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OGE Energy Corp. (NYSE: OGE ) Q3 2015 Earnings Conference Call November 5, 2015 09:00 a.m. ET Executives Sean Trauschke – President, Chief Executive Officer Steve Merrill – Chief Financial Officer Todd Tidwell – Director of Investor Relations Analysts Anthony Crowdell – Jefferies Matt Tucker – KeyBanc Capital Bryan Russo – Ladenburg Thalmann Jay Dobson – Wunderlich Paul Patterson – Glenrock Associates Operator Good day ladies and gentlemen and welcome to the Third Quarter OGE Energy Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call will be recorded. I would now like to introduce your host for today’s conference, Mr. Todd Tidwell, please go ahead. Todd Tidwell Thank you, Katherine. Good morning everyone and welcome to OGE Energy Corp’s third quarter 2015 earnings call. I’m Todd Tidwell, Director of Investor Relations and with me today, I have Sean Trauschke, President and CEO of OGE Energy Corp; and Steve Merrill, CFO of OGE Energy Corp. In terms of the call today we will first hear from Sean, followed by an explanation from Steve of third quarter results and finally, as always we will answer your questions. I would like to remind you that this conference is being webcast and you may follow along on our website at oge.com. In addition, the conference call and the accompanying slides will be archived following the call on that same website. Before we begin the presentation, I would like to direct your attention to the Safe Harbor statement regarding forward-looking statements. This is an SEC requirement for financial statements and simply states that we cannot guarantee forward looking financial results. But this is our best estimate to date. I would also like to remind you that there is a Regulation G reconciliation for gross margin and ongoing earnings in the appendix along with projected capital expenditures. I will now turn the call over to Sean for his opening remarks. Sean? Sean Trauschke Thank you, Todd. Good morning everyone and thank you for joining us on today’s call. This morning we reported third quarter results and our utility OGE contributed $0.82 per share compared to $0.79 per share last year. Looking forward to the full year, the company projects 2015 utility earnings to be at the low end of the earnings range of $1.41 to $1.49 per average diluted share. This is primarily due to mild summer weather as compared to normal and environmental compliance assets placed in this service that have not yet been included in rates. Earnings from the Enable Midstream for the third quarter of 2015 include a pension settlement and the good will impairment charges of $0.35 per share. Ongoing earnings on a consolidated basis which exclude these non-cash charges were $0.90 for the third quarter compared to $0.94 per share for the same period in 2014. Steven will discuss the financial results and impairment in more detail in just a moment. That being said, the Enable impairment does not change our plans for OGE. We are on plan to achieve our utility long term growth rate of 3% to 5% and to continue to grow our dividend through 2019. We continue to believe our businesses are strong and well positioned for the long term growth and value creation. In September the Board of Directors proved a 10% increase in the quarterly dividend, bringing the dividend to $1.10 per share annually. This was the 10 th consecutive year of dividend growth. It reaffirms our commitment to growing the dividend 10% a year through 2019. We have received approximately $104 million of distributions from Enable year-to-date. With the quarterly distribution they’ve just announced, distributions to OGE will be approximately $140 million for the year. As we said before, cash distributions received is the key metric we are using for Enable. Distributions from Enable will continue to help fund our dividend and utility investments. Turning to the utility, our service territory remains strong despite the continued pressure from the current commodity cycle. The latest economic statistics with Oklahoma’s unemployment rate at 4.5%, with Oklahoma City just under 4%. Although these rates have increased, we are still well below the national average. As expected, we are seeing pull backs in the industrial and oil field sector, but growth from the commercial sector, particularly chain accounts has offset those loses. This is a testament to our region’s growing economic diversity. Our operations team did a great job of maintaining the fleet in the grid this summary. Our combined cycle plants achieved best in class for liability of nearly 99% and capitalize on lower gas pricing to bring the best value to our customers. Our coal units demonstrated a liability of 91% and during the summer months 9% of our total generation came from renewable resources. On the cost side we continue to focus on controlling costs and increasing efficiency and productivity. As a point of reference, our O&M cost per customer is lower today than it was in 2011. This is really good news for our customs. Attracting customers with not only competitive rates, but additional products and services is a key component of our strategy. Last month our customers saw improved functionality with the implementation of our estimated time of restoration project. This technology allows customers access to outage issues, and estimates for when they can expect service restoration. We continue to look for ways in which technology will improve our customer experience. Next I would like to provide an update on our regulatory events in Oklahoma and Arkansas. In Oklahoma we are still waiting on a order for our environmental case. We plan to file a general rate case in Oklahoma later this month, with a test year ending June 30, 2015. The case as we have said previously will focus on two main issues. First, we have terminated a large wholesale contract and several smaller contracts and will now seek to place in the rates approximately 300 megawatts of that capacity previously used to meet those obligations. The second focus will be to recover the retail portion of several in-service transmission lines that OG&E has constructed at SPP’s direction over the last few years. Also in Oklahoma we’ve filed a distributed generation tariff with the commission. Oklahoma’s Senate Bill 1456 was signed into law last year, requiring us to have a tariff by the end of 2015. This tariff is to ensure that distributed generation customers are not being subsidized by other customers. Our proposed tariff enables an individual adding distributed generation to expense reductions in their utility bills, while ensuring that they pay for their fair share for the grid as the law requires. While the number of DG customers of our system is very small today, this prepares us for accurate cost recovery in the future, should the adoption of DG devices become more prevalent. Moving to Arkansas, we have filed under Act 310, which provides a constructive way to file and begin the recovery of environmental expenditures for assets placed in the service. We made our first filing in May, and put the rates into effect in June. The settlement hearing was in October and we are waiting the commission’s final order. We anticipate making our second filing later this month and we will update the filing every six months as additional compliance investments are placed into service. We are very pleased with this process in Arkansas. We also plan to file a general rate case in Arkansas in early 2016. We intend to utilize the formula rate provision in the recently passed legislation, and our biggest issue in Arkansas continues to be the imputed capital structure utilized. We are planning to work with the Arkansas Public Service Commission on this issue. Proper resolution of this issue will improve our ability to enhance the customer experience in Arkansas and to make investments that will help attract new businesses to this day. Turning to the environmental compliance plan, regardless of the delays we experienced on the regulatory side, we must move forward to meet our compliance deadlines. Regarding the activated carbon systems from MATS compliance, we are on budget and construction has begun to meet the April 2016 compliance deadline. Looking at the regional haze compliance plan, four of the seven low NOx burners are complete and in service and installation will begin on the remaining units this winter and will be completed by the spring of 2017. The equipment and installation vendors for the two dry scrubbers at Sooner have been selected and schedules and budgets are on plan. For the Mustang plants, full notice to proceed has been issued to the turbine manufacturer. Permanent applications have been filed with the Oklahoma Department of Environmental quality and we anticipate the final permit will be issued by the end of the month. Engineering studies for the conversion of the two coal units in Miscurgie have been completed and we’ve issued an RFP for gas supply, and recall our plan is to continue to run these coal units as long as possible to maximize the benefit to our customers. Finally the EPA issued its clean power plant in August and the plan seeks to reduce CO2 emissions in Oklahoma from 24% to 32% depending on the format of the compliance plan, the mass versus rate base plan by 2030. As you know Oklahoma’s Attorney General has begun the legal proceedings against the EPA in regard to the clean power plant, stating that it threatens the reliability and affordability of power generation across the nation. Similar to regional haze litigation, we will be support of the AGs efforts on behalf of the State of Oklahoma. In the meantime we are in process of reconfiguring our fleet with the addition of Mustang and the conversion of the Miscurgie units. In addition, we are we are 18 months into the SPP day head market and the decisions other generators and other states make could impact our fleet. As a result we will continue the evaluation of our units, our role in the state and our role in the broader southwest carpool, while continuing our active discussion with the state regarding various options of compliance. Finally, last week Rod Sailor was announced the CEO of Enable. As you know Rod joined us in April of 2014 and has been an instrumental part of the company. Since June, Rod has been leading the development and execution of the business strategy, and I’m comfortable that Rod brings familiarity to the company, customers and the market, providing that stability and consistency we are looking for. I’m confident that he is the right person to lead Enable’s growth strategy going forward. So in summary, this is an exciting time for us at OGE. As a management team we are committed to executing on our strategy to continue growing our business. I’ll now turn the call over to Steve to review our financial results. Steve. Steve Merrill Thanks Sean and good morning everyone. For the third quarter we reported net income of $111 million or $0.55 per share as compared to net income of $187 million or $0.94 per share in 2014. The contribution by business unit on a comparative basis is listed on the slide. I would like to point out that the loss from Enable is due in part to a $0.35 per share write down of good will and a pension charge. Excluding the impact of these charges, third quarter 2015 earnings would have $0.90 per share as compared to $0.94 per share for 2014. I will discuss the good will impairment on a later slide. The holding company loss is primarily attributable to changes in our differed compensation plan. The holding company is on plan, and is expected to be flat for the year. At OG&E net income for the quarter was $163 million or $0.82 per share as compared to net income of $157 million or $0.79 per share in 2014. Third quarter gross margin at the utility increased approximately $11 million, which I’ll discuss on the next slide. O&M is on plan for the year. The decrease of $4 million is primarily due to the lower maintenance cost at our power plant and our continual focus to control cost. Depreciation increased $7 million, primarily due to the large transmission lines that were added in the last 12 months, part of the over $800 million of plant placed in service in 2014. Income tax expense also increased approximately $4 million due to higher pre-tax net income and a reduction of federal tax credits recognized. Turning to the third quarter gross margin, utility margins increased approximately $11 million for the third quarter of 2015 compared to 2014. The primary drivers for gross margin were new customer growth, which contributed $9 million. We added over 9,000 new customers to the system as compared to the third quarter of 2014. We continue to see about 1% growth supported by the commercial sector. Weather contributed nearly $9 million of margin as cooling degree days increased 6% compared to the third quarter of 2014. However, compared to normal, weather decreased for us the margin, approximately $11 million for the quarter. Partially offsetting this growth was wholesales transmission revenues which decreased $4 million compared to the third quarter of 2014, primarily due to an adjustment of the SPP formula rate to reflect the continuation of bonus depreciation. Finally, on June 30 we had a wholesale power contract that expired, reducing margin by nearly $8 million for the quarter. As we’ve said before, this is an item that will be included in the general rate case we are filing this month in Oklahoma. For the third quarter of 2015, Enable Midstream contributed ongoing earnings of $0.10 per share compared to $0.14 per share in 2014. Cash distributions increased by 6% to $35 million from $33 million in 2014. Year-to-date OG&E has received approximately $104 million of distributions from Enable. Before I explain the impairment charge, I would like to point out that cash flow in the form of distributions, not the earnings from Enable of what is important to OGE. Though commodity prices are low, Enable is performing as planned in regards to allowing us to fund environmental CapEx and to grow our dividend by 10% per year through 2019. Turning to the impairment, Enable Midstream recorded a goodwill impairment of approximately $1.1 billion in the third quarter of 2015. OGE’s portion of Enable’s good will impairment is approximately $108 million. The reason our shares left within the pro rata share is because of the formation of Enable. We received a higher level of LT [ph] interest just compared to the assets that were contributed. However, we were required to record our investment of historical costs, thus creating a basis difference. Turning to 2015 outlook, the company projects 2015 utility earnings to be at the low end of the earnings range with $1.41 to $1.49 per average diluted share, primarily due to mild summer weather as compared to normal and environmental compliance assets placed into service that have not been included in rates. For the Midstream business we are projecting to receive approximately $140 million in cash distributions. Utility is on track to achieve its long term growth rate of 3% to 5%. Our cash flow position for 2015 remains strong and is key to our value proposition, which is growing utility UPS and utilizing our cash flow from Enable to fund our capital investments and grow our dividend at 10% annually. This concludes our prepared remarks and we’ll now answer your questions. Question-and-Answer Session Operator Thank you. [Operator Instructions] Our first question comes from Anthony Crowdell with Jefferies. Your line is open. Anthony Crowdell Good morning. Sean Trauschke Hey, good morning Anthony. How are you doing? Anthony Crowdell Just crushing it. How about yourself? Sean Trauschke Just crushing it. Well, I’m going to use that line. Anthony Crowdell No worries. Just two questions, the first question is related to I guess the delay in the approval of your regional haze CapEx. Do you think that the clean power plant or the Oklahoma Attorney General fighting the clean power plant is what’s causing the delay of the regional haze approval? Sean Trauschke No, I don’t. I think those are totally independent issues and the ruling on the regional haze is with the three commissioners right now. So the AG is not part of that. Anthony Crowdell If I remember correctly, you guys said I think a 55 month window to comply. Is this eating into the time of that 55 month window to comply? Like it’s a clock running and you are just waiting to start executing once you get approval on it. Sean Trauschke Yes, no very good question Anthony. You’re exactly right. We have a deadline to comply. By law we have to comply. So we are actually in that process of complying. I mentioned in my comments, we’ve got four of the seven low NOx burners already in service. We’re well down the path that Sooner on the scrubbers. We’ve made the commitment; we’re doing an RFP right now for the gas supply, the stogie for the conversion. So we’ve got to move ahead. We could not wait for commission approval to begin this. I mean we have to comply and so that’s what’s going on, we’re moving forward. Let me say it differently; non-compliance is not really an option. Anthony Crowdell Right, but I guess I’m just thinking out loud if you did not get approval for regional haze, does that create a more challenging regulatory environment? Sean Trauschke Yes, while we’re surprised or disappointed that it’s taken this long to get the order; we do believe that we’re going to receive approval for these required expenditures. Anthony Crowdell Great. And moving to the easy part of the business Enable, I think on Enable’s second quarter call or whatever they spoke about when they thought they’d hit maybe the Tier 2 distributions, which that also I think it begins with GP just like getting some distributions. When does OGE forecast that they start receiving some of the GP distributions? Steve Merrill Sure. At the present time with the guidance that Enable put out yesterday, we would anticipate starting to receive those in 2017. Anthony Crowdell And is it like a – I don’t want to use the word trickle, but a small amount and then 18 to get a gradual step up or… Steve Merrill That’s correct. I mean at the current growth that’s out there right now, it would be a gradual step up. Anthony Crowdell Great. Guys, thanks for taking my questions. I’ll see you at EEI. Sean Trauschke All right, see you Anthony. Operator Thank you. Our next question comes from Matt Tucker with KeyBanc Capital. Your line is open. Matt Tucker Hey guys, good morning and thanks for taking my question. Sean Trauschke Good morning Matt. Matt Tucker I was hoping you could elaborate a little bit on what’s changed in terms of the utility outlook. If you could maybe quantify how much of the headwind is weather versus the recovery of environmental investments and is that Writer drag just related to the delay in the environmental case approval? Steve Merrill Yes, that’s correct. If you look at weather, it’s about $0.03 and then the environmental drag is a couple of cents at this point and yes, it’s just timing of the Writer. That will go away as soon as we get the Writer. Matt Tucker Got it, thanks. And then thinking about, you’ve maintained the long term outlook despite Enable kind of reducing its distribution growth guidance for the next couple of years and I know that you built a lot of cushion into your longer term assumptions. Could you talk a little bit about how stress tested those are if Enable were to hypothetically hold its distributions flat for the next couple of years or beyond. Would you still be okay in terms of the dividend growth guidance and lack of equity needs? Sean Trauschke Yes, we would. Matt Tucker Okay, great. That’s all I had guys, thanks. Sean Trauschke Thanks Matt. Operator Thank you. Our next question comes from Bryan Russo with Ladenburg Thalmann. Your line is opened. Bryan Russo Good morning. Sean Trauschke Hey, good morning Bryan. Bryan Russo Just curious. How much environmental spend is not in base rates. Steve Merrill Right now that’s about $39 million. Bryan Russo Okay, great. I realized the delay in the OCC order. I think previously you had conveyed that they indicated they were going to try to make a decision by September and we’re probably six weeks past September; any reason for the delay? Sean Trauschke None that we’re aware of Bryan to be perfectly blunt. There was that public hearing they did allude to. They thought they were going to try to get an order out within 30 days. We’ve not seen the order and we’re talking to them and anxious to receive the orders as quickly as you are. Bryan Russo Okay, so it’s basically any day is how we should look at it? Sean Trauschke Yes, but I wouldn’t characterize that any day any differently from September. Bryan Russo Understood. And if you don’t get the ECP for the tracker order by the end of the month and you file your rate case, does not having that tracker or a decision on the order, does that complicate this rate case at all or is it because your environment, the spin is so back end loaded that your able to manage it? Sean Trauschke Yes, you’re correct in your assumption there. I think the complication that arises with this filing is that under 1910 there is a provision there that you file a rate case every two years after the Writer goes in place and our goal and objective was we wanted to run our business and we didn’t want to get tangled up in rate cases every couple of years and just because of the time, energy and money you spend going through that process. In your scenario there we would file and not have – file a rate case and we potentially could not have rates, the Writer in place and so that may give rise to another rate case. I believe we’ll cross that bridge when we get there. I think the thinking thereby and just to be perfectly honest, we said all along we were going to file this rate case this year and this is to recover those items that Steve’s mentioned to that are not being recovered today. There would be good value for customers, the transmission lines are in service and we are going to bring 300 megawatts there back to our utility customers around 230 a KW. So that’s good value for the customers and we ought to be doing it, but we’ve got to kind of run our business for our customers and not get bogged down with kind of the regulatory timeline. Bryan Russo Okay, and the June 2015 test here. What’s like the true-up here or a known and measurable date? Sean Trauschke Six months. Bryan Russo Okay, and what’s the statutory deadline for the commission to issue a final order in a rate case? Sean Trauschke Well, after 180 days from that filing in the rate case, we can implement rates. Bryan Russo Okay, got it. So we should feel rest assured or comfortable that new rates are going to affect prior to near your summer third quarter peak period. Sean Trauschke Yes sir. Bryan Russo Okay, great. Thank you. Sean Trauschke Thank you. Operator Thank you. Our next question comes from Jay Dobson with Wunderlich. Your line is open. Jay Dobson Hey, good morning Sean. Sean Trauschke Hey, good morning Jay. Jay Dobson Hey, a couple of questions if I can. Operating cost trends obviously have been moving in the right direction and you spend a little time highlighting them. Can you talk a little bit about what’s going on there and sort of the durability of those controls or reductions? Sean Trauschke Yes, I think – good question. So we’re actually quite proud of this and philosophically this is not a one-time project that we have these initiatives or teams out there; this is every day. This is just grinding away, looking for opportunities. We’ve seized opportunities around supply chain recently, around our maintenance of our facilities, our engineering systems. We’ve had a number of opportunities as people have retired. How we re-tool the workforce and brought new people into the company. So there’s no singular item Jay is what I would tell you and I think that speaks to the durability or the sustainability of what we’re doing here and it’s just a daily effort and we’re keenly focused on keeping our own costs low. In this case actually reducing them, but I expect that to continue. Jay Dobson Is that something we’d measure in quarters or years? Sean Trauschke I think it’s probably something that you do on an annual basis. A lot of things going at your own expense, but I think that’s more of an annual trend and we’ve been trending that. We’ve been watching that since 2011 and I’m really proud of the effort the entire company has put forth on this. I don’t expect it to seize. The expectation is we’ll continue going forward. Jay Dobson No, that’s great. So the reduction sort of to-date or whenever the rate case is filed, you’ll be sort of handing those back in a rate proceeding, but looking forward sort of post rate case we should assume that costs could continue to decline in a measurable pace. Sean Trauschke Well, let me clarify that a bit. So we are very fortunate to see low growth on our system and so we’re adding customers and so what we’ve been able to do is absorb that and not see incremental costs go out, okay. So I don’t think you’re going to see O&M reductions go down if you’re thinking in terms of rate case activity or anything like that. What we’re saying is that we’re absorbing this additional low with productivity and efficiency gain in our system. Jay Dobson Nope, that’s perfect. It’s like you read my mind. So commercial trends you indicated, what exactly is going on there? Is there new customers coming in? Is this expansion sort of economically related? What’s going on there? Sean Trauschke Yes and yes and so we’re seeing a number of the chain account kind of builds, box stores and restaurants and things like that coming in. We are beginning to see a bit of a slowdown in the oil field sector as you would expect, but it does not seem to be slowing down on the commercial side or the retail side. Jay Dobson Got you, that’s great. And then Enable, I assumed they’d be in the running to serve the Miscurgie conversion and Mustang gas needs. Sean Trauschke Yes, I think we’ll conduct a competitive bid process like we do with everything we procure in this company and if they are successful they’ll get it, if they are not, somebody else will get it. But yes, they would certainly be a viable candidate, but they will not receive any kind of special treatment. Jay Dobson Do they serve other facilities on your system currently? Sean Trauschke Yes, they do. So Enable serves the Mustang plant currently and Horseshoe Lake and Seminole and then some other suppliers serve Redbud and McClain. Jay Dobson Got you. And then two last ones; tax rate with the write down maybe more for Steve. I imagine not that you’re a big tax payer, but that it would do Steve, actual taxes paid, so cash flow benefit. Am I thinking about that right from the good will impairment you recorded? Steve Merrill Yes, you are. We won’t be a full tax payer until 2018. Jay Dobson Perfect. And then last one, just to tag on to the – I think it was the last question Sean. So you can implement rates, 120 days if you don’t have a decision, but am I remembering historically you haven’t actually done that. Sean Trauschke Yes, so it’s actually 180 days and so have we done that? I believe we’ve done it way, way back in the past, but not in recent history. Jay Dobson Okay, got you. Awesome! Thank you so much. Look forward to seeing you in a couple of days. Sean Trauschke All right, thanks Jay. Take care. Operator Thank you. Our next question comes from Paul Patterson with Glenrock Associates. Your line is open. Paul Patterson Hi, how are you doing? Sean Trauschke Hey, good Paul. How are you? Paul Patterson I’m managing. With respect to the, back to this regional haze thing, I mean I guess it was asked and I guess if you could just elaborate a little bit. I mean there’s no sense as to why this is being delayed. Sean Trauschke Well, they are deliberating right now. This is I think the top item on their play. In fairness to the commission, they’ve got a heavy case load. They’ve been very involved in some of the – there’s been a lot of earthquakes here. So they’ve been involved in that analysis and in fairness to commissioner Hye [ph], he walked into this. He didn’t have the benefit of the history that had gone on the previous four years with this. So he is quickly getting up to speed as well. So I don’t really have any, Paul any more insight than that and we’re as anxious as you are to get this resolved. We’ll tell you that we have had some discussions, not complaining or anything about this case, but more about prospectively we’ve got to come up with solutions. What can we do on our side to make this process faster in the future. So we are looking forward in terms of how we can improve this process to make it more timely. Paul Patterson But the record has been closed for some time. There was a deliberation statement from Anthony right. I mean so isn’t like – it seems like it’s got nothing to do with you guys at this point, correct. I mean you guys can’t do anything to – so generally your really… Steve Merrill I think your thesis is exactly right. I mean we have asked if they are looking for any more information or they need anything from us. I think your thesis is right. Its sitting there on their desk. They are deliberating right now. Paul Patterson So we are really not going to be in a situation where you are going to be doing things to address the regional haze issue before we get this; at least nothing that would be controversial potentially. Correct? Sean Trauschke Are you talking about as far as taking access to comply? Paul Patterson Yes. Sean Trauschke No Paul, we are taking actions to comply. We have a deadline, we have a compliance date between regional haze and MATS and we are taking actions – go ahead. Paul Patterson But is there anything that like I guess in terms of – is there any risk that you’ll be taking action that these guys might say, ‘hey, well that’s not what we really thought you were going to do.’ Sean Trauschke No, no the actions we are taking is exactly what we spelled out in our testimony, exactly what we communicated well in advance of our filing and our plan of attack is exactly what we’ve been communicating for a couple of years now. Paul Patterson Okay and so if these guys come up with a decision that’s different than that? Sean Trauschke When you say a decision different than that, what do you mean? Paul Patterson I mean if they go with the ALJ recommendation, right. Would that… Sean Trauschke The ALJ, I think the ALJ was primarily speaking about various components of how you’d recover that, but the commission is not – it’s our job to kind of design and operate this system and make these decisions on how the business is going to operate, and aside I don’t believe that they are going to get into making decisions about what asset we should be utilizing. And besides remember, the ALJ did indicate all of this was prudent, and the legislation provides for that as well and that this was a mandate, a requirement and that’s what this legislation that was put in place was to address, was timely recovery for environmental mandate and this is the mandate. Paul Patterson But the Mustang monetization plan and stuff like that, I mean how do we think about that I guess. Do you follow what I’m saying? Sean Trauschke Yes, so on Mustang, our point there on Mustang was we wanted to be upfront and transparent with the commission. Let them know where we are going with how we are going to reconfigure our fleet. We had a window of opportunity there to be able to site new generation closest to the largest load center. It serves a very critical piece of our 345 transmission loop around the city and we made that case to the committee, to the commission and whether they account for that and the writer or whether they want to do deal with that later in a rate case, that’s fine, we’ll deal with that. Paul Patterson Okay. And then just in terms of good will, I’m sorry to be a little so on. Just with the account and back to Jay’s question, what was the tax impact? I apologize, it’s been a busy morning, associated with our write-off. Steve Merrill I mean it’s really just a timing issue as it relates to a tax impact. That write-off will actually flow through our corporate tax calculation and impact our effective rate accordingly. Paul Patterson As opposed to being amortized, is that how we should think about it. Steve Merrill That’s correct. It accelerates in the amortization, and you don’t really amortize good will anyway. It just sits there until… Paul Patterson Not on a GAAP basis, but on the tax basis, was there any amortization on that. Steve Merrill No. Paul Patterson Okay, I just wanted to check on that. Steve Merrill Okay. Paul Patterson Thank you. Sean Trauschke Thanks Paul. Operator Thank you. And I am showing no further questions at this time. I would like to turn the call back to Sean Trauschke for any closing remarks. Sean Trauschke Well, once again I want to thank our members for their hard work and dedication and commitment to safety and thank all of you for joining us on this call today and have a great day. Operator Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day.