year. We look forward to implementing some of these new mechanisms and policies in the coming months. And with that, I’ll turn it over to Teresa. Teresa S. Madden – Chief Financial Officer & Executive Vice President Thanks, Ben and good morning. Today we reported ongoing earnings for the second quarter of $0.39 per share, flat with last year. The most significant drivers in the quarter were improved electric margin, which increased earnings by $0.06 per share, largely due to new rates and higher rider revenue driven by infrastructure investments that provide long-term value to our customers. These incremental revenues were partially offset by unfavorable weather and lower sales. Additionally, offsetting the higher electric margin was increased depreciation, higher property taxes, and lower AFUDC. Each of these items separately had a negative $0.02 per share impact on earnings. Turning to sales, our year-to-date weather-normalized electric sales were down four-tenths of a percent, driven primarily by declines in the residential class, partially offset by modest growth in the C&I class. Regardless, we continue to experience healthy economies in our service territories with an average unemployment rate of 4% compared to a national rate of 5.5%. Our customer additions remain solid at about 1%. The decline in residential sales is driven by lower customer usage. We believe this trend is due to a combination of factors including appliance efficiency, conservation efforts, and an increase in multi-unit dwellings. We have adjusted our annual electric sales guidance to reflect year-to-date results, which lowers our expected growth rate for 2015 to about 0.5%. We will continue to monitor sales and customer usage and will take appropriate management action if we determine this represents a long-term trend. It is important to note that we will be implementing de-coupling for the residential and small C&I class in Minnesota in 2016, which will offset any decline in customer usage trend. Next I will provide an update on several regulatory proceedings. Additional details are included in our earnings release. Earlier this month, we received decisions on several outstanding items under reconsideration in our Minnesota electric rate case and our Monticello prudence proceeding. The Commission allowed NSP Minnesota to recover its 2015 rate increase beginning in early March and determined that the Monticello extended power upgrade investment was not used and useful until certain NRC conditions were met. These conditions were met in early July. While we believe that the Commission should have concluded differently related to the in-service date of the Monticello project, we will review the written order to determine our next steps. In Colorado, last month we received intervenor testimony in our PSCo multi-year natural gas rate case. The staff recommended a rate decrease, while the Office of Consumer Council recommended a modest rate increase. Primary differences between the Company and other parties were driven by ROE, capital structure, and whether to use a historical test year in the establishment of base rates. The positions recommended by the staff in the OTC were consistent with past positions and we remain confident we will reach a constructive outcome in the case. Finally, I wanted to address our rate case in New Mexico. After another utility in the state had its case dismissed, the New Mexico Commission determined our filing also did not comply with their new interpretation of the statute regarding forward test years and the timing of rate case submissions. As a result, the Commission dismissed our case as well. We believe our filing was consistent with the requirements of the New Mexico legislation that allows for a forward test year and have appealed to the State Supreme Court. While the timing of resolution is uncertain, we plan to re-file the case later this year. This morning we are reaffirming our 2015 ongoing earnings guidance range of $2 to $2.15 per share. We are confident in our ability to deliver earnings in our guidance range due to the timing of O&M expenses and revenue recognition from the Minnesota rate case, both of which will provide for a more favorable comparison in the second half of the year. Our guidance range is based on several key assumptions as described in our earnings release. Please note that some of the assumptions have changed. With that, I will wrap up my comments. We are very pleased with the legislation that was passed in Minnesota and Texas during the quarter. The new legislation provides a framework that will allow us to reduce regulatory lag and streamline the regulatory process. As a result, we are confident that we will achieve our goal of reducing the ROE gap by 50 basis points by 2018. Growth projects like the Courtenay Wind Farm are on schedule. We remain on track to limit increases in O&M to 0% to 2% for 2015. The company is well positioned to deliver an attractive total return to our shareholders by growing earnings 4% to 6% annually and our dividend at 5% to 7%. And finally, we are reaffirming our 2015 ongoing earnings guidance range of $2 to $2.15 per share. So operator, we will now take questions. Question-and-Answer Session Operator Thank you. And we’ll take our first question from Michael Weinstein with UBS. Michael Weinstein – UBS Securities LLC Hi, good morning. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Good morning. Teresa S. Madden – Chief Financial Officer & Executive Vice President Good morning. Michael Weinstein – UBS Securities LLC Hi. Considering the legislation in Texas and the legislation in Minnesota and you are now very confident of increasing or reducing the regulatory lag by 50 bps by 2018, just wondering if, at what point would you consider increasing your long-term growth rate commensurate with the improvement in ROEs? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, I think that’s what we are focused on is closing that gap. And if we close that gap by 50 basis points that will get us on the upper end of that – those growth objectives. So you’d have to start to exceed that and see some other things before we would be comfortable doing that Michael. Michael Weinstein – UBS Securities LLC Would you say that would require a, I guess, wait and see after the results of a rate filing in Texas? Is that…? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer We need to implement it. We are working the plan. This is the legislation. While wasn’t essential to close that gap, it’s certainly helpful. And now we need to execute on that and let things play out. Michael Weinstein – UBS Securities LLC Okay. Thank you very much. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer You are welcome. Operator We’ll take our next question from Travis Miller with Morningstar. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Hey, Travis. Travis Miller – Morningstar Research Good morning. Teresa S. Madden – Chief Financial Officer & Executive Vice President Hi, Travis. Travis Miller – Morningstar Research Hi, thanks. On the Minnesota legislation, just wonder if you could lay out maybe a more detailed timeline in terms of – I know it’s obviously one of your lower spreads on – a wider spread between allowed and earned right now. How do you go about closing that, sort of taking advantage of the legislative items? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, you are absolutely right. We have been under-earning in Minnesota. If you are looking at the charts by the way that were attached, keep in mind that that’s a little bit distorted due to some revenue recognition. But you are right; it’s been in the mid-eighths and we need to improve that. Take a look at what we did in Colorado. When you get into a multi-year plan, I think you’ve got a much better shot at closing that ROE gap. You are getting all of your capital recovery; you are getting your O&M potentially recovered and I think Travis, the other thing that I think is so important about entering into these multi-year plans is it gives you an opportunity to communicate more frequently with your commissions around important policy decisions, resource plans decisions, where we want to go with our portfolio generation et cetera. So you don’t get disconnects. And I think if you look at why we’ve under-earned, we’ve had a lot of CapEx going through a funnel. We had to relicense our nuclear plants. We had some challenges there as everyone in the industry did. And we didn’t have a lot of forums to communicate some of those challenges. So it’s not only the mechanisms associated with the legislation in the multi-year plan; it’s kind of what that frees you up to do. And I am optimistic that we will make good progress next year and in the years to come. Travis Miller – Morningstar Research Okay, great. Do you think this is something you could do in one cycle for your multi-year plan or is this closing up the gap, would that take two rate cases or two cycles? Is this something that you can close quickly? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, the multi-year plan, as you know the legislation allows for up to five years and allows a number of other things. The regulatory team is busy right now assessing how we put those tools to work, what alternatives we want to present to the department and ultimately the commission and we’ll figure out – we’ll use the tools that we can and do it in a pragmatic approach. Now, depending on how you structure that, do you get it all in one year? – Not necessarily. But do you get it over the timeframe of the filing? – Yes. That would be the plan. Travis Miller – Morningstar Research Great, thanks so much. Appreciate it. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer You’re welcome. Operator We will take our next question from Paul Ridzon with KeyBanc. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Hi, Paul. Paul T. Ridzon – KeyBanc Capital Markets, Inc. Good morning, Ben. Good morning, Teresa. Have you indicated when you are going to re-file in New Mexico? Teresa S. Madden – Chief Financial Officer & Executive Vice President We have just indicated that we will re-file before the end of the year. Paul T. Ridzon – KeyBanc Capital Markets, Inc. It seems as though the commission has kind of said we want a do-over with PNM. How does that play into the timing? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, I mean – are you talking about the appeal or – I mean right now the commission has taken the rule back and is trying to I guess maybe understand their own interpretation of the rules. So we recognize that there might be some time lag with that, Paul. So we will re-file a case that we think will meet their current interpretation of the rules by year end, so we can get to start it while we are trying to sort through what the future test year rule and legislation really means from a administrative standpoint. Teresa S. Madden – Chief Financial Officer & Executive Vice President Right. I mean, we obviously think that the legislation allows for the forward tester as we had previously interpreted and that’s why we are filed with the Supreme Court in terms of an appeal. Paul T. Ridzon – KeyBanc Capital Markets, Inc. Thank you. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Did I answer your question Paul? Paul T. Ridzon – KeyBanc Capital Markets, Inc. Yes, you did. Thank you. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Okay. Paul T. Ridzon – KeyBanc Capital Markets, Inc. And where – you kind of walked down the growth numbers. Where are you seeing the most weakness? Teresa S. Madden – Chief Financial Officer & Executive Vice President Seeing the most what? Paul T. Ridzon – KeyBanc Capital Markets, Inc. Weakness. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, I mean – and Teresa, jump in here, but it’s really been on the residential side. And we are seeing good growth, Paul; we are seeing about 1% customer growth but what’s happening we believe is you’ve got energy efficiency – some of that we are driving of course. And you have – where we are thinking some of the growth is, is in more multi-unit dwellings which inherently use less electricity. So those two factors combined are putting – or offsetting growth with lower usage per household. Teresa S. Madden – Chief Financial Officer & Executive Vice President Right. I mean, just to supplement that in the multi-units, we think they use about 50% what a standard, stand-alone dwelling or whole module (19:14). So you get the customer growth, but just not at the same pace in terms of adding to our growth. Paul T. Ridzon – KeyBanc Capital Markets, Inc. Have you seen efficiency start to plateau with I guess a lot of the light bulbs already been switched out and a lot of the appliances have been switched out? Where are we in that cycle? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Yes, that’s a really good question, Paul. I mean I think if you look at technology, it’s going to continue to get more efficient. Will the pace of that efficiency slow down? – I don’t know if I have a crisp answer for you at this point. But I wouldn’t think that it’s going to plateau and just level off. I think you’re going to continue to see more efficiencies; you’re going to continue to start to see – as we get to the, ultimately the Internet of Things, even more efficiency. I think we are a few years away from that. But the gas business has been a long-term efficiency cycle and I think we will see that on the electric side. And that’s not necessarily a bad thing. It does mean though, back to the earlier comment that we have to start rethinking rate design and what the 21st century regulatory compact and offerings to our consumers look like. That’s one of the reasons again, why we think it’s so important to have longer-term regulatory compact, so you can have these dialogues with new (20:34) policymakers. Paul T. Ridzon – KeyBanc Capital Markets, Inc. Thank you very much for your time. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Welcome. Operator We’ll take our next question from Anthony Crowdell with Jefferies. Anthony C. Crowdell – Jefferies LLC Hey, good morning. I just wanted to focus on Minnesota. You’re successful at getting a legislation for potentially a five-year deal, but I think previously I think you had the ability to file for three-year deals but I think maybe you filed for two. Is there reluctance on the regulator for granting a longer-term deal? Some states, you see regulators push back on longer-term deals. I wonder what’s your feeling or view of that in Minnesota. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, keep in mind that prior to this legislation, the multi-year compact was not really comprehensive. So when we filed, we were able to file for larger step-in type capital programs. This legislation was passed with input from a lot of important parties, including the Department and certainly the Governor’s office and it was passed and it was supported. That said, I think to your point, this could be transformative, it’s change, and I think our team has to work with the department and make sure that they’re comfortable with the pace of what we are doing. So that’s what we are trying to assess right now. So your question is a good one. I think the policymakers support it. I think there is a number of reasons why the business community would want this and it’s good for our customers and this could be tremendously more efficient than how we process rate cases today. So I am optimistic we are going to use the majority of those tools and come out with something far more comprehensive than we had prior to this legislation. Anthony C. Crowdell – Jefferies LLC And I guess on your next filing you would file, you would attempt to get the full five years? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, we’re going to incorporate a number of the tools. We’ll figure out – I mean, I would anticipate that we will look at the five years, figure out how that could be done, but I also anticipate that we’ll present the Commission with different alternatives. The key is, get something comprehensive, make use of the tools, and close that regulatory gap. So that is always the first and foremost in mind. And again, we want something that frees up space to have a timeframe that we can work with the Commission on other important policy decisions. Anthony C. Crowdell – Jefferies LLC Great. Thanks for taking my question. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer You’re welcome. Operator And we will take our next question from David Paz with Wolfe Research. David A. Paz – Wolfe Research LLC Hey, good morning. Teresa S. Madden – Chief Financial Officer & Executive Vice President Hey, David. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Hey, David. David A. Paz – Wolfe Research LLC Just on Minnesota filing, when would you expect a final decision? On the November filing. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer The pending case that we haven’t filed yet? David A. Paz – Wolfe Research LLC Yes. On the November filing. Teresa S. Madden – Chief Financial Officer & Executive Vice President It could take either late in 2016, it could – depending on the schedule, other cases that we know are going to be filed, we could go into 2017. But I think the key thing that’s important is we have interim rates and we are anticipating that those will start just as they always have. I mean, that’s still part of the new compact that we have starting in January 1, 2016. So I think that’s really the key thing to be focused on. David A. Paz – Wolfe Research LLC Great. Okay. And separately, did you update your capital plan for the Courtenay Wind Farm? Teresa S. Madden – Chief Financial Officer & Executive Vice President We haven’t updated it yet; we plan later this year. I mean, we’ll do a more comprehensive update. I mean, we have disclosed the cost is about $300 million and so – again, we’ll do a more comprehensive look later this year. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer And that project’s moving along very well, so… Teresa S. Madden – Chief Financial Officer & Executive Vice President Yes. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer David, we expect that the Commission is going to probably rule on – the Commission in North Dakota and in Minnesota will rule on that in August. Teresa S. Madden – Chief Financial Officer & Executive Vice President Right. David A. Paz – Wolfe Research LLC Okay, great. And then just last, I think your projected rate base growth over the period you’ve outlined is just shy of 5%. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Right. Teresa S. Madden – Chief Financial Officer & Executive Vice President That’s correct. David A. Paz – Wolfe Research LLC And so it looks like Courtenay will be added. Any other potential upside to that growth? I know it’s three stages (25:03), but you guys will do a new look soon. But anything we should think about? I mean you mentioned gas rate base, other type of renewable. Just anything else that we might be missing, particularly as carbon rules get at some point finalized? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Yes, I mean, we’re going to look at all of those opportunities you mentioned. They are not included in the CapEx forecast right now. Maybe there’s more opportunities for Courtney Wind type projects, the Calpine projects that we have done in the past. We’ve got a great backyard and I think there is a number of opportunities that we think makes sense and are keeping with our low-risk profile that we’re going to pursue. We’re conservative; we’re not going to increase our forecast for things that aren’t – that you can’t touch. But we’re certainly going to go after all the opportunities that makes sense for us. And you hit on a couple of them. David A. Paz – Wolfe Research LLC Okay, great. Thank you. Teresa S. Madden – Chief Financial Officer & Executive Vice President Thanks. Operator We’ll take our next question from Feliks Kerman with Visium Asset Management. Feliks Kerman – Visium Asset Management Hi, thank you. Can you just remind us in which states you’ll have decoupling in, in 2016? Teresa S. Madden – Chief Financial Officer & Executive Vice President We will have it in Minnesota. There is an open docket in Colorado, but it has not been acted on for quite some time. But for sure, we will have it in Minnesota. Feliks Kerman – Visium Asset Management And is there expectation that we will achieve the decoupling in Colorado or no? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer I would think – we’re under a multi-year plan there, so, no, we don’t anticipate that we’re going to have decoupling during this – the current multi-year plan that we have. That said, as you know that we’ve actually exceeded our authorized return in Colorado. So I think barring some major drop-off, there is no reason to really be concerned in Colorado. Teresa S. Madden – Chief Financial Officer & Executive Vice President I agree. Feliks Kerman – Visium Asset Management Okay. Thank you. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer You’re welcome. Operator And that does conclude our question-and-answer session. I’d like to turn the call back over to Teresa Madden, Chief Financial Officer, for any additional or closing remarks. Teresa S. Madden – Chief Financial Officer & Executive Vice President Well, thank you all for participating in our earnings call this morning and please contact Paul Johnson and the IR team with any follow-up questions. Thanks again. Paul A. Johnson – Vice President-Investor Relations Thank you, everyone. Operator And this does conclude today’s conference. Thank you for your participation.

A Staples ETF Soars Above Its Rivals

Summary Consumer staples stocks have been performing this year. Focus on the outperforming PowerShares DWA Consumer Staples Momentum Portfolio. How the PowerShares Consumer Staples ETF stacks up against the competition. By Todd Shriber & Tom Lydon Although Treasury yields have been surging in anticipation of the Federal Reserve raising interest rates later this year, 2015 has thus far been a decent year for consumer staples exchange traded funds. The Vanguard Consumer Staples ETF (NYSEARCA: VDC ) is up 4.1% year-to-date, which is well ahead of the 2.9% returned by the S&P 500. However, VDC’s gain is less than half that of the PowerShares DWA Consumer Staples Momentum Portfolio ETF (NYSEARCA: PSL ) . So strong has PSL been this year; it was one of just 12 ETFs hitting all-time highs in Tuesday’s lousy tape. PSL’s strong 2015 showing is proof positive of several things. First, momentum and growth have been trumping value this year. Second, the smart or strategic beta phenomenon, one that is often derided on the basis of nomenclature works at the sector level, not just with diversified broad market ETFs. PSL was one of the 10 PowerShares ETFs that were transitioned to momentum indices from Dorsey Wright & Associates in February 2014. PSL now tracks the Dorsey Wright Consumer Staples Technical Leaders Index, an index “designed to identify companies that are showing relative strength (momentum),” according to PowerShares . PSL has other advantages. Consumer staples have been derided as vulnerable to a strong dollar , but that thesis is most applicable to the sector’s large- and mega-cap names. Think Coca-Cola (NYSE: KO ), Procter & Gamble (NYSE: PG ) and related fare. PSL allocates just 23% of its weight to large caps, roughly the same amount it devotes to small caps, which can endure bouts of dollar strength. Following the Heinz-Kraft merger announcement in March, we noted PSL is home to several credible takeover targets, Hain Celestial (NASDAQ: HAIN ), Monster Beverage (NASDAQ: MNST ), and WhiteWave Foods (NYSE: WWAV ). Those stocks combine for nearly 11% of the ETF’s weight. For its part, PSL is not a stranger to food and beverage M&A. The ETF earned some time in the limelight last year when Tyson Foods (NYSE: TSN ) and Pilgrim’s Pride (NASDAQ: PPC ) fought for Hillshire Brands. Other PSL holdings that have been previously mentioned as potential targets include Constellation Brands (NYSE: STZ ) and Dr Pepper Snapple (NYSE: DPS ), a combined 7.4% of the ETF’s weight. Advisors and investors have been embracing PSL this year. Now home to over $132 million in assets under management, $60.6 million of that has come into the ETF just this year, according to PowerShares data . PowerShares DWA Consumer Staples Momentum Portfolio ETF (click to enlarge) Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.