Avista Corp (AVA) 2009 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the third quarter Avista Corporation earnings conference call. My name is Anne and I will your coordinator for today's call. (Operator Instructions). As a reminder this conference is being recorded for replay purpose. At this time all participants are in listen-only mode. We will be facilitating a question and answer session following the presentation.

I would now like to turn the presentation over to Mr. Jason Lang, Investor Relations Manager. Please proceed, sir.

Thank you, Anne and good morning everyone. Welcome to Avista as you third quarter 2009 earnings conference call. Our earnings were released pre-market this morning and the release is available on our website at Avistacorp.com. Joining me this morning are Avista Corp. Chairman of the Board, President and CEO, Scott Morris, Senior Vice President and CFO, Mark Thies, Vice President of Finance, Jason Thackston, Vice President and Chief Council for Regulatory and Governmental Affairs, David Meyer and Vice President, Controller and Principal Accounting Manager, Christy Burmeister-Smith.

Before we begin, I would like to remind that some of the statements made today are forward-looking statements that involve risk and uncertainties, which are subject to change. For reference to the various factors which could cause actual results to differ materially from those discussed on today's call, I would direct you to our form 10-K for 2008 and 10-Q for the period ended June 30th, 2009, which are available on our website.

To begin this presentation, I would like to recap the financial results presented in today's press release. For third quarter of 2009, our consolidated net income was $0.15 per diluted share compared to net income of $0.13 the third quarter of 2008. On a year-to-date basis our earnings were $1.18 per diluted share compared to $1.04 per diluted share for the first nine months of 2008.

Now, I'll turn the call over to Avista's Chairman of the Board, President and Chief Executive Officer, Scott Morris.

Thank you, Jason and good morning everyone. We are pleased with our 2009 results through September 30th. Our continued solid financial performance keeps us on track to meet our earnings expectations for the year. We are expecting to be at the upper end of our range for our consolidated and utility earnings guidance for 2009. We continue to make progress in the timely recover of our costs and capital investments we're making in our generation, transmission and distribution infrastructure. New rates went into effect in Idaho August 1st and in September we reached an all-party settlement in our Oregon natural gas general rate case. As approved by the Oregon commission, new rates will effective in Oregon on November 1st. As part of the settlement, we reached an agreement -- we have agreed to refund a total of $2.4 million to our Oregon customers related to Oregon Senate Bill 408 over a two month period, November and December of 2009. This refund is approximately equal to the new revenue from the general rate increase for this period.

In Washington, we reached a partial settlement in our general, electric and natural gas rate case in September, the settlement resolved issues in the areas of cost of capital, power supply, rate spread and rate design and funding under the low-income rate-payer assistance program. Issues in the case that remain unresolved include, among others, the prudence and timing of the addition of the power purchase agreement for the Lancaster plant, capital additions to rate base, labor costs, tree-trimming costs, information systems costs and the proposed continuation of the natural gas decoupling mechanism. These issues are being addressed in further regulatory proceedings before the WUTC. We expect a decision from the WUTC on the remaining issues and new rates to become effective by the end of the 2009, some eleven months after the case was initially filed.

In November, we will be lowering natural gas rates for customers in all jurisdictions because of a decline in wholesale prices. These purchase gas adjustments are designed to pass-through changes in natural gas costs to our customers with no change in gross margin or net income. Since the beginning of the year, when considering all rate changes effective through November 1st, residential natural gas rates will have decreased 30% in Idaho, 28% in Washington and 12% in Oregon.

Also contributing to our improvement in results for 2009 are lower interest costs and a decrease in income tax expense. The decline in interest expense was primarily the result of financing transactions and decisions we made in 2008 and 2009. In September, we issued $250 million of 5.125% debt due in 2022.

I would like to comment about the economy and our service territory. We're observing declines in employment throughout our service area due to cutbacks in construction, forest products, mining and manufacturing. Unemployment rates are much higher than a year-ago in our eastern Washington and northern Idaho and southern Oregon service areas. The housing markets in Spokane, Coeur D'Alene, Idaho and Medford, Oregon are showing year-over-year increases in permits, but the commercial construction markets remain weak.

We plan to invest in generation, transmission and distribution systems with a focus on continuing to enhance service reliability for our customers. Utility capital expenditures were $141 million for the nine months ended September 30th, 2009. We expect utility Cap Ex to be approximately $210 million for 2009. We're expecting Cap Ex of $210 million for 2010, excluding potential costs with wind generation and projects associated with stimulus funding. The American Recovery and Reinvestment Act known as the "ARRA" includes almost $80 billion of stimulus funding in areas that have some relation to electric and natural gas utilities, such as Avista and just yesterday we received notification of an award from the SmartGrid Investment Grant program for the deployment of SmartGrid enabling technologies in the Spokane area. The total project costs are estimated to be $40 million, of which we will contribute approximately 50% and the project will be completed over a three-year period.

In August, the Northwest submitted an application for consideration for regional SmartGrid demonstrate project. This project is comprised of 12 regional utilities located in five Northwestern states that includes six cost-share partner vendors. The The proposal is assumes that 50% cost-share from the Department of Energy. Our portion of the project is located in Pullman, Washington and it's estimated for a total cost of $38 million. If approved, we expect to fund $13 million, DOE would fund $19 million and our cost-share partners would fund $6 million. The SmartGrid Demonstration project would spend the funds over the course of five years and a decision by the DOE on the award is expected in December of 2009.

In August we filed our 2009 electric integrated resource plan with the WTI and I PUC and highlights of the IRP include up to 150 megawatts of wind by 2012 and additional 200-megawatts of wind power by 2022, 750-megawatts of clean-burning natural gas fired generation, aggressive energy efficiency measures to reduce requirements by 26% or 399 megawatts, transmission upgrades that are needed to integrate new generation resources and hydroelectric upgrades at existing facilities that will generate renewable energy. Based on resource acquisition goals identified in the IRP, we're evaluating proposals from suppliers to provide us with up to 35 average megawatts of long term qualified renewable energy by 2012, in order to take advantage of federal and state tax incentives. The amount of renewable resources in future RFPs could change as the cost effectiveness of those resources changes.

As you recall in 2008, we completed acquisition of development rights for wind generation site near Reardon, Washington, contingent on the results from the evaluating proposals from suppliers we could construct this generation facility of at least 15 average megawatts and an estimated cost of over $125 million. We're continuing to evaluate the timing of this project relative to the investment tax credit rules and sales tax-exemption rules in Washington State. Based on the supplier proposals and the analysis of various options to meet our renewable energy needs, we may accelerate the deployment of capital related to the wind generation site and/or increase the capacity. So overall, especially considering economic conditions, I'm pleased with the progress we have made in 2009 and I believe we are well-positioned to continue our earnings growth in 2010 and beyond.

So now I would like to turn the presentation over to Mark Thies and Mark will provide details on the performance of our businesses, liquidity, financing activities, dividend information and earnings guidance.

Thank you, Scott and good morning everyone. Avista Utilities contributed $0.13 per diluted share for the third quarter of 2009 compared to $0.12 in the same period in 2008. On a year-to-date basis, our utility operations contributed $1.15 per share, an increase from $0.96 per diluted period in 2008. The improvement in our year-to-date results was primarily a result of increased gross margin due to the implementation of new retail rates in Washington and Idaho. The increase in net income was also due to a decrease in interest expense and income tax expense. The interest expense decrease was due to the effect of refinancing higher-cost debt with lower-cost long-term debt and lower interest costs on our short-term borrowings. An adjustment to reconcile our 2008 federal income tax return to the amount included in the financial statements for 2008 resulted in a $3.2 million decrease to income tax expense for the third quarter of 2009. These positive impacts on net income were partially offset by an increase in other operating expenses, depreciation and amortization and taxes other than income taxes. In addition, in the third quarter of 2008 we reported $5.7 million partially offset by $1.4 million of interest expense related to income tax settlements in that period.

We absorbed $2 million of expense under the Washington Energy Recovery Mechanism in the third quarter of 2009, compared to a benefit of $0.1 million in the third quarter of 2008, which decreased electric gross margin and income from operations by $2.1 million in the third quarter of '09 as compared to the same period in '08. We absorbed $6.1 million of expense under the ERM in the first nine months of 2009, compared to $7.3 million in the first nine months of 2008; which increased electric gross margin and income from operations by $1.2 million in the first nine months of 2009, compared to the same period in '08. We expect to be in a benefit position under the ERM by the end of the 2009 due to lower wholesale electric and natural gas fuel prices and the amounts included in our retail rates, partially offset by the negative impact from the extended outstanding at our Colstrip plant.

Utilities revenues in the nine months ended September 30th, decreased $127.8 million as a result of decreased natural gas revenues of $127.2 million and decreased electric revenues of $0.6 million. The decrease in natural gas revenues was primarily the result of decreased wholesale revenues of $112.2 million, and retail natural gas revenues of $17 million. The decrease in natural gas wholesale revenues reflects the decrease in natural gas prices partially offset by an increase in sales volume. The decrease in natural gas sales primarily reflects the decrease in sale volumes due to weather. The decrease in electric revenues was primarily due to decreases in wholesale revenues of $44.2 million and sales of fuel of $11 million partially offset by increased retail revenues of $54.8 million. The increase in retail revenues was primarily due to general rate increases.

Resource costs for Avista Utilities decreased $163.6 million due to decreases in natural gas resources of $130.6 million, electric resource cost of $33 million. The decrease in natural gas resource cost primarily reflects a decrease in the price of natural gas purchases, the decrease in electric resource costs primarily reflects a decrease in fuel costs. Utility operating expenses increased $17.2 million primarily due to an increase of $6.6 million in electric generation O&M expenses, an increase of $2.6 million in natural gas and distribution service costs, as well as an $8.2 million increase in pension and other post-retirement costs.

As Scott mentioned earlier, in September we issued $250 million of 5.125% first mortgage bonds due in 2022. The net proceeds from the issuance of $249.4 million were used to retire variable rate short-term borrowings outstanding under our $323 million committed line of credit and for general corporate purposes. In conjunction with the issuance of the long-term debt we settled interest rate swap agreement and saved total of $10.8 million this resulted in effective borrowing rate of 4.9%. As of September 30th, 2009 we had a combined $513 million of available liquidity under our $320 million committed line of credit, $200 million committed line of credit and $85 million revolving accounts receivable sales facility. Our $200 million credit facility expires in November, 2009, and we're in the process of renewing this credit facility at a reduced level. We don't expect that to exceed $100 million. We have a sales agency agreement to issue up to 2 million shares of common stock from time to time and we issued 750,000 shares under this agreement in 2008. We continue to evaluate issuing common stock in future periods. However, we are not currently planning to issue common stack for the remainder of 2009 other than for compensatory plan and direct stock for the dividend reinvestment plan.

As Scott mentioned, he we expect capital expenditures to be $210 million for 2010, excluding the cost for wind generation projects and projects associated with the stimulus funding. We're planning on issuing long-term debt and common stock in 2010 in order to finance a portion of our capital expenditures and maturing long-term debt, while maintaining our capital structure at an appropriate level for our business. Due to market conditions, and the decline in the fair value of pension plan assets, we contributed $48 million to the pension in 2009. Our annual contribution represents a significant increase compared to the $28 million we contributed in 2008. We expect that our contribution for 2010 will be approximately $21 million. The determination of pension plan contributions for future periods is subject to multiple variables. Most of which are beyond our control and we will continue to evaluate the changes in actuarial assumptions.

Advantage IQ's net income attributable to Avista Corp. for the first nine months was lower than the first nine months of 2008. This was primarily due to a decrease in the interest earnings on funds held for customers due to lower interest rates and reduced ownership percentage in the business as a result of the acquisition of Cadence network, effective July 2008. On August 31st, 2009, Advantage IQ acquired a [Ecos] Consulting Inc., a Portland, Oregon based energy efficiency solutions provider. The acquisition of ecos was funded primarily through borrowing under Advantage IQ's committed credit agreement. Under the term of transaction, Ecos is a wholly-owned subsidiary of Advantage IQ and had about $19 million for the nine months ended September 30th, 2009. For the first nine months of 2009 total revenues increased 32% from an increase in service revenues, partially offset by a decrease in interest revenue. For the first nine months of 2009 revenue increases included revenue as a result of the acquisition of Cadence in July, 2008. The first nine months of 2009 Advantage IQ managed bills totaling $13.5 billion, an increase of $1.2 billion or 10% as compared to the first nine months of 2008. The acquisition of Cadence network added $1.8 billion of managed bills for the first nine months of 2009, compared to '08.

Advantage IQ continues to experience slower internal growth than was originally expected as some of its customers are experiencing bankruptcies and store closures in these tough economic times. The weak economy has also resulted in slower than expected customer growth. Additionally, interest revenue will be lower for 2009 due to the historically low short-term interest rate environment that Advantage IQ is currently experiencing. In the first nine months of 2009, we absorbed some market losses on venture fund investments of $0.9 million, due to overall economic conditions as well as an accrual of $0.3 million of an environmental liability. These were the primary drivers of a net loss attributed to Avista Corporation of $2 million in our other businesses.

As we have indicated in past calls, management intends to recommend to the Board, consider gradually increasing the dividend payout ratio to be more in line with the average dividend payout for the utility industry; which currently is approximately 60% to 70% of earnings. In September 2009 Avista Corp. paid a quarterly dividend of $0.21 percent on the Company's common stock. The Board considers the levels of dividends on a regular basis, taking into account numerous factors including financial results, business strategies and economic and competitive conditions. Declaration of dividends is within the sole discretion of the Board.

We are confirming our 2009 guidance for the consolidated earnings to be in a range of $1.45 to $1.60 per diluted share. We expect Avista Utilities to contributing is in the range of $1.40 to $1.50 period for 2009. Our outlook for Avista Utilities assumes as among other variables normal precipitation, temperatures and hydroelectric generation for the fourth quarter. We are expecting to be at the upper end of our consolidated and utilities guidance for 2009, however despite recent rate increases these results still do not reflect full recovery of utility capital investments and operating costs to serve customers. We expect Advantage IQ to contributing in the range of $0.09 to $0.11 per diluted share and other businesses to be between a loss of $0.04 and a gain of $0.01 period.

With this release, we're initiating our 2010 guidance for consolidated earnings to be in the range of $1.55 to $1.75 per diluted share. We expect Avista utilities to contributing in the range of $1.45 to $1.60 period for 2010. Our range for Avista Utilities encompasses variable and power supply costs and resulting impact in the energy recovery mechanism. Our outlook for Avista Utilities assumes among other variables, normal precipitation, temperatures and hydroelectric generation. We expect Advantage IQ to contributing in the range of $0.10 to $0.13 per diluted share and the other businesses to be between a breakeven and contribution of $0.02 period. Although recent rate settlements in Idaho and Oregon and the expected resolution of our Washington rate case by the end of 2009 provide progress in the recovery of utility costs, we will continue to experience regulatory lag in 2010 due to a delay in the recovery of incremental capital investments and increased operating expenses. We plan to file new general rate cases in all three states in the first half of 2010, to more closely align returns allowed with those authorized by the regulators.

I will now turn the call back to Jason.

Now we'll open the call for questions.

(Operator Instructions). The first question comes from the line of Paul Ridzon with KeyBanc.

Good morning, how are you?

Good morning, Paul.

I have a handful of questions. One is it you review how the ERM for the forward-looking year will be set and what that will be set?

The ERM for the -- the ERM always gets reset when we complete our power supply costs in our rate case and we just have a tentative settlement subject to the commission approval that would have with our on the power supply and capital structure that we reached in September. So we still have to go through the approval process with the Commission on that, but that will set our power supply costs, in which we will calculate the ERM for 2010.

And the gas is the big driver of how that is set?

And power costs, but the gas strip is a driver of that, but also forward power costs.

What takes you from a $6 million absorption of the ERM to positive in the fourth quarter?

A lot of that is very similar, the comparison of the current natural gas strip in the fourth quarter and power costs compared to what we had in our rates effective as of January of 2009.

You are currently based on $8 gas strip? Is that the number?

Yes. $8 and change.

From a rate making perspective and regulatory balance sheet, what is going to happen to the stimulus funds? Will those go in as equity? Wha t does that do to the regulatory capital structure?

I this it's just Cap Ex. Contribution to construction.

You are going to spend some $19 million of government funds on smart meters -- .

We don't expect to get any earnings on that. I mean, we will get to spend that. The government will pay for it, but we don't expect to add that to rate-based and to get to earn on it. We will get to earn on what we spend on our share of that contribution, that matching share. That is what we'll get to put in rates. The customers will get the benefit of the capital that we is deploy, but we don't get to earn on.

So it has no impact on equity layer?

It should have no impact.

From '09 to '10, you have an improvement in the other segments, what is driving that?

We have had some -- I mean in the tough economic times, we have had some reductions in certain of those funds. We anticipate that turning around the we're not look at generating significant earnings, but the losses should slow down and get to a positive in that segment and it's a pretty small number.

Is there any progress in kind of exiting those businesses or it's just not the right time to do that?

We don't think it's the right time to exit the businesses, given the current economic condition.

I understand. Thank you very much.

Thank you, Paul.

And the next question comes from the line of Brian Russo, please proceed.

Good morning.

Good morning, Brian.

Could you be a little bit more specific on your external capital needs in 2010? You mentioned you will raise both debt and equity. Will the equity be accomplished through your sales agreement?

If you look at -- here is how we look at it. We have approximately $210 million -- excuse me -- of Cap Ex expected, and our dividend at the current rate is approximately $45 million. So if you have $255 million of need of capital need, we generate around $170 million to $175 million of cash out of our existing business on a trailing 12-month base, assuming income is about $82 million and depreciation around $90 million. So that leaves us with a need of about $80 million to $85 million and to maintain a reasonable capital structure would look at around a 50/50, just for example purposes, that gives you some range of that expectation, to maintain our consolidated balance sheet. We're about 47% equity as of September 30th.

So will the sales agreement of about 1.25 million shares left, will that satisfy your external equity needs?

If we're at $80 million to $85 million for the year, one we have an expectation of around 50%, let's assume on those calculations, $40 million to $42.5 million and where we're trading at now, no, the 1.25 million won't be enough the we anticipate applying to get another two million shares on that agency-- renewing the program for 2010. We would go in and file to be able to do that and with that we would expect that to be able to cover any needs.

So we can expect incremental shares outstanding by year-end of $2 million for updated sales agreement plus the remaining $1.25, so total of $3.25 million, on top your shares outstanding right now?

No. What we're looking at raising is the equity, between $40 million and $50 million roughly and over the course of the year and we haven't set out specifically how we would do it, and let's assume we're around $20 today is where our stock price is and to get to that number, it's 2 million to 2.5 million shares.

Well, and just on the 2010 guidance, what assumptions are you making to get you to the midpoint in terms of load growth?

It's about 1.5%. Load-growth in our expectations, which we have had a long-running consistency on that. So that is our expected load growth.

Okay and correct me if I'm wrong, but I think in your consolidated tables it looks like load growth were relatively flat in the third quarter, to slightly down as well as in the nine months. Is that accurate?

Yes.

So you are expecting a pick up maybe in the fourth or at least in 2010?

That is correct.

And can you just update us on any transmission projects that are being proposed that you might be involved with in the Northwest?

Brian, still too early around the Pacific gas and electric line that has been proposed. We're still actively engaged in negotiations and planning around that, but see no significant capital expenditures on that project in 2009 or 2010. So still on a study mode and to be determined, and just normal what I call normal transmission for reliability purposes in our service territories. So no large transmission projects and again, with our wind projects what we're excited about is if we do chaos to build wind early we have native transmission near the wind projects and we do not need to put any significant transmission investment to build the wind.

Will the wind project need additional equity above and beyond what you laid out early, above the Cap Ex profile you had so far?

It's a three-year project, so over the course of time, we'll continue to capitalize the company to maintain a prudent balance sheet. We want to have our strong investment grade rates and maintain our capital for what we have allowed by our commissions. But that capital will be spent over a three-year period. So the incremental equity over that period, there may be some as we go forward, yes.

And then just one last question, if I may. Advantage IQ I think in the press release when you announced the acquisition of Ecos, you conveyed that it was accretive and can you quantify that as far as it's impact 2010?

It's included in the expectations for the $0.10 to $0.13 for Advantage IQ. It's not a significant impact, but we do expect it to be accretive.

Okay. Thank you very much.

Thank you.

And the next question comes from the line of Brandon [Mae] with Levin Capital.

Thank you, our questions were answered.

Thank you.

And the next question from the line of James Bellessa with D.A. Davidson and Company, please proceed.

Good morning.

Hi Jim.

Earlier in the year when you were providing earnings guidance, did you anticipate the third quarter tax benefit of $3.2 million or $0.06 per share?

We do our accrual every third quarter and there times it can be up and there are times it can be down. Last year in '08, we had a positive in the third quarter of 5.7 less 1.4 million on a pre-tax base. So we had a positive then and we had a positive this year, but we didn't have that expected. We don't know that until we file our return and do all of our analysis.

So you did not anticipate it, but when you got to the August earnings report and you increased your outlook for your utility, did you then have an anticipation you were going to get a benefit or is that something that later on in the quarter that happened?

We hadn't even filed our return yet. So we worked through in September we file our return, so we did not have an expectation that it would be that much of a benefit when we did our August numbers.

Now, therefore, why doesn't your earnings band for the utility go up by that $0.06 for this year that you are still repeating what you were saying last August?

What we added was that we'll be at the upper end of the range. So Jim, we have provided some commentary that we expect to be -- we didn't change our range, but we expect our position within the range will be at the upper end of the range.

And that is also for consolidated business, so you are saying not just the utility, but the overall business guidance you expect at the upper end of the range?

For both utility and consolidated. So that is the change.

Thank you very much.

Thank you, Jim.

And the next question comes from the line of Chris Ellinghaus with Shields & Company. Please proceed.

High guys, how are you?

Good morning Chris.

I apologize, I think I missed a piece of the ERM discussion. Relative to prior quarter comments where you were suggesting that the ERM would be positive in the second half of the year, were you expecting at that point to have drag of $2 million for the quarter?

I think we anticipated that the third quarter would have some drag and then it would turnaround in the fourth quarter. Really, we just speak to it. It's an annual calculation and we just speak to where we expected to be at the end of the year and we said at that time we expected to be on a positive side. We continue to expect to be on the positive side in the ERM.

Okay that $2 million is an after-tax number?

No, that is a pre-tax number.

Also with Advantage IQ, the slight positive swing year-over-year, what was that attributable to?

Chris, it's a number of things? A. It's continuing to add new customers and continuing to expand in our consulting areas. While it hasn't been the traditional growth we have seen year-over-year we're still seeing around 10% growth, roughly, in the business. So it's those consolidated revenues that continue to grow because of business performance.

And we did pick up the cadence acquisition mid-year in 2008, so we had it for the full period in 2009. Now we did also offsetting that is that we don't have a complete -- we don't have the same ownership. We have 75% ownership.

Right.

We did get Ecos for the month of September.

Does that also include any transaction expenses year-over-year as a delta?

Well, the expenses are included in how we account for the acquisition, yes.

Okay. And can you just go -- there was one comment that Scott made on the Oregon settlement. Can you just go over the offsetting factor there that you had in the settlement?

I'm going to let David Myer or Chief Regulator Council walk you through the Senate Bill.

Chris, this is David. In that settlement, well let me back up. We had originally filed for an excess of $12 million and through negotiation we settled out at $8.8 million, but one of the advantages of the settlement was to bring those new rates into effect early, much earlier that 2010 implementation date. So they would be in effect on November 1st and that allowed us to get more revenues for the months of November and December, which happened to offset almost entirely a refund obligation under Senate Bill 408 of $2.4 million. So we'll work off essentially that obligation over the next two months and starting January 1, 2010, we'll begin with earnings from that $8.75 million settlement.

Okay. Was that by design?

Yes.

Thank you.

And the next question is a follow-up from Paul Ridzon with KeyBanc, please proceed.

On the second quarter call you talked about being in the $4 million to $10 million ERM band. Is that still reasonable?

Oh, in the 75/25 share, we expect to be within the $4 million debt band. We're pretty close to whether we get to that other band or not, it hasn't moved significantly, but it has moved slightly down.

Okay and what is go on at Colstrip?

We expected to be online no later than mid-November. So we fill pretty good about it.

And still expecting to incur about $10 million of losses from that?

That is all incorporated -- all of the amounts are incorporated within the power supply cost and ERM. They are still included in our expectations for the ERM for this year.

And previous management always talked about as soon as IQ got to about $100 million of revenues, it was probably time to start thinking about exit strategy. What is your thought process around that?

Well, Paul, we're going to continue to execute on our strategies around Advantage IQ, and what we'll do is continue to see opportunities in that business. Remember when we say "Monetize," that doesn't necessarily mean we are going to exit the business, that means we want to set a value for the business and when monetize we might obviously keep a portion or a majority of the business. It will give our partner an opportunity to exit the business, if they so choose. So we'll continue to look at that in the 2011-2012 timeframe, but we have great opportunities to continue to grow the business and with the acquisition of Ecos and with the focus on sustainability and energy-efficiency in these markets, Ecos brings tremendous expertise and providing more products and services to our customers. So we're going to continue to execute around those strategies and see where it takes us.

Are you seeing any more roll up-type acquisition potential out there?

We are always having our eye on the marketplace and if this are opportunities, we certainly take advantage of them.

Thank you again.

(Operator Instructions). And the next question is a follow-up from James Bellessa with D.A. Davidson and company. Please proceed.

The question about Advantage IQ, you cite in the press release managed bills totaling $13.5 million for the first nine months, but if you ex out Cadence and Ecos, it looks to me like they were down over half a billion dollars. Can you explain that or discuss that, please?

We did have some decline, Jim, in overall managed bills. Some of them we had some client-based reductions and just some reductions that have occurred just in the pricing of the bills and some of that is also timing of what dollars, where we are getting billed, what we're managing. Overall as we have seen utility operations, gas prices have come down. Electric has stabilized. So we can see some expecting lowering in bills just as we're seeing that with our own customer base. So it's not overly concerning, but you are accurate it has come down.

During the current recession, are you picking up market share or losing market share?

We have actually added overall slightly to our accounts that we manage. It's not a significant number, but we have seen an addition. We have had some losses and we have had some pick ups in accounts, but on a net basis, we have a slight increase in accounts, which given these tough economic times we feel pretty good about.

Thank you very much.

Thanks, Jim.

Ladies and gentlemen, this concludes today's Q&A session. I would now like to turn the call back over to Jason Lang for closing remarks.

Thank you all for joining us today. We certainly appreciate your interest in our Company. Have a great day.