Chesapeake Utilities Corp (CPK) 2017 Q4 法說會逐字稿

Good morning.

My name is Casey, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Chesapeake Utilities 2017 Earnings Conference Call.

(Operator Instructions)

Beth Cooper, you may begin your conference.

Good morning, everyone.

I'd like to welcome you to Chesapeake's Fourth Quarter and Year-End 2017 Earnings Conference Call.

Today's call is being hosted at our corporate office here in Dover, Delaware.

Joining me in the room today are our President and CEO, Mike McMasters; other members of our senior leadership team; and also other members of our management.

Once again, thank you for joining us.

Turning to Slide 2. Before we begin today's presentation, I'd first just like to make some references to the fact that our presentation today includes forward-looking statements.

I would ask that you refer to our annual report on Form 10-K, which was filed yesterday morning, to take a look at those particular items that might cause our actual results to differ from these forward-looking statements.

I would also like to make a note that today's presentation does include certain references to non-GAAP measures, including gross margin and adjusted EPS.

And now what I'd like to do is turn our presentation over to Mike McMasters, who's going to begin with a discussion regarding our earnings for the year.

Thanks, Beth.

I guess, on Slide 3, you'll see our net income and -- for the full year and also the fourth quarter.

You'll notice reported earnings of $58 million, adjusted at $47 million.

Those adjustments are to reverse the impact of the tax reform act and also to add back the unrealized mark-to-market loss.

Again, $58 million reported earnings, $47 million of adjusted earnings.

On an earnings per share basis, that's $3.55 and $2.89.

On the fourth quarter, you'll notice EPS reported, $1.59; and then adjusted at $0.93.

I guess one of the significant things, with all of the changes that we're seeing, primarily with the tax reform impacts, and we have provided some guidance below, our forecast of earnings per share growth this year is 17%.

And that includes both tax reform and the other key projects.

Turning on to Slide 4, now we're going to discuss diluted earnings per share first.

What I would say is that the 5-year compound annual growth rate for earnings per share is 12.3%; and 10 year is 10.7%.

If you make the same adjustments that we made in the prior slide, that would be 7.7% EPS growth rate for 5 years and 8.4% for 10 years.

If you look at our dividends per share, 5-year growth rate, 6%; the 10-year, 5.2%.

What you can see is that our dividend growth rate is lower than our earnings per share growth rate, which supports that dividend.

Turning to Slide 5. Again, using adjusted earnings per share of $2.89, significant growth in all of our businesses only if you look at the first 2 -- the first bullet up there.

Significant growth in all of our operating businesses and increased -- based on our increased gross margin of $24.6 million.

That excludes the unrealized mark-to-market.

Just as a benchmark, that $24.6 million is a 23% increase over our recent averages.

In operations, Eight Flags CHP plant, approximately $5 million of additional gross margin.

Eastern Shore rate case settlement, $3.7 million in margin in 2017.

It'll be $9.8 million in 2018, excluding the any more -- any of the adjustments, again, for the tax reform act.

Natural gas growth, $4.9 million increase in gross margin; propane operations, $2.8 million in incremental margin; Aspire Energy, $2.3 million in additional margin.

On the capital investment side, we did complete 2 projects: Eastern Shore System Reliability project and the White Oak project.

We also got approval for $117 million expansion.

We were able to complete a component of that in '17 with the TETCO upgrade.

Moving on to Florida.

$48 million project for Florida pipeline and distribution projects initiated and expected to go in service during 2018.

We're expecting it to be the second quarter.

We're continuing to make investments to support growth and reliability in Delmarva and the Florida distribution businesses.

Total return to shareholders of more than 17% for 1, 3, 5 and 10 years ended December 31.

Dividend increased by 6.6% in May of 2017, with a payout of 44% of adjusted EPS.

5-year average dividend growth rate of 6%, it's increased by over 14 -- the last 14 years.

Dividend growth, once again, supported by earnings per share growth.

With that, I'll turn the hard work over to Beth.

Thanks, Mike.

Turning to Slide 6. Mike talked a little bit about the year's results, and I'm just going to spend a minute talking about the fourth quarter because it was a very strong quarter for the company.

Once again, when you exclude those significant items, which represented $0.66 on a net basis per share, you'll see that our earnings per share in the fourth quarter grew from $0.73 to what would be $0.93.

That $0.20 increase would represent a 27% increase quarter-over-quarter for the fourth quarter of the last year.

That -- those results were primarily attributable to higher gross margins, both in the regulated and unregulated energy segments, again, that represented $0.28 per share.

Moving to Slide 7. You'll see that we've got 3 slides here where we would like to spend some time talking about tax reform.

The first slide includes a discussion of the key impacts, the second one talks about where we stand within our various regulatory jurisdictions, and the third slide, I'll just give some concluding remarks overall in regards to tax reform.

Beginning with Slide 7. The first thing, as you know, the new tax rate on the federal side became effective January 1. But what that did was it resulted in us having to do a revaluation of our deferred taxes at the end of the year.

On the regulated side, that resulted in us establishing a regulatory liability equal to $98 million.

On the unregulated side, that resulted in us being able to take into earnings $14.3 million of net income or $0.87 per share.

That revaluation on the unregulated side is a direct result of the investments that we've made in the last 5 years, including Eight Flags, the Aspire Energy transaction and the growth that's occurred in those unregulated businesses.

When we think about it on a go-forward impact in terms of the impact on our future results, on the regulated side, currently, we're in discussions.

And we'll talk about that in more detail on Slide 8, but we're in discussions with those regulatory bodies in regards to how fast those regulatory liabilities will flow back as well as the impact of tax reform on customer rates.

On the unregulated side, certainly, the tax rate change will be positive in our unregulated businesses.

And ultimately, we don't know, but we do and could foresee some adjustment in terms of the competition in regards to pricing our margins.

Lastly, as it relates to depreciation and interest, when we look at it from the regulated perspective, bonus depreciation was eliminated for the utility businesses effective September 27.

However, 2 of our largest projects were far enough along that we will still have the bonus depreciation impact of 40% this year.

And then as we move forward, certainly, we will be under the MACRS depreciation.

On the interest side, the regulated entities are allowed the current-period interest deduction.

On the unregulated side, we'll be qualified for 100% bonus depreciation effective September 27.

And in our forecasts and projections, we see no interest being excluded because of the limitations as it relates to 30% of EBITDA.

Everything should be fully deductible.

Moving to Slide 8. By jurisdiction, I'll just touch upon each of those, beginning with Florida.

In our electric operation, we had a limited proceeding, where we received an order in December.

And within that order, it prescribed how tax reform will impact that particular division.

Basically, within 120 days, we have to adjust customer rates.

And in addition to that, the order also prescribes the amortization of the regulatory liabilities within that actual division.

On the natural gas side, we're currently engaged in multiple discussions with the PSC, as are other utilities, and we're working on a proposal to submit to the Florida PSC early this year.

In Delaware, we're underway also in preparing a filing.

We'll be required to submit something by the end of March that addresses the tax reform impact in regards to customer rates as well as give some indication as to how the treatment or the flowback of those regulatory liabilities are going to occur in Delaware.

In Maryland, we've already submitted some preliminary estimates at the middle -- in the middle of February.

We're fine-tuning those as we speak.

And in addition, we'll be providing more information as it relates to the regulatory liabilities associated with both the Maryland division as well as Sandpiper by the end of March.

Lastly, in regards to FERC or our Eastern Shore pipeline, the settlement agreement that we entered into in December basically included the effect and accounted for any change as a result of tax reform.

Moving to Slide 9, just some key takeaways overall.

At the present time, we estimate that our 2018 EPS impact in terms of the unregulated energy businesses will be an incremental $0.10 to $0.15 per share.

We are, as I mentioned earlier, engaging across the board with our various regulatory bodies regarding the benefits to customers.

We do know that lower rates to customers will ultimately impact our cash flow from operations, but our estimates today do not indicate that it will be a significant impact to either our financing needs or our financing costs.

I touched earlier upon the fact that interest deductibility, we believe, will be retained on the unregulated side.

The 100% expense deductibility we see as an upside in our unregulated businesses, particularly if we continue to grow and expand our portfolio.

And then lastly, certainly, we'll continue to provide updates through these calls and other communications as we progress through the year, and we'll refine our assessment and impact accordingly.

Moving to Slide 10.

Just touching on -- on many of these calls, we talk about, really, it's been fundamental and paramount that we have a balance sheet that can support our growth.

And what this slide shows is, at the end of December, we were sitting with book capitalization that totaled about $944 million.

That's over or approximately 100% increase when you turn the clock back about 5 years ago.

Today, we're sitting with equity as a percentage of total capitalization of just under 52%.

On the long-term debt side, we've already made a commitment to finance later this year $100 million of long-term debt in 2 tranches:, one by May, the other by November, at an average cost of 3.3%.

And we will continue to look to utilize the permanent capital markets as necessary to maintain and to target -- and to reach our target capital structure.

Our capitalization has grown, turning to Slide 11, as a result of the investments that we've made.

And what you'll see on this slide is that we've basically invested approximately $950 million when you look at the 6-year period.

We've laid out before you our CapEx forecast for this year, which we also project to be very strong at $182 million, with the largest pieces coming in our natural gas transmission businesses, both with Eastern Shore and Peninsula Pipeline as a result of the projects that Mike mentioned earlier and he's going to talk about in just a few minutes; as well as continued growth in our natural gas and electric distribution businesses as a result of our system conversions, organic growth and some of the expansions that are underway there as well.

So the investments that we've made over the long term, we tried in several of our presentations to show how those translate into incremental margin growth.

Moving to Slide 12, you'll see that in '17, those investments translated into an additional $13.5 million.

And you'll recall, in the beginning of the presentation, Mike talked about that our gross margin for the year increased by $24.6 million, $13 million of which came from these projects.

So certainly, another $11 million that's coming from organic growth that's not included in here, growth in our unregulated businesses, whether that be in propane, whether that be in Aspire, whether that be in PESCO's growth.

So strong growth coming from projects and then also from areas outside of what's shown in this table.

As we look to 2018, what you'll see is there's an additional $16.7 million that we expect to add in '18 from the investments that we're making, the rate proceedings that are finalized.

So strong margin growth also coming from these types of investments in '18 projected as well.

And with that, I'm going to turn it now over to Mike, who's going to discuss our performance quadrant.

Thanks, Beth.

I guess turning to Slide 13, the performance quadrant.

What you'll notice on the far right-hand side -- far right-hand top corner is that Chesapeake is continuing -- we're continuing to maintain our position in that top right-hand quadrant.

Basically, that's driven off of strong returns on capital and also strong investments.

The other -- a side effect that this had was -- I think Beth mentioned a little bit earlier, was it impacts that -- the tax reform benefits.

This large level of CapEx, coupled with bonus depreciation, generated large deferred taxes, which we then were able to write in on the unregulated side of our business.

Turning to Slide 14.

What you're seeing is -- first, is Eastern Shore Natural Gas capital investment of $117 million, that's the 2017 project.

We're estimating $15.8 million in the first full year of full operation.

We've recognized $433,000 in 2017 with the completion of the TETCO upgrade.

In addition, we've got remaining a lot of construction underway still.

We expect to place those facilities into service throughout different periods in 2018.

So by the end of 2018, we should be completely finished with this project.

We're putting in 23 miles of pipeline looping, 17 miles of new mainline extension.

So I mentioned upgrades to the TETCO interconnect, 3,750 horsepower of new compression.

In addition, we're adding 61,162 dekatherms per day of capacity.

Turning to Slide 15 with the Florida natural gas projects.

First off, the Northwest pipeline expansion, it's a $35.9 million project.

We're estimating $6 million in annual gross margin once it's in service.

We expect that to happen in the second quarter of 2018.

It makes up the 38 -- makes up 38 miles of pipeline to our transmission and 5 miles of natural gas distribution.

Customer commitments of 68,500 dekatherms per day, with a total capacity of 80,000 dekatherms a day.

The next project, New Smyrna pipeline expansion, a $9.1 million capital project, $1.4 million of estimated annual gross margin.

We expect that to be in service the third quarter of 2018, and it's 14 miles of transmission pipeline.

The Belvedere pipeline expansion, $3.8 million of capital, $600,000 of estimated annual gross margin, in service the third quarter of 2018.

I'm going to say something real quick about the Northwest project.

You'll notice -- or you can't help -- you can barely see it in the top left-hand corner of Florida, just inside, I guess, the state line, we've got an interconnect with Florida Gas Transmission.

And that particular interconnect puts us in a very strong competitive position as we have lower zone rates or transportation rates in that particular corner.

And so that's helping us make this project profitable.

Turning to Slide 16, Regulatory Update.

I guess on February 28, just earlier this week, the FERC issued a letter order approving the Eastern Shore settlement.

We still have to wait 30 days to -- for the right to rehearing to expire before it becomes final.

We've also gotten a certificate of public convenience for that 2017 project, a $117 million project we just talked about.

In Delaware, we had a rate case settlement of $2.25 million annual increase in rates.

For the year and 3 months ended December 31, we recorded $831,000 and $431,000, respectively, related to the increased rates.

In Florida, the Florida PSC approved our limited proceeding via settlement agreement, including a $1.6 million annualized rate increase effective in January 2018.

Those revenues are starting in January.

Turning to Slide 17.

And just to really recap some of the other operations.

Our propane operations, as you can see on the top left-hand corner, we've got growth of $2.8 million out of our propane operations from a variety of things.

Some of this was margins.

Some of this was growth through volumes.

And also, the AutoGas project or initiative is also showing a great future.

We're actually getting help from customers in the auto gas market as they are looking for us to strengthen our infrastructure there to expand new services.

You think about our strategy below that.

We've got our -- we are looking for organic growth in existing markets.

We're expanding growth into new territories beyond our geographic footprint via start-ups.

We're looking for acquisition opportunities that can roll into our existing operations.

We've got targeted marketing to commercial and industrial users to convert the propane and expand our customer base.

We're targeting new community gas systems in high-growth areas and expansion of the propane vehicular platform through AutoGas.

Our propane business units provide opportunities for us to earn higher returns than allowed in a regulated environment.

Turning to Slide 18, Peninsula Energy Services Company.

And what you can see here is the impact of that mark-to-market loss, which you'll notice, as reported numbers, gross margin, $2.2 million; operating income of negative $3,147,000.

When you adjust out the mark-to-market, you've got gross margin of approximately $8 million and $2.6 million of operating income.

So it had a significant impact on us.

And most -- almost all of that mark-to-market occurred during the last week of December.

Moving on to Slide 19, talking about shareholder return.

If you look at the left-hand side, you'll see our return relative to all New York Stock Exchange companies.

You'll notice that for the 3 years, 5 years, 10 years and 20 years, we're all top quartile; in the 10-year, top decile; and then finally, the 1-year, 62% or a little higher than the 50th percentile, so we're above median.

Looking over to annualized shareholder returns for the performance peer group, we are in the 75th percentile in every year.

Very proud of these accomplishments.

Turning to Slide 20.

Our strategic focus, it all starts really with our employees.

We have engaged employees, they're doing a great job day in and day out, and it all starts there.

Looking to maintain operating efficiency and provide safe, reliable service to our customers.

From a growth perspective, we're focused on pipelines, Eastern Shore and Peninsula pipeline; natural gas and electric distribution; the unregulated businesses, this could be Combined Heat & Power, the Eight Flags as an example, Aspire Energy; our propane; and also our marketing.

And we're looking to expand our skill sets.

We've got a strong financial performance and a consistent track record.

And we just spoke about that on the last slide.

The balance sheet that supports our growth.

As Beth mentioned earlier, we're maintaining capitalization of 50% to 60% equity to total capitalization.

We have total assets of $1.4 billion, with approximately $1.3 billion of those being in plant.

We have a high investment credit rating.

We have committed bank lines of credit and available capacity to adjust -- to raise the capital we need.

Future earnings growth opportunities.

We're identifying profitable capital investments that produce earnings growth and attractive returns.

We have $191 million invested in capital in '17 and $182 million budgeted for 2018.

We're continuing to develop and harvest growth opportunities based on our core competencies to further expand our capabilities for future growth.

We continue to expand our capabilities to provide new services, expand our footprint, develop unregulated opportunities, all to grow earnings and increase shareholder value.

With that, we'll open it up for questions.

(Operator Instructions) And your first question comes from Insoo Kim with RBC Capital Markets.

Thanks for providing some framework around your growth for 2018.

The 17%-plus number that you guys gave, I guess, if you take out the tax reform benefit of $0.10 to $0.15, it should be more in that 13% to 14% range.

And I guess is the assumption embedded in that growth just the projects and initiatives that you have already laid out for the year?

I -- yes, that is the case, Insoo.

If there were additional projects that come along that aren't factored into our capital budgets today or incremental opportunities on the unregulated side, those would be above and beyond.

But it's what we've laid out right now.

Got it.

And I know, on the financing side, you're set to issue about $100 million of long-term debt this year.

I guess if that's the case, then that could potentially get your equity-to-cap ratio slightly below that targeted 50% to 60% range.

Is that -- are you pretty set on trying to maintain that range on a year-to-year basis?

Or can you fall below that for a short period of time?

We can fall below that for a short period of time.

You would not see us stay below it for a long period of time.

And I think, as we see things right now, and we've looked at our preliminary numbers for the year.

For this year, right now, we're not forecasting an equity issuance this year.

You could potentially see us access the debt capital markets again, given our current short-term borrowing levels.

But we're going to proceed through the year a little bit more and, I would say, into -- we're going to continue to reassess.

We'll look at where the equity markets are.

We'll see what and if additional projects comes to the table.

And then we may refine that as we continue to move through 2018.

Understood.

And just one more question if I may.

When you look out over the next few years of CapEx opportunities, are you seeing it being a collection of smaller investments across your businesses?

Or are there some more material opportunities that could potentially be in the pipeline?

Yes, we're always looking for the larger opportunities, but we're also making sure that we're doing a little work underneath that, whether it's the distribution growth in addition to the transmission growth and, in addition, the unregulated company.

So we -- and we have a 5-year outlook, if you will.

We go through our strategic planning process where we're constantly questioning our existing strategy and looking to see if there's other things that we should be doing to keep that -- keep those opportunities in the pipeline.

So yes, I think it's going to be, I guess, I'd say all-of-the-above kind of thing.

And we've got a strategic development team that's focused on looking at things outside the footprint and things that may be a little bit different than what we're looking at in our existing businesses, but we are also looking for existing businesses to be creative and innovative as well.

(Operator Instructions) Your next question comes from Spencer Joyce with Hilliard Lyons.

Mike, Beth, just to maybe piggyback on Insoo's questions, thanks for that -- the 17% kind of guidance-type figure for this year.

I guess I wanted to ask kind of about the sensitivity there, specifically the language kind of 17% or more.

Should we be thinking about 17% as kind of the lower bound?

Or does the additive to 17% merely reflect potential projects that could come up during the year?

I just kind of want to understand if we're working with more of a base case or kind of a midpoint there.

I think, Spencer, in terms of that question, from a CapEx perspective, at this point, any sizable CapEx projects that we're going to add are really going to be impacting 2019.

But we've put the plus there just given the growth that we've been able to see on the unregulated side and the things that we're doing there.

And so there is an opportunity for it to be more -- slightly more than that.

But that'll depend upon capturing those growth opportunities also as well as, I would say, the fourth quarter in terms of the weather impact, being second-most weather sensitive.

So I think as you're thinking about it, I would kind of think about it as kind of that midpoint but with those caveats around it.

Okay, that's helpful.

Maybe a similar question kind of asked a different way.

So as you were doing kind of your internal modeling and backed into that 17% figure, what were some of the points of uncertainty, maybe aside from the weather?

I mean, is there still any kind of wiggle room on tax?

Or does that feel pretty locked in there?

I mean, is there anything obvious kind of operationally that we might be able to look to during the year?

Just maybe a few of the uncertainty points.

I think, for the most part, on the unregulated side, we've captured what we think the impact will be.

But to the extent, as you know, that earnings on those businesses vary from that, there's a corresponding tax impact, so to speak, that could get to the bottom line or even deduct from the bottom line, depending upon where those come in.

So I think we feel like we've got a good estimate there.

On the regulated side, we're going in.

We're discussing where we are from a position standpoint with each of the regulatory jurisdictions.

Could there be something that comes out of that potentially?

And if so, we'll certainly go through that with you.

So I think we've kind of laid out, I think, with what we know today, our best estimate.

But certainly, depending on growth that comes in or any factors that change, that could adjust slightly.

Spencer, what we're saying, if you go to the utility side of things, we are seeing more construction than we've seen in the past.

It is starting to ramp up.

So there's some things happening there that are positive.

And then when you look to the unregulated side, we had some substantial growth in 2017 that, because of the mark-to-market, is getting masked.

And so that kind of growth makes it a little bit tougher for us to -- actually gives us an opportunity to exceed the 17% more than go backwards -- going backwards would be compression of margins in the propane, for example, or other markets or the weather -- you mentioned the weather.

But it's really the opportunities that we can get from both the residential and commercial growth in our territories and the -- in the unregulated side of the business, the things that they're able to do, that are just a little bit more flexible than the regulated side.

Okay.

Yes, that's helpful.

A final, I guess, kind of housekeeping question.

The capital budget for 2018, the $180 million or so, I know typically you all have come in a little bit under the capital budget outline kind of earlier in the years.

Should we be thinking about that kind of the same way this year?

Is that $180 million sort of the upper band, and then we'll see what we can get put in the ground kind of within that context?

Is that still kind of a fair way to go?

Typically, Spencer, when we start off the year, we'll come out of the year with a base capital budget, and then we actually will have some items that have carried over from the prior year that may further add to that budget, which will drive it up.

And then we typically come back down closer to the original capital budget.

So the number that you have right now is our original budget.

And I would say that's a very good estimate of the likely amount that we'll spend somewhere around there because that does not, at this point, reflect some carryover dollars that are coming in from 2017 and moving to 2018.

So I think that's good for purposes of what you're going to factor into your models.

And it's likely we're going to spend that amount this year.

Okay, okay.

That's good.

And as kind of a refresher, so absent kind of the major growth initiatives, what's sort of a run rate for your base capital or kind of maintenance capital, if you will?

From this point last year, I kind of had a note that it was $60 million to $70 million.

Is that still pretty close?

Or is that maybe a shade it a little bit higher?

That's pretty close.

It's still running about that level.

When we look at our budgets for the period of time that we have projected, that's still a good estimate.

(Operator Instructions) Your next question comes from Sarah Akers with Wells Fargo.

Just a question on PESCO.

So on a percentage basis, it looked like gross margin was up over 70% in '17.

So can you just expand on what drove that increase and if you consider that level of gross margin to be sustainable?

So PESCO's gross margin actually came from multiple different sources through the year.

If you'll recall, in the beginning of the year, we talked a lot about they participated in the Columbia of Ohio (sic) [Columbia Gas of Ohio] Standard Choice Program.

And there was growth that we had in margin that came from that program.

Our legacy business in Florida also continued to have growth in that C&I portfolio and what we've been able to do there.

We added the ARM acquisition in August.

And not only did the ARM acquisition add incremental revenue just from that acquisition, but then in addition to that, our producer services business and some of our ancillary services actually increased because of the market that, that opened up for us both in Ohio as well as in Pennsylvania.

So it wasn't really just one area of PESCO that grew.

It was really across the board in multiple different areas.

Got it, great.

And then lastly, just as we think about Q1 estimates, how has weather been in January and February in your service territories?

Well, January was a very good month from a weather perspective in terms of having cold temperatures.

In fact, we probably had a little bit too much there for one -- for a few days.

Then in February, I think I was hearing that Florida was -- might have been a record warm February.

And so I think here is probably a little bit warmer than normal, too, in February.

But we've been -- as you compare it to last year, I would think that we are colder than last year.

Okay.

But -- so the 17% growth, so that's based on normal weather, and given the cold in January and maybe a little bit warmer in February, it doesn't sound like you're necessarily running all that different to normal thus far?

That's correct.

And your next question comes from the line of Nate Martin with Seaport Global.

I think most of the topics I was thinking about have kind of been touched on, so maybe just couple of housekeeping items.

I think, Beth, you mentioned about the $100 million in debt this year.

What was the timing on that?

Did you mention that?

I might have missed it.

That's okay, no problem.

One tranche, we are required to pull down by May.

And then the second -- and that's for $50 million, Nate.

And the second one, which is also a tranche of $50 million, we are required to pull that down by November.

We can always pull it down earlier than that, but those are the required time frames.

Got it, got it.

And then the other question I had was regarding tax rate.

I think I saw in the K, you're expecting the effective tax rate for this year to be about 27.5%.

Is that something that you kind of see going forward?

Or any color you could give on that?

Sure.

So right now, in terms of the projections that we've looked at, I mean, I would say that's a fair and reasonable number to use.

As our unregulated businesses in certain states grow, for example, Aspire, to the extent Aspire grows and becomes a larger part of the portfolio, you would see that overall rate decline because Ohio doesn't have a state income tax.

And so there's a couple of our unregulated businesses like that.

So it could come off of that a little bit, and the expectation would probably be more that it might move down slightly.

But like I said, I think, as a starting point, that's a great number to use as you think about 2018.

And there are no further questions in queue at this time.

I will turn the call back over to Mike for closing remarks.

Thank you very much.

Well, I want to thank everyone for their continued interest in our company.

We remain committed to generating value for our shareholders.

I wish you all to have a great weekend.

Thank you.

Thank you.

And ladies and gentlemen, this concludes today's conference call.

You may now disconnect.