CMS能源 (CMS) 2006 Q3 法說會逐字稿

Good morning, everyone, and welcome to the CMS Energy 2006 third quarter results and outlook call. [OPERATOR INSTRUCTIONS]

At this time I'd like the turn the call over to Laura Mountcastle, Vice President and Treasurer.

Please go ahead.

Thank you.

Good morning and thank you for joining us for our third-quarter earnings presentation.

With me today are Dave Joos, President and Chief Executive Officer and Tom Webb, Executive Vice President and Chief Financial Officer.

Our earnings press release. issued earlier today, and the presentation used in this webcast are available on our website at www.cmsenergy.com.

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 filings.

This presentation also includes non-GAAP measures when describing the Company's results of operations and financial performance.

A reconciliation of each of these measures to most directly comparable GAAP measure is also posted in the investor section of our website.

CMS Energy anticipates the 2006 reported earnings are likely to be substantially lower than the suggested earnings because of the expected reversal of mark-to-market gains, impairments and gains or losses from potential asset sales.

We are, therefore, not providing specific reported earnings guidance recollection because of the uncertainties associated with those factors.

Now I'll turn the call over to Dave.

Thanks, Laura, and good morning, ladies and gentlemen.

Thanks for joining us today for our third quarter call.

As is our usual practice, I'll start the presentation with a brief update on the business, and then I'll turn the call over to Tom Webb for a more detailed discussion on the financial results and outlook, and then we'll close with questions and answers.

Our operating results from the third quarter were about as expected.

Our non-GAAP adjusted earnings, excluding the effects of mark-to-market accounting, were $0.31 per share for the third quarter, up from $0.20 last year.

We've not changed our 2006 guidance of about $1 a share on this basis.

Our reported net income for the quarter, driven by expected mark-to-market losses associated primarily with the gas contracts at the Midland Cogeneration Venture and by an impairment of our ownership interest in the GasAtacama project in South America, was a loss of $0.47 per share.

We've been reporting concerns about the availability of gas to our GasAtacama pipeline and power plant in northern Chile for some time.

Unfortunately that situation degraded further during the quarter.

An evaluation of the fair market value of our investment resulted in an after-tax charge of $169 million in the third quarter.

Tom will discuss the impairment and our financial results for the quarter in more detail shortly.

Before he does, though, I'd like to give you an update on our regulatory agenda, discuss our recently announced participation in the Prairie State generation project in southern Illinois and give you an update on our 2006 asset sales and operating performance.

First the regulatory agenda.

On October 26, three months after we filed with the Michigan Public Service Commission seeking their concurrence with the sale of the Midland Cogeneration Venture interest, all parties in the case filed a settlement agreement with the Michigan Public Service Commission.

The parties concur with the use of net proceeds to pay down consumer's debt and agreed that the commission's prior orders concerning recovery of purchased power agreement costs remain in effect after the sale.

We're pleased with the agreement and expect the Commission to approve it later this month.

In the Palisades case we're seeking commission approval of the power purchase agreement with Entergy.

The administrative law judge recently approved a case schedule that will allow the commission to issue an order after February 20, 2007, about six months from the date of our filing.

The staff and intervenor filings in the case are due December 20th.

We're anticipating a final order in our pending natural gas rate case in the fourth quarter.

All of the proceeds -- or proceedings and briefings in the case were complete by the end of August.

As a reminder, the administrative law judge proposal in the case issued in July recommended $74 million in final relief.

The judge basically adopted the staff's position in the case, though he recommended inclusion of $200 million in equity infusions made by the Company in the first quarter of 2006, and recommended an 11% return on equity slightly, lower than the staff's recommended 11.15%.

On August 22nd the commission approved our gas recovery settlement for the 2006/2007 period.

The base gas costs recovery factor is set at $9.48 a 1,000 cubic feet with a quarterly adjustment mechanism, which allows the factor to be moved as high as $11.36, if gas market prices rise.

Barring any major market disruptions we believe this GCR factor range is adequate.

The commission recently issued a number of orders relating to the recovery of power supply and stranded costs.

They addressed a number of important policy issues and we're pleased with the outcome.

On September 22nd the Michigan Public Service Commission determined that the Company incurred $24 million of stranded costs in 2004 and approved its recovery through the retention of wholesale revenues.

These decisions were consistent with the Company's expectations.

On August 22nd the commission issued its final order in the 2006 PSCR, power supply cost recovery plan case, and approved a factor that will permit the recovery of an incremental $41 million from September through December 2006.

We're still forecasting a cash under recovery of roughly $116 million for 2006, due to the delay in implementing this increase.

We talked about that in the second quarter call.

However, we're pleased that the commission found all of the filed costs to be reasonable and prudent, allowing for full recovery over time.

And further, they indicated that it would be appropriate to roll the short fall into our 2007 PSCR plan, which would allow for full recovery by the end of next year.

The 2007 plan was filed on September 29th, and absent any MPSC action by the end of year, the commission's allowed -- or the Company is allowed to self-implement the filed factors in January.

On October 11th we announced our participation in the 1600-megawatt Prairie State generating project in southern Illinois.

The project will be jointly developed by CMS Enterprises and Peabody Energy, who will each own 15% of the project through shared ownership of a limited liability company.

The remainder of the project will be owned by a number of municipal utilities and electric cooperatives, who have already committed to 53% of the ownership.

CMS Generation will be the lead developer, construction manager and operator of the power plant.

Peabody will develop and operate the coal main that is adjacent to the plant site.

The mine will be owned by the project and is expected to fuel the plant for 30 years.

Financial close is contingent on Peabody and CMS being able to secure an acceptable engineering procurement construction contract, or EPC contract, for the plant, long-term power purchase agreements for the output owned by CMS and Peabody and non-recourse financing.

We will be seeking power contracts that allow us to achieve a premium over a utility-like return.

CMS 's equity investment in the project is estimated at about $200 million, which we expect to finance with a bridge loan until completion of construction.

This project fits our disciplined growth strategy for CMS Enterprises that's focused on enhancing future earnings and cash flow with low financial risk.

It also allows Enterprises to use its main strengths, which are building and operating power plants.

Much of the conceptual engineering is complete and air permits have been approved by the state EPA and supported by the U.S.EPA's Environmental Appeals Board.

As expected, a group. including the Sierra Club. appealed the permit to the seventh U.S.

Circuit Court of Appeals.

Site work will continue, however, during this appeal process.

We'll keep you updated as development progresses.

Let me bring you up to date on the status of planned asset sales.

The MCV sale is on track to close in the fourth quarter.

The net proceeds will be used to reduce debt at the utility.

Based on the MPSC's case schedule the Palisades sale is scheduled to close by May 1, 2007.

The net proceeds here will also be used to reduce debt at the utility.

With only two months remaining this year, we moved the projected closing date on the Enerbank and CPEE transactions into 2007.

The sale of Enerbank has been delayed pending review by the Federal Deposit Insurance Corporation, which in July issued a six-month moratorium on all applications for these specialized banks.

Pending a favorable outcome by the FDIC, we anticipate the closing to occur in the first half of next year.

The partial sale of our interest in CPEE in an initial public offering has been delayed due to market conditions for the offering.

And it's too early to tell at this time when we'll be ready to resume that IPO.

Now on operating performance.

Year-to-date base load availability averaged 86% at the utility, right on target for the year.

The CMS Enterprise's fleet achieved 91% availability.

Heading into the winter heating season, about 90% of our total natural gas requirements, about 200 billion cubic feet, are under contract, with about 88% at fixed prices.

Our targeted storage inventory of 105 billion cubic feet has been met.

The present forecast is that our November through March cost of gas will be about $7.85 a 1,000 cubic feet, down from 8.65 last winter season.

The utility's largest coal-fired unit, Campbell 3, began an extended outage on September 29th.

The six-month outage will include a boiler conversion to burn 100% western coal, a turbine overhaul and a tie-in of the selective catalytic reduction system that's been installed to comply with the new nitrogen oxide emission limits.

The modifications will include investments of over $400 million at the plant for NOX compliance.

The hot weather during July and early August set a number of new electric send-out records.

In August we set an all-time system peak of 8,885 megawatts, 5% higher than the record we set in 2005.

Our employees deserve credit for keeping our plants operating at full capacity during the record demand, and for managing the distribution system without any major customer upsets.

A key priority for us is to understand and improve the drivers of customer satisfaction and value.

We're seeing our efforts pay off in various national customer satisfaction benchmark studies.

In a recent J.D.

Power residential gas customer satisfaction survey, Consumers tied for sixth out of 20 companies in the Midwest.

Earlier this year, Consumers was ranked fourth in the Midwest for electric residential customer satisfaction.

Our employees take great pride in our continuing improvement in Customer Service.

Now let me turn the call over to Tom for a more in depth review of our financials.

Tom.

Yes, thanks, Dave.

And thanks, everybody, for joining the call today.

As Dave mentioned, in the third quarter we reported a loss of $0.47 a share compared to a net loss of $1.21 a share last year.

Excluding the favorable refund of prior-year property taxes at the MCV, the impairment of our interest in GasAtacama and mark-to-market losses, adjusted earnings were $0.31.

Now that's up $0.11 from $0.20 a year ago.

Adjusting for weather in the third quarter, which was less favorable than last year, earnings were $0.26, up $0.15 from a year ago.

On a September year-to-date basis, adjusted earnings are $0.88, and that's up $0.11 from last year.

Before we look at the third quarter in just a little more detail, let's cover the GasAtacama impairment.

Since 2004 GasAtacama, and that's our power plant in Chile fueled by natural gas from Argentina, has experienced restrictions of natural gas due to Argentina government policies, including price caps.

In August of this year GasAtacama was notified that one of its major suppliers would no longer be able to deliver gas under the Argentine government's present policy.

GasAtacama's operations were affected adversely by this situation.

When conducting our review of the third quarter results, we performed an impairment analysis and we concluded that we should write down our investment to its fair value, or about $122 million.

As a result, we recorded a non-cash charge to net income of $169 million or about $0.76 a share.

This charge increased our debt-to-capital ratio by about a point, but had no impact on our other key credit ratios.

In the third quarter adjusted earnings per share was up $0.12 at the utility, and it was down $0.01 at Enterprises and the parity.

While average temperatures were slightly warmer than normal this year, they weren't as warm as last year, resulting in a $0.04 year-over-year profit decline.

The impact of weather was more than offset by a return of retail open access customers and regulatory orders that allowed us to recovery power supply costs from our customers.

At the Enterprises and the parent, the 2005 tax benefits related to the American Jobs Creation Act were not repeated in this quarter.

Other improvements were due largely to lower interest expense and the absence of premiums on early debt retirements that we took last year.

So let's turn to the next slide for an update on our 2006 guidance.

Our full year adjusted earnings per share guidance remains unchanged at $1 a share.

Compared to our previous guidance, the utility is unchanged at $1.05, which incorporates third quarter weather was offset by higher service restoration costs, lower RCP savings and the softening economy.

At Enterprises, earnings of $0.42 also are unchanged, reflecting the benefits from the delay in closing the MCV sale, that were offset by lower margins at dig and other projects.

Interest and other costs at $0.47 are unchanged from our last outlook.

Let's turn to the next slide and take a look at cash flow for 2006.

As shown in the right box, we expect Consumers 2006 cash requirements to be $456 million, and that's $76 million more than in our last call.

Operating cash flow is about $1 billion, and that's $21 million less than our prior guidance, principally due to the increased core working capital requirements.

Now this reflects a voluntary agreement with the Michigan Public Service Commission, as with other Michigan utilities, to extend the due date of residential customer bills by three days for the winter heating season.

This was offset, in part, by a Public Service Commission order allowing us to increase our 2006 PSCR billing factor.

Total cash uses of $1.5 billion are up $55 million due primarily to increased dividends and tax sharing payments to CMS.

Consumers financing needs of $242 million, $74 million higher than the last forecast, are now being satisfied from inter-Company borrowings, compared with a prior guidance which assumed external financing.

Now shown on the left box, CMS cash at year end is forecasted $79 million.

That's down $273 million since the prior call.

This really reflects two major items.

The $213 million inter-Company loan to Consumers, which will be repaid in early 2007, and the delay in closing of asset sales that Dave outlined just a minute ago.

We're forecasting $195 million of available credit at year end.

On each call we provide factors that could change our profitability and/or our cash flow.

The sensitivities are smaller as we near the end of the year.

Let me mention a couple of these items that may be of interest to you.

We raised the 2006 MCV-RCP benefit from $0.08 to $0.10 due mainly to the little delay in the closing of the MCV sale.

We've locked in about 90% of our gas supply for the utility, and it's substantially reducing our exposure to changing natural gas prices.

The cash flow sensitivity related to $1 change in gas prices for the rest of 2006 is down, and down to about $5 million.

Three months ago, when we had more gas left to buy, the sensitivity, if you may recall, was $25 million.

For the most part the sensitivities affecting our 2006 guidance are relatively minor this late in the year, but still let's turn to our report card for the year.

Our 2006 forecast is on track to meet or exceed the targets that were set at the beginning of the year.

We continue to target adjusted earnings, excluding mark-to-market changes, at $1 a share.

Our forecasted cash flow before capital spending [technical difficulty] mostly to lower natural gas prices.

Our debt-to-capital ratio, while right on target at 71%, still is a bit worse than our prior guidance, and that reflects the GasAtacama impairment.

And our total debt's expected to be about $6.7 billion, that's down $800 million from our target. $400 million is due to the elimination of the MCV debt and $200 is due to the improved cash flow.

And another couple hundred million dollars is due to less external financing.

Well, thanks for listening to us today and, operator, we'd now like to take questions.

[OPERATOR INSTRUCTIONS] Our first question is from the line of Terran Miller from UBS.

Please proceed.

Good morning.

I was wondering if you could give us additional information with the impairment at Atacama how that might change your ability to extract cash out of the Chilean businesses in the future and how that might impact your ability to delever the holding company through 2008?

Let me take that question and tell you, even though we've taken the impairment, the business is still a positive cash flow and still positive earnings, and that's why we've impaired it down to $122 million, as opposed to further.

You may recall in the past we had thought about doing a little more leveraging in the business there to bring up cash, but we took that out of our plan some time ago -- some many, many months ago -- so we're not looking at that in our plans for an opportunity.

I would tell you that we obviously have a serious situation that we addressed with the impairment, but we still see a positive outlook for the business that will contribute to us in the future.

Thank you.

Your next question is from the line of Russ Covode from Lehman Brothers assets.

Please proceed.

Ross, if you're on, go ahead.

I'm sorry -- sorry about that.

A question regarding year-end liquidity.

The number's going to be down quite a bit from what we'd expected earlier in the year.

Can you walk us through the thinking behind the bridge loan down, as well as it looks like the debt retired number's changed significantly?

Ross, we really are taking an opportunity to do the most efficient sort of financing that we can.

And we're sitting on more cash than we need at the parent, so we've taken that opportunity to do an arm's length loan over into Consumers, rather than going out into the public market, so that will make some good sense.

However, over on the parent side, as Dave mentioned, we deferred a couple of our asset sales and that hurts us for this year.

You may remember in the last quarter when we talked about asset sales, we talked about $154 million, and we're showing a goose egg there today.

That just means that that cash is going to come in a little bit later.

It's going to be into next year, and that never bothers us in terms of that basic timing.

We're down a little bit, but we're really down because we're trying to optimize the financing between our businesses, and we've got a little bit slower recovery here -- or slower ability to sell some of the assets that we've targeted.

Okay.

Can you walk us through how the interim bridge loan works?

It is just an arms- length sort of loan, nothing special.

Consumers pay regular market rates, not higher,not lower, and so there is nothing to it.

We're able to put -- up to $300 million is what we author ourselves inside the Company over to the Consumers, just to meet cash needs on a timing basis and in an efficient way.

Nothing special.

Okay, there is no maturity on it?

We set that up as a loan so that we can bring it back at any reasonable time, and we plan to do that early in 2007.

One final question.

Sorry.

Can you refresh us on what the restricted payment capacity is with your [holdco] debt indentures?

Yes, we do have -- I think what you're probably referring to is the way we -- it might not be your answer, but one of the key pieces is that through our revolver we have a limitation on how much that we could dividend if we resume the dividend.

We have plenty of capacity, as you can see, because it is just a matter of how much cash we're holding or how much revolver capacity we have in place.

That's not a limitation for us of any meaningful size -- or meaningful kind.

I was more referring to the RP tests in your bond indentures.

Yes, and I think that -- and Dave can correct me if I've got a number wrong here -- but I think our limitation is like $300 million.

Okay.

Thank you.

[OPERATOR INSTRUCTIONS] And your next question comes from the line of Wen Wen Lindroth from PIMCO.

Please proceed.

Good Morning.

Good morning.

Do you still believe you can pay down $1 billion of parent debt by the end of 2008.

Absolutely we do.

It gives us a lot of nice choices to have the plans in place to be able to do that.

But in our calls that we've talked about in the past, we show our maturity schedule, so that by the end of 2008, we would plan to reduce our parent debt to $1.5 billion.

And also relating to the write down of the Atacama plant, is that going to reduce the amount of annual distributions coming up from Enterprises to the parent?

The best way to think about that is remember our core earning capacity comes out of businesses like Jorf, Taweelah, Shuweihat and the like, and we've always tried to give you an indication that there's a flow from those businesses of around $100 million, and we see no reason why that couldn't continue.

Okay.

Thank you.

Your next question comes from the line of Andy Smith from JPMorgan.

Please proceed.

Thanks.

Good morning, guys.

Good morning, Andy.

A couple questions for you.

One is just on the Atacama Do you have any recourse through insurance business interruption or anything like that or just is what it is?

Let me take that one.

As a Company that participates in international markets, we do take the prudent step of having that type of insurance, but the terms of those policies don't allow us to talk about, specifically, where they apply or what those terms are, so I can't tell you any more than that, Andy.

Okay.

It sounds like you guys would be exploring that to the extent it's available to you?

You know, the Atacama situation is a complicated one, because it involves numerous countries and various groups of customers.

About half of the sales of Atacama are to the local distribution company, and about half under contract to the local copper mines.

And of course, the gas comes out of Argentina, and some of that supplies into Argentina comes from Bolivia.

There's been a lot of developments recently down there.

I would say we're going to be pursuing our political and legal options down in Atacama to continue to bring positive earnings and cash flow out of project.

But it's a bit complicated and it's hard to predict how that will come out.

Okay, fair enough.

And this may -- the next questions may be more for Tom.

It is on slide 13 on the cash flow forecast.

Okay, Andy.

Good.

The first question is if I take your second quarter slide and look at this quarter and I adjust for the asset sales on the Inter-Company loan, it looks like your cash at year understand is actually running about $100 million higher than it was at the second quarter slide.

Is that just operating performance or what would be driving that upside there?

Yes, it is operating performance over at Consumers, which is permitting us to bring over a little larger dividend and a little bit better tax sharing.

And that along with our Enterprise performance is actually -- I'm glad you looked through this and I'm glad you asked the question -- actually it makes us a little bit stronger.

But then we used that cash, as you noted, to put a loan over into Consumers, and our asset sales, as you noted as well, are slipping out early into next year.

So net-net, the underlying performance is good, but the asset sales and our ability to make a loan are offsetting that.

Okay.

That's great.

This may just be sort of working through some math.

If I take the $213 million Inter-Company loan on the left side at the parent, you guys mentioned that was financing to Consumers, but the financing is will be up about $50 million versus the second quarter on the financing line.

Where do I see the $213 show up on the right side of that slide?

You need to think of pieces in terms of how we're making the use of that, because this can displace, for instance, our use of accounts receivables, that funding that we do, as well as not going out and doing as much public debt as we would have done.

It is a little hard to pull it right out of the pieces there, I grant you that.

That's fair enough.

Thanks for the time, guys and I'll see you in Las Vegas.

Andy, see you there!

Your next question comes from the line of Erica Piserchia from Merrill Lynch.

Please proceed.

Hi, guys, just two quick questions.

First, just looking at the trailing twelve months earnings picture, looks like you're coming in maybe a little ahead of the guidance at $1.05 on an adjusted basis, and I am wondering, looking forward to the fourth quarter, obviously you have some rate relief maybe offset by some increased spending, but why are you not increasing the guidance at all?

And then a follow-up question I guess would be the -- that old chestnut on the dividend?

I'll take the first part, and I won't touch the second part.

We had some tax benefits last year in the fourth quarter, and so on a comparative basis, you're not going to see us probably do as well as we did a year ago.

We feel pretty good about the guidance that we're giving here.

Remember, summer weather, which had these peaks that Dave was talking about, sure made it very hot with new records, but it didn't stay as warm as it actually was a year ago.

All in all, when we look at our numbers, we're very comfortable with the guidance we're giving and we think the dollar looks good.

I mean what's the left for you to consider before the board looks at the dividend or potential for a dividend?

I guess you left the chestnut for me, Tom. [LAUGHTER] I did.

It's all yours.

We have not tried to tie the dividend to specific events, and I'm not inclined to do that at this point in time.

I've said that we continue to look at the dividend as a high priority.

Our board talks about it regularly.

And I guess every day I get a day older and we get one day closer to paying a dividend, but we're not in a position, yet, that we're going to make any announcements.

Okay.

Thank you.

Your next question comes from the line of John Kiani from Deutsche Bank.

Please proceed.

Good Morning.

Morning.

Just to be clear on your previous comment, the roughly $100 million of annual distributions from Enterprises are -- I guess largely derived from your contracted assets like Jorf, Taweelah and Takoradi, is that correct?

That's correct.

Since you're still pursuing some of those residual asset sales that obviously have slipped a little bit into next year, would you ever consider the sale of one of those contracted assets that could potentially get a pretty decent price because of the good payment history?

You know, our track record on answering that question is just absolutely the same.

Everyone knows that we have certain assets that we are looking at and trying to time carefully so that we can get good value out of the sale of those businesses.

It is always a challenging thing to do that.

We never look for the peak.

That's too difficult to do.

We are trying to take advantage of opportunities in the market conditions to be able to exit some of those businesses.

We sure like the businesses that we're in that have these long-term contracts and they have very good cash flows, but we always said if anyone did see a synergy or benefit that was bigger, they could allow themselves to give us more cash than we could get on a reasonable discounted basis, we'd consider that.

Okay.

Thank you.

Your next question comes from the line of John Alli from Zimmer Lucas.

Please proceed.

Good morning, guys.

Sorry if this question has been asked.

I joined the call like.

The GasAtacama is that -- would that be an ongoing impairment?

Will you be able to continue to get some contribution from that asset at all?

That's a good question.

We actually wrote GasAtacama down to a $122 million value, and we're at that level, because we anticipate positive cash flow and earnings from the business as we go into the future.

But we took a pretty steep write-down because the conditions are such on the uncertainty of the gas supply that we believe we needed to reflect it.

We still see it as a business that has a good ongoing capability. an important part of our portfolio; obviously, less important than it was before.

Sure.

I had previously on this write-down estimated it was worth $0.04 to $0.05 a year.

Is that kind of in the right ballpark?

You guys disclose that?

I don't know that we have actually called out the Atacama results specifically, but again, it still should be a positive earner and a positive cash flow.

Sure.

Your CapEx number for the year at Consumer is now 747?

How much of that is the gas prepay?

I don't believe there is any gas prepay in that.

I will stand corrected if I am wrong.

Those are just capital expenditures, including cost of removal and leases.

Right.

There is no gas prepay in that.

Okay.

I was just reading the wrong note.

I apologize.

How close to an ongoing number is that for CapEx?

At Consumers?

That's a little hard to put your finger on.

We obviously have been up in CapEx the last several years, with clean air act compliance and certainly this number reflects that as well.

Our ongoing absent things like clean air and investment in new capacity would be substantially lower than that, pick a number around 500.

Having said that, you know, we've got finishing work on Phase I of clean air.

There is additional clean air act requirements coming, and we have been talking about needs for new capacity in Michigan longer term.

It is a bit hard to put a number on that.

Okay.

Great.

Thank you very much, guys.

Appreciate your time.

Your next question comes from the line of Maura Shaughnessy with Massachusetts Financial Services.

Please proceed.

Good morning.

I think it was about a year ago where the gauntlet was put down on the dividend and it wouldn't be looked at for awhile or what have you.

And here we are a year later and we don't even have the criteria, yet, as to what you would do on the dividend; whether it is certain balance sheet metrics or what have you.

So it just -- here's a year later, and we still are nowhere on the dividend clarity.

Is there going to be any clarity any time soon?

Well, Maura, it's probably a fair question, and I appreciate it.

I know a lot of you have been looking for very specific criteria, and we've been a bit careful not to tie this to any specific event, as I indicated earlier.

Obviously, we made a lot of progress on a lot of fronts.

There's obviously a lot going on right now with the regulatory proceedings.

Considering our MCV sale, looks like that is going to go through with the settlement that we've reached.

We've still have the Palisades sale going on.

Tom mentioned assets.

There's a lot of things in flux right now.

I wouldn't tie the dividend to any of those specific items.

Obviously, we've made a lot of progress on the financial front, and, obviously as the board looks at our dividend capacity they're feeling better about it.

But we haven't made specific decisions yet, and obviously we're getting a little closer to doing that.

I just can't be any more specific than that today.

I will reiterate what we said a few years ago and I know that the board and I are still in lock-step on this.

The Company has become more and more utility like.

We still have a portfolio of non-utility assets.

But we believe that given the nature of the company, that restoring a dividend is important and a high priority.

And I guess I will just have to leave it at that for today.

But in all fairness, there is always a lot of things going on.

I'm not sure how that drives the decision.

I think you're right about that.

I would suggest that what we have going on right now is maybe a little bit more than normal.

But there are always a lot of things going,on, and that's one of the reasons we don't want to take a dividend to any specific event.

The board's looking at the overall capability, and as we said before, wants to be very comfortable that we restore a dividend from a position of strength and one that we're very comfortable can be maintained over the long-term.

So I appreciate your concerns.

I appreciate your desire for additional information, and hopefully we'll be able to provide that not far down the road, but we're not prepared to be more specific today.

Thank you.

Thanks, Maura.

[OPERATOR INSTRUCTIONS] Your next question is from the line of Clark Orsky from KDP Investment Advisors.

Please proceed.

I just had a quick question on the operating expenses, the general tax line, the turn around there.

Just wonder what was running through there?

Tom, you got an answer for that one?

I wonder where you're looking at it.

On the CMS consolidated statements of income.

It went from 59 last year to a $9 million credit.

I tell you what it's difficult to follow taxes for us because we've had so many changes with the simplified service, benefit credits that are coming back.

Here is a good thing to give you some guidance to help out on how to look at us, as we go into the future.

Expect our effective tax rate to be more in the ballpark of 25% to 30% on a normalized basis.

But in many of the last quarters we've had special things happen, whether it is it is American Jobs Creation Act benefits or whatever it may be that skewed those rates.

The best thing is to look to the future to watch that normalize out in our business.

Clark, in this quarter we did have MCV recorded a property tax refund, so there was a large credit or income item in the general tax line.

Okay.

About how much was that, do you know?

It was in that line at $74 million.

Okay.

Appreciate it.

You have a follow-up question from Russ Covode from Lehman Brothers Asset Management.

Please proceed.

Thanks, guys.

One final question.

Can you walk me through the components of the -- again on page 13, the debt retired line?

For this quarter I think it is 197?

That includes the retirement of our gas prepay obligations you'll see in the footnote, so that's a piece of it..

And, Laura, do you have the other pieces handy?

The other pieces is we've been -- earlier in the year we retired some of the nine and 7/8 due in October.

So 197, has that all been completed?

Yes.

Thank you.

Thanks, Russ.

At this time we have no further questions.

I would like to turn it over for closing remarks.

Well, let me just wrap up again that we did have a good quarter from an operating perspective.

We've not changed our guidance for the year at about $1 a share on the adjusted basis, excluding the impacts of mark-to-market.

It is unfortunate that we had to take a charge at our Atacama project.

It's a situation that's been fluid, as you know, and we've talked about for quite a while.

It's something that we'll continue to work on to improve the performance down there, but it's very complicated situation.

We've got a lot on our platter, as we talked about, at the regulator, and a lot of issues are long-term issues like the MCV and like Palisades, that we think will improve our risk profile.

So we're continuing to work at the overall financials.

As Tom said, we continue to look at long-term debt retirement goal in 2008 of about $1.5 billion total debt at the parent Company, and we feel good about the progress that we're making.

We'll look forward to updating you at the end of the next quarter.

Thanks very much for your participation today.

This concludes today's conference.

We thank everyone for your participation.

Have a great day.