CMS能源 (CMS) 2004 Q1 法說會逐字稿

Good morning everyone and welcome to the CMS Energy 2004 first quarter results and outlook call. This call is being recorded. As a reminder, there will be a rebroadcast of this conference call today beginning at 1:00 p.m. eastern time are running through May 13th.

This presentation is also being web cast. An audio replay will be available approximately two hours after the webcast. And will be archived for a period of 30 days on the CMS Energy website in the invest in CMS section.

At this time, but would like to turn the call for to Phil McAndrews, Director of Investor Relations. Please go ahead sir.

Good morning and thank you for joining us. With me today are Ken Whipple, Chairman and Chief Executive Officer. Dave Joos, President and Chief Operating Officer, Tom Webb, Executive Vice President and Chief Financial Officer.

First I will read our disclosure statement. This presentation contains forward-looking statements. Actual results may differ materially from those anticipated in such statements as a result of various factors discussed in our SEC filing. This presentation also includes nonGAAP measures when describing CMS Energy's results of operations and financial performance.

We have prepared a reconciliation of these measures to the most directly comparable GAAP measure in our earnings which is posted in our website at www.cmsenergy.com/invest. A copy of this presentation is also posted on the web site.

Now will turn the call over to Ken.

Thanks Phil, and good morning ladies and gentlemen. We are please you could join us today for our first quarter call.

What I would like to do is start out by review the progress we made on the 2004 priorities that we laid out for you on the last call. Then I will turn the call over to Dave to give you an update on our recent operating performance. He will also bring you up-to-date on the key regulatory cases that are so important to us, and he will cover the status of this year's asset program.

Next, Tom will discuss our solid first quarter financial results, our 2004 earnings guidance, and our cash flow forecast. As you saw earlier today, the first quarter ongoing earnings per-share was 44 cents, down slightly from last year results, and that was most accounted for by weather and it was on target for our full year guidance of 85 cents. Finally, I will wrap up the call with a look at our 2004 financial report card, and then we will open it up for your questions as time permits.

On our March 10th call, I discussed five of our top priorities for 2004. We have already made good progress toward achieving those goals. Our plans for this year haven't changed. We continue to focus our efforts on growing our utility and a handful of good business is under the CMS enterprises and price umbrella, we call that the plus part of our utility plus strategy.

Our strategy also incorporate the divestitures of businesses that are not part of a strategy. In April, which closed on the sale of Loy Yang in Australia, I can hear some of you saying, finally, and I certainly agree with that. We also closed on the blue water pipeline in Michigan and together they produce net proceeds of $48 million.

Another priority is to keep the strong focus on cash flow and earnings. Tom will fill you in on some of the earnings sensitivity, as well as our cash flow outlook for the year.

Although at times it seems we are making only slow progress on the legislative and regulatory front, the wheels are turning. For the major areas, we're still pretty much on the schedule set by the Michigan Public Service commission. Dave will give you a complete update and a few minutes, but a real highlight there was the governor's signing our appliance service plan it built on April 22nd. A big plus for customers and for our company.

We had very strong support from our union and that was a major factor in this success. Another priority this year to continue resolving investigations and litigation. In March, we reached a settlement agreement with the SEC on matters regarding roundtrip energy trades. As you know, this settlement did not involve a financial penalty.

Finally, our employees continue to demonstrate their commitment to operational excellence. Our generating plants as you will you hear continue to exceed performance expectations and our customer service continues at superior levels. Last year, consumer energy that all 10 Public Service Commission standards with particular strength in areas that customers value the most. Get my power back on quickly after an outage, answer the phone promptly, and respond to my request, not rock science, but they produce terrific results for us.

Now altering the call over to Dave to update you on the operations.

Thanks Ken, and good morning.

As you know, we had an exceptional year in 2003 at from an operational perspective and I am pleased that the good performance has continued into 2004. At the electric utility our base flow generating fleet achieve 87% availability through the first quarter which is about 3% better than our plan.

Most notably, our Palisades nuclear plant which in April exceeded the all-time company record by any generating unit continued to operate well. As of today, the plan has been online for 883 days and I will remind to our plans are to refueled that unit in mid September. The the performance of our fleet and power prices for the quarter, allowed us to more than offset increased coal costs through increased wholesale power sales.

Our nonutility generated fleet also performed well, achieving 94% availability in the first quarter. Our electric supply portfolio for 2004 is now 100% in place. We've planned for a bundle peak load forecasts of 7,900 megawatts and an 11% reserve market.

Our 2004 coal supplies are nearly 100% committed with very little exposure to higher coal prices. About 74% of this year's supply will be met with lower cost western coal. We expect total requirements for 2004 of 10 million tons at a cost of about $270 million. Good looking up to 2005 we also have two-thirds of our requirements committed.

Almost 90% of our 2004/2005 heating season gas supply now in place, in March the Michigan commission approved a temporary settlement on our gas cost recovery factor. We're nearing a final settlement and we expect to recover all purchased gas costs through this process estimated at $1.5 billion.

Incidently, in 2003 consumers continue to be one of the lowest cost gas providers in the United States. Our average all in price of natural gas sold to residential customers was third lowest in the U.S. at $7.76 per 1,000 cubic feet and 31% below the national average.

One concern I do want to mention is the potential for impact on our [ADACOMA] project of the Argentine government's recent actions to export gas exports because of their concern of the adequacy of domestic gas supplies for the coming winter. This is a very fluid situation and recent actions to arrange for import of Bolivian gas and relaxation of price controls in Argentina to promote additional production, we think that will help this concern.

Nevertheless, the uncertainty is a threat to our ability to complete a planned debt financing at the project this year, and may also affect earnings and cash distribution from the project although it is certainly a bit too early to predict the outcome.

You will recall and Tom Webb will remind you, that our 2004 cash plan assumes $100 million cash distribution from the [ADACOMA] associated with plan project financing. Tom will also discuss associate contingency plans associated with this issue.

Turning to our regulatory agenda, let me bring you up-to-date on developments since our last call. [REEFs] by all parties in the gas rate case were completed by late March so that case is now ready for a commission decision. As Ken mentioned, Governor Granholm recently signed legislation that allows us to continue the appliance service plan under our utility operations indefinitely. This program generates about $14 million in annual margin.

Lawmakers passed the legislation overwhelmingly after literally being inundated with letters from our program customers. Briefing is now complete in the rehearing of our pending securitization request. We call it the commission authorized a $550 million last summer to recover our retail implementation cost and certain Clean Air Act costs. But that the surcharge structure a proposed by the commission was problematic and we have to ask for a rehearing. The commission order is anticipated in the second quarter. Assuming a favorable outcome and no appeals, we would expect to market the bonds of this fall.

Regarding our 2002 stranded cost case, testimony and exhibits were filed in April, presented in June and required briefs scheduled for July 1st, so the commission would be in a position to issue an order in the third quarter. This week, which filed for recovery of $93 million of stranded costs for 2003 plus carrying costs which were determined consistent with the Michigan Commission's established methodology.

This number excludes Clean Air Act related costs which we expect to recover through our securitization request. We also asked for expedited approval of a one-half cent per kilowatt hour interim stranded cost surcharge and elimination of the current offset to securitization charges for open access customers. Both of which are consistent with the Commission's recent order in the Detroit-Edison the interim rate case. I'll remind you again that we have been conservative in our stranded cost recovery assumptions and with not yet accrued any regulatory assets for 2004 or for prior years. We did get a favorable order from the commission last week with respect to initiating recovery from our open access implementation costs which now total about $100 million.

After the Michigan Court of Appeals took issue with the fact that the commission had deferred recovered of our 1999 costs, the commission last week issued an order acknowledging the court's finding as to whether we would prefer our securitization requests or through a separate surcharge. We will be responding to the commission yet this week. We expect the commission, or the court's decision will cause the commission to deal with our post 1999 cost as well.

In our last call, and into some detail about the proposal we made to the commission to change how we dispatch the Midland-COE generation venture and also how we recover capacity charges from our customers associated with the MCV. We call a our proposal the research conservation plan because it will conserve an estimated 30 to 40 billion cubic feet of natural gas per year with no additional cost to our electric utility customers. A hearing schedule has not been set with respect to this request which should result in a final decision early in the fourth quarter. I must say we were a bit disappointed that the administrative law judge in the case declined to consider expedited approval of interim implementation of the plan, however we are optimistic that a settlement can be reached to allow us to start the program as early as the second quarter.

While not a new issue, we have added nuclear decommissioning to our regulatory agenda because we just recently completed a review of our commissioning fund adequacy for both Big Rock Points and Palisades and have determined that additional funding will be needed for both. Primarily as a result of lower in planned investment returns on the existing fund over the past several years. We will be asking the commission to authorize an increase in the surcharge for Palisades effective 2006. For Big Rock, we plan to wait for the decommissioning project to be complete in 2006 before we seek additional recovery.

Finally, we're hard at work preparing our electric general rate case which we still plan to file late this year. Over all we still have an awful lot before the Michigan Public Service Commission and I am both hopeful and cautiously optimistic that we will have some real progressed to report in our next quarterly call.

This slide summarizes our 2004 asset sales planned, and much shorter list than we had last year. We anticipate an exit from Australia and sale of at least one of our power plants in India by the end of the year raising it total of about $160 million of net proceeds through asset sales. We have already closed of the Loy Yang and the blue water pipeline raising total net proceeds from asset sales of $48 million to date. The remaining projects are in various stages of the sale process.

Let me turn the call over to Tom now for a discussion of first quarter results.

Thanks, Dave.

As shown on the next slide, we lost 7 cents a share on a reported basis, and we earned 44 cents on an ongoing basis. The reported loss includes a charge related to the sale of Loy Yang. Recognizing and income, the foreign currency translation account balance held another comprehensive income.

The charge of course doesn't have any impact on equity. We are delighted to have this sale behind us as Ken and Dave mentioned and pleased that it came in at a better price than we budgeted. At 44 cents a share, ongoing earnings exceeded our plan as well as first call estimates that average about 41 cents. This is down 6 cents from last year, but up a penny on a weather adjusted basis. Those of you in Michigan last year know it was pretty cold here.

As shown on the right side of this slide, utility results were below last year by 2 cents. Enterprises up a penny, and interests in other of 5 cents reflecting higher interest, severance, and auditing costs. Now let's turn to the next slide for a bit more detail.

At the utility, which is shown on the left, earnings are down 2 cents compared to prior year. Excluding the impact of weather, net earnings were actually up 9% from 56 cents in 2003 to 61 cents this year. Financing cost increases of 3 cents reflected higher borrowing partly offset by lower borrowing costs as a result of refinancings completed last year.

Revenue reductions of 2 cents include more customers choosing alternative electric suppliers and lower gas deliveries principally due to milder weather this year, partially offset by increased electric sales and higher gas rate. Costs and other earnings improvements of 3 cents, reflects the absence of costs related to the refueling outage in Palisades of 2003. And the authorized a decrease in gas utility depreciation rates.

At enterprises over on the right side of the slide, earnings are up a penny from 16 cents in 2003 to 17 cents this year. Market to market impacts in changes from the fair value of derivative to our [TOWELA] facility in the middle east as well as gas supply contracts reduced earnings 6 cents.

Down sizing and other more than offset the market to market impact. The down sizing improvements of 7 cents reflects cost reductions of last year that include elimination of 160 positions at Enterprise. Closures of offices in Houston, London and Jackson, and write off of redundant computer system. Also we completed a favorable settlement with Ford and[inaudible] at our Dearborn Industrial Generation Business earlier in the quarter.

Now let us turn to our guidance for 2004. Because the loss associated with the sale of Loy Yang was less than planned, we now expect to report a loss of about 35 cents in 2004. That is an improvement of 15 cents from our prior guidance. Again, that is on a reported basis. The final amount will depend on the timing and level of proceeds from asset sales during the remainder of this year.

Excluding the adverse earnings impact from asset sales and certain legal costs as well as favorable earnings associated with expected securitizations this year, when projected ongoing earnings of about 85 cents a share. This is unchanged from our prior guidance. As a reminder, this will be up 4 cents or about 5% from last year. This includes $1.45 from utility, 60 cents at Enterprise and interest and other costs of $1.20 per share.

At our earnings call and March, you may recall that we provided to returning sensitivity. These represent significant exposures or items where there has been a lot of market volatility. Here is an update. First, with increased their percentage of call under contract for 2004 requirements from one minute 91% to 98%, almost at 100% as David mentioned. This reduces our sensitivity to changing coal prices. The change in price of coal of $10 per ton would change our earnings per share by about a half a penny. So far power sales have offset any deterioration.

Second, our sensitivity to changing interest rates has dropped from 3 cents to 2 cents as results of a richer mix of low-cost fixed-rate debt and less floating-rate debt. Also, if our plan to conserve in MCV gas resources is delayed to year end, we could lose 3 to 4 cents. In our forecast, we assume the plan will be approved early in the fourth quarter.

Let us turn from earnings to cash flow. He's as shown on the right of this slide, consumers would generate $740 million of cash flow to cover most of its capital expenditures, interest and deferred dividend. This is $50 million lower than our prior estimate principally to higher gas costs. These will be recovered in future rates.

Also, capital expenditures are up $20 million, primarily a fund increase site restoration security costs at our Big Rock facility. We expect to end the year with $50 million in cash and $235 million of available bank facilities. At the CMS parent shown on the left, dividends from Consumers and Enterprises of about $280 million more than covers interest and preferred dividend requirements of $235 million.

Cash flow at the parent is better than our as by $30 million and as date mentioned until gas supply issues in Argentina are resolved, the planned distribution of $100 million from [ADACOMA] is at risk. When may delay or replace this action. Work is underway now to identify improvements to our capital spending, asset sales, coral working capital and earnings to offset any decline.

With or without the [ADACOMA] distribution we will be able to further reduce parent debt and invest in Consumers. We plan to end the year to $390 million in cash and unused bank facility of $190 million at the parent. Please keep in mind that this level of cash provides as with ample room to retire $100 million note that matures on January 15th of next year.

Now this next flight slide shows debt maturity for CMS and Consumers through 2006. As a white or clear bars show the maturities that we faced about one year ago. For example, it in the first half of this year we faced $617 million of debt coming due. As you can see in the first column, that is now down to $10 million. As a parent, we have $192 million due later this year and about $200 million next year.

For Consumers, we paid down our $300 million maturity this year. Our next maturities are in 2005 and they include $300 million note in March and a $141 million note in June. These total $441 million as you see on this side and will be refinanced next year.

Lets turn to other recent developments. As Dave mention, the Loy Yang sale is complete. It resulted in net proceeds a touch better than $43 million. After taking into consideration the currency translation adjustment of $110 million, we reported an after-tax loss on the sale of $81 million or 50 cents per share. This is better than we had anticipated.

To comply with a final vision of the FIN 46 accounting change, we are consolidating the MCV. The final standard required consolidation of variable interest entities which is judged at 50% or more of the risk and/or benefits accrue to the investor. As shown on the right, consolidating MCV will add about $600 million of our debt at year end. Including the related equity, our debt to capital will improve from 76% to 72%.

However our GTN debt covenant does not permit including minority equity. A debt to capital covenant calculation would rise from 72% to 74%. This is a debt incurrence test, and going over 75% does not result in any default.

At year end, we could pay off those remaining GTNs totaling about $220 million without any penalty. We'll only do so if it makes economic sense to do that.

So on balance, this has been a good quarter with performance ahead of plan. The outlook is healthy for earning, but we still have work to do to stay on course for cash flow.

With that, I would like to turn the call back to Ken.

Thanks but a lot, Tom.

This slide show is our usual report card. The first quarter results behind us we remain on track for the year. Now normally would not change its targets for the year, but for a significant accounting change like FIN 46 that Tom just discussed, we have adjust the capital structure of items. And the only performance change from last time, I've colored the cash flow status yellow. Tom mentioned higher gas prices and slightly higher capital expenditures. In addition, as Dave mentioned, the exact timing and amount of [ADACOMA] distribution from Argentina is a little more uncertain this quarter. We don't know enough yet to change the assumption we're watching it closely as we work on several alternatives to offset any delay there.

That concludes our formal presentation, so now we would like to move to your questions. Operator please.

Thanks you very much Mr. Whipple. The question and answer session will be conducted electronically. If you would like to ask a question please do so by pressing as star key followed by the digit 1 on your touch tone phone. If you are using a speaker function, please make sure your mute signal is turn off.

We will proceed in the order that you signal us, and we will take as many questions as time permits. Please press the star one on a touch-tone telephone to ask a question. If you do find that your question has been answered, and you wish to remove yourself, please press star 2. We will pause for just a moment as questions queue up.

Your first question comes from Ashar Kahn of FAC Capital. You may proceed.

Good morning gentlemen and congratulations on a nice quarter.

Ashar, how are you?

Pretty good. Ken, can you just give us a little bit more feedback as to when you look the certain regarding this Argentina--it's like, how can we follow this event more closely to knowing which direction it is going? If you don't get this 100, with the fine with lower cash balances? And now you are trying to recover from other things, but credit with lower cash balances be fined or would you need some kind of [inaudible] from some where?

Well, you've got a couple parts there. Maybe I will ask Dave to start off on the operational part.

Yeah, let me talk about that, then I will let Tom talk about the specific cash contingency plans.

As a mentioned, it is a very fluid situation. In fact, there is a referendum today to approve a proposed action by the Argentine government that would allow for increased in cost for new investment in drilling in Argentina and production, so that they can insent additional production of gas supply in Argentina. We expect that will be approved so that is one thing to watch.

Secondly, we expect Bolivian gas to start flowing shortly here and as long as that occurs, we think that is a six month agreement at this point in time, as long as that occurs we expect there will be adequate gas supplies to allow the project to get the cash it needs to meet its electric generating in northern Chili. So it looks like at least from an operational perspective things are moving along.

Having said that, we will still have to make sure that the situation is stable. So that lenders become more comfortable obviously before financing can likely be done. I would simply watched as issues of gas flowing from Bolivia and also the incentives that the Argentine to thinking of putting into place to promote additional production.

Thanks, David. Let me just add to that.

The cash flow levels that we projected are a commitment that we intend to meet one way or another. We could go out and do some financing to cover this. We are not concerned about that. However, we want to keep on our track of our debt reduction as a parent and their cash flow improvements during the course of the year. We're actually a little bit ahead of the game in the first quarter.

Our cash flow is a little bit better than we had planned for, but the thing is the areas we're looking at include capital expenditure reduction. We're looking at some alternatives were maybe the timing of that cap ex, or some opportunities to do some small reductions. That is an area we have always been very good at and typically and the year and a little bit better than what expected. But our folks are looking at specific plans that could provide 10 to $20 million of improvement.

In terms of core working capital, we have opportunities there. Some of you know we still have a few, we call them prepayments, where actually paying for some of our gas that is delivered, and we have some opportunities with our suppliers to improve that situation. And there may well be between another 10 and $30 million in that area of opportunity.

In addition on the asset sales side, we try to be a very realistic. In fact, perhaps maybe just a little bit conservative for the year so there may be some upside in that arena as well. So there's a lot of specific thinking in place and opportunities the management team and the whole team of the company are working on to try to ensure that we meet our cash flow commitment and stay on our debt reduction plan.

I would just-ended a bit to that. This is Ken again.

As I mentioned on one of our calls, when an internal bonus system based on operating earnings on cash flow and it pays to all salaried employees. Last year, we have a pretty good pay on that plan. Largely, because we did such a good job on the cash flow piece of the performance. So we have the full attention of the operating management were well aware, even those who work and long way away from Argentina, of their responsibility if they would like another payout to work on the kind of offset that Tom talked about. So I'm pretty confident that we will get some of that.

Thank you. Can I just pursue on one more question?

On the resources conservation run, David, you said you might have an implementation done if I heard it right in the second quarter, but the final decision will be in the fourth quarter. Is that correct?

The commission set a schedule that causes all the briefings to be completed in September. Assuming they move relatively quickly after the briefings are completed, we would anticipate an order in the fourth quarter and that would allow implementation under a normal schedule. Also, though, I think that there is a fair amount of interest amongst the parties to pursue a settlement that would allow us to implement earlier. Obviously, we cannot predict the outcome of that, but there's certainly a lot of attractiveness to do that, and we are hopeful in that regard.

So that can then, if I saw the slide right, if you can implement earlier the 3 to 4 cent drag that you're mentioning it could then evaporate? Am I correct in that?

There will be some upside. You'll recall that when we talk about this last quarter we actually have an expectation we can actually implement it. In the second quarter. We had some ups and downs in other areas, a delay to the beginning of the fourth quarter is what we now have in our forecast, and of course we haven't changed our guidance. If we're able to implement earlier, it would actually be a little bit of an outside right now.

I appreciated. Thanks a lot.

Your next question comes from Jeff Gildersleeve of Millennium Partners. You may proceed.

Hi Jeff.

Good morning, how are you?

Good.

Sorry if I missed this, but I'm just trying to reconcile between the year and cash flow slide and this quarters. It looks like the tax sharing went down as well as Enterprises of in some of the financial and securitization went up. Can you just comment on that? Explain what is going on there.

You're probably looking at slide 12 on the cash flow forecasts just to register everybody else and what you're referring to. In the side, we have seen and a bit of movement with the tax sharing which is where at the close end right now where it may be positive which it is or it may be flat to negative for this year. That is something that grows as we go through time. But that is down just a little bit from where we were from last time. What was your other question?

On the enterprise's line, that seemed a little less than last time. I was wondering if there was a timing issue or asset sales or performance related.

Good question. You're referring to the $85 million which we had at about $100 million an hour prior slide. That has to do largely around. Where we had some timing issues where recover fuel costs and coal costs and their issues. That's what they're using their. There are some timing issues we do not see the distribution so begin to next year to make up for that.

This is Dave, Joe. I mentioned the coal costs associated with utility. I didn't mention the coal costs and the economy in China is driving a lot of the higher coal costs internationally. That has driven up the cost of coal at Jorf. That causes some cash flow issues.

So essentially that is a cash flow lag? Could just began quickly explain how the fuel in the margin works at Jorf?

It is a bit complicated, so I will not get too precise. Largely, the fuel cost is the responsibility of the offtake. We don't take any significant fuel cost risks. But of course we have a working capital issue that occurs as a result of having to pay for higher costs call and having it delayed for the recovery in.

Okay. And then, if I look at -- still looking at slide 12 on the right, the financing went up from to 295 to 355. Whether the plans there and what is the bump up associated with?

The increase that you see there is really associated with the higher gas prices that we have been paying up at the consumer side up above their. In our uses of what we had essentially. So we've just kept some of our financing plans modestly and there is really a serious issues there. The way to really look at the bottom and I know you're familiar with this committee for others, is the securitization at that 555 is really a refinancing, that is part of the 725 down below of debt retired. Then you see the equity infusion in there which again is a repeat from where we were in our last plan. So it is just a small adjustment to the financing plan which won't be and issue for us.

Okay. Thank you very much.

Your next question comes from Ali Aga of Wells Fargo Securities. You may proceed.

Thank you. One additional question I had on the Argentine situation, from ongoing perspective in terms of ongoing earnings and cash flows, what is the contribution from Argentina to the company?

Let me answer the questions with regard to [ADACOMA], because that is really the issue. It is a relatively small number. My recollection is in the range of $6 million this year. Our best estimate at this point in time is that the impact of this issue, unless something changes dramatically from where it's headed right now, would be related deminimus, maybe a million dollars or two on this year's earnings.

The cash distribution is kind of similar to that?

Yes. It is sort of similar to that if you exclude the $100 million associated with the financing.

Okay. Within the Enterprises, when you give us the breakdown, can you just remind us the 5 cents for the DIG settlement that you received this year? What is that?

We have a dispute between ourselves and the customers there which include Ford and [inaudible] steel when it offered some contract related items after the start up of the unit a couple years ago. We have been in the middle of that dispute. That dispute was resolved and as a result of that, we took a pretax gain of $16 million is my recollection.

I see okay. And then final question. Looking at the overall interest expense at the company, clearly you are doing more financing at Consumers than you're paying off debt as a parent. When you look at it but as in a net basis, how should look at total interest expense for the year compared to last year?

You will see interest expense probably--you have to take it into pieces. The base interest expense probably drifts up just a little bit. But on a gross basis if you have all the, if you will, fees last that we paid, and the like last year you'll recall there was over $60 million of that. You'll see a substantial reduction.

And so the starting base debt is the $594 million the reported last year?

And that's right.

Because the first quarter was higher than last year.

That is true. To have to consider the consolidation of MCV. When I pick up the MCV in there that drives up just a tad. Last year's numbers would be without MCV.

I see. Thank you.

And your next question comes on the David Gromass of Covia Capital. He may proceed.

Good morning.

Hi David.

A couple questions on Enterprises. The improvement that you saw at energy, you know, resource management from the down sizing closing of the offices, can expect to sort of see that year on year where the quarter on quarter picked up throughout the year? When did those really kick in, I guess. You know, was it last year or is this the first quarter that we really see the benefit of it?

Your first releasing a full quarter benefit as you get into this year, but we have a piece of that in the fourth quarter last year because these were occurring during the course of 2003. So you won't see a fixed number. You'll see that improvement has occurred throughout 2003, and you're seeing pretty much the full effect here. Or close to it. In the first quarter and they will see that cascade throughout the year.

But it will trend down in sort of a Q over Q pick up because of when it came in?

It building up last year. Right.

Picking up on the settlement at DIG. Is that period one time or is there some more that we may see the rest of this year?

That was a onetime issue associated with some past disputes.

Great. That is of. Thanks a lot.

You next question comes from Ben Stun of Luminous Management. You may proceed.

Hello. Just a quick question. You mentioned the possibility of financing if there are any sort of delays in the cash flow. Could you just comment and what type of financing, are we talking about debt financing? Clarify that?

Most of the financing that you will see in our plan is the financing. But we really have no comment yet about, well, we may finish up the year with parent financing.

OK. Thank you.

Thanks.

And there are no further questions at this time.

OK. And thanks everyone for your usual good questions. I want to just close here with a reminder that our annual meeting is coming up on May 28th here in beautiful Jackson, Michigan. As most of you hold shares in our company, you are cordially invited. So we will see you there and we will talk to on the next earnings call. Thank you and goodbye.

This concludes today's conference. We thank everyone for your participation.