道明尼資源 (D) 2014 Q2 法說會逐字稿

Good morning and welcome to Dominion's second-quarter earnings conference call.

On the call today, we have Tom Farrell, CEO; Mark McGettrick, CFO; and other members of senior management.

(Operator Instructions)

I would now like to turn the call over to Tom Hamlin, Vice President of Investor Relations and Financial Planning, for the Safe Harbor statement.

Good morning and welcome to Dominion's second-quarter 2014 earnings conference call.

During this call, we will refer to certain schedules included in this morning's earnings release and pages from our earnings release kit.

Schedules in the earnings release kit are intended to answer the more detailed questions pertaining to operating statistics and accounting.

Investor Relations will be available after the call for any clarification of these schedules.

If you've not done so, I encourage you to visit the Investor Relations page on our website, register for e-mail alert, and view our second quarter earnings documents.

Our website address is www.dom.com.

In addition to the earnings release kit, we have included a slide presentation on our website that will guide this morning's discussion.

Now, for the usual cautionary language.

The earnings release and other matters that will be discussed on the call today may contain forward-looking statements and estimates that are subject to various risks and uncertainties.

Please refer to our SEC filings, including our most recent annual report on Form 10-K and our quarterly report on Form 10-Q, for a discussion of factors that may cause results to differ from Management's projections, forecasts, estimates, and expectations.

Also on this call, we will discuss some measures of our Company's performance that differ from those recognized by GAAP.

Those measures include our second-quarter operating earnings and our operating earnings guidance for the third-quarter and full-year 2014 as well as operating earnings before interest and tax, commonly referred to as EBIT.

Reconciliation of such measures to the most directly comparable GAAP financial measures we are able to calculate and report are contained on schedules 2 and 3 and pages 8 and 9 in our earnings release kit.

Joining us on the call this morning are our CEO, Tom Farrell; our CFO, Mark McGettrick; and other members of our management team.

Mark will discuss our earnings results for the second quarter and our earnings guidance for the third-quarter and full-year 2014.

Tom will review our operating and regulatory activities and review the progress we have made on our growth plan.

I will now turn the call over to Mark McGettrick.

Good morning.

Dominion reported operating earnings of $0.62 per share for the second quarter of 2014, which was in the upper half of our guidance range of $0.55 to $0.65 per share.

Excluding the $0.02 per share impact of milder than normal warmer weather, second-quarter operating earnings would have been at the top of our guidance range.

Positive factors during the quarter were lower than expected operating and maintenance expenses, lower than expected interest expense, and a lower effective tax rate.

Offsetting these positives were lower kilowatt-hour sales, due to mild weather, and the impact of an unplanned outage at our Millstone nuclear plant.

On a year-to-date basis, our 2014 operating earnings are $0.22 per share better than the first half of 2013.

GAAP earnings were $0.27 per share for the second quarter.

The principle difference between GAAP and operating earnings was a $191 million charge associated with Virginia legislation signed into law in April that permits Virginia Power to recover, through base rates, 70% of the cost previously deferred or capitalized through the end of last year relating to the development of a third nuclear unit at North Anna and the development of offshore wind facilities.

A reconciliation of operating earnings to reported earnings can be found on schedule 2 of the earnings release kit.

Moving to results by operating segment.

At Dominion Virginia Power, EBIT for the second quarter was $243 million, which was below the midpoint of its guidance range.

Kilowatt-hour sales were below expectations, largely due to milder than normal weather.

Excluding weather, sales were up about 1% year to date, somewhat below expectations.

Second-quarter EBIT for Dominion Energy was $215 million, which was near the top of its guidance range.

Higher transportation and storage revenues and lower operating expenses drove the strong results.

Dominion Generation produced EBIT of $306 million in the first second quarter, which was below the midpoint of its guidance range.

EBIT from utilities generation was below expectations due to lower than expected kilowatt-hour sales, reflecting mild weather.

EBIT from merchant generation was impacted by an unplanned outage at Millstone.

A loss of offsite power caused both units to shut down automatically, as designed.

Millstone unit 2 was unavailable for three days, and unit 3 was unavailable for nine days.

On a consolidated basis, our effective tax rate was 31% for the quarter, which was below our guidance of 33%.

Interest expenses were also a little lower than our expectations.

Overall we are very pleased with our second-quarter and year-to-date operating results.

Moving to cash flow and treasury activities, funds from operations were $1.7 billion for the first half of the year.

Regarding liquidity, we had $4.5 billion of credit facilities at the end of the second quarter.

Commercial paper and letters of credit outstanding at end of the quarter were $3.2 billion.

Taking into account cash and short-term investments, we ended the quarter with liquidity of $1.6 billion.

During the second quarter, we executed final agreements with our existing credit providers to increase our credit lines by $1 billion, from $3.5 billion to $4.5 billion, the terms of which will run for five years.

Gas Holdings was also added as a potential borrower under these facilities.

For statements of cash flow and liquidity, please see pages 14 and 25 of the earnings release kit.

Moving to our financing plans.

Earlier this month, we issued $1 billion of mandatory convertible securities.

The issue was very well received by the market, and we thank those of you who participated.

During the second quarter, we also filed the Dominion Gas holdings S4 registration statement with the SEC.

This quarter's 10-Q filing will include financials for Dominion Gas for the first time.

The $1.2 billion of 144A bonds issued last fall are expect to be exchanged for registered securities next week.

We have also filed a combined self-registration for future debt issuances, including expectations for debt issue of approximately $1 billion for Dominion Gas in the fourth quarter.

On March 28, we filed an S-1 registration statement with the Securities and Exchanges Commission for an initial public offering of common units, representing limited partner interests in Dominion Midstream Partners LP, a master, limited partnership whose initial asset will be a deferred equity interest in Cove Point.

We expect to commence the offering later this quarter, after receiving FERC approval to begin construction of the Cove Point export project.

Now to earnings guidance.

Our operating earnings guidance for the third quarter of 2014 is $0.90 to $1.05 per share, compared to $1 per share for the third quarter of 2013.

Mild weather impacted last year's third-quarter earnings by $0.04 per share.

Last year's results also included $0.07 per share from the contribution of the TL-388 Pipeline to Blue Racer.

This midpoint of this year's third-quarter guidance is flat to last year's results when normalized for weather and the asset drop.

Positive factors for the quarter include a return to normal weather, higher revenues from our rider projects, and higher merchant generation margins.

Offsetting factors include higher interest expenses and higher operating and maintenance expenses.

Our operating earnings guidance for the year remains at $3.35 to $3.65 per share.

Through the first half of the year we are up $0.22 per share, or 15% over last year.

As to hedging, you can find our hedge positions on page 27 of earnings release kit.

Since our last earnings call, we have made no changes to our hedges at Millstone.

Let me summarize my financial review.

Operating earns were $0.62 per share for the second quarter of 2014, in the upper half of our guidance range.

Excluding the impact of mild weather, earnings would have been at the top of our range.

Lower than expected operating expenses, interest and taxes, offset mild weather and the impact of an unplanned outage at Millstone.

Year-to-date operating earns were $0.22 per share or 15% higher than the comparable period in 2013.

Our financing plan for the remainder of 2014 include a debt offering for Dominion Gas Holdings and the initial public offering of Dominion Midstream Partners.

Finally, our operating earnings guidance for the third quarter of 2014 is $0.90 to $1.05 per share.

Our operating earnings guidance for the full year remains $3.35 to $3.65 per share.

I will now turn the call over to Tom Farrell.

Good morning.

Our business units delivered strong operational and safety performance in the second quarter.

Our nuclear fleet continues to operate well, completing two refueling outages last quarter.

As Mark mentioned, a loss of offsite power triggered an automatic shutdown at Millstone power station on May 25.

The loss was due to a problem with the local utilities substations, not the generated facility, and backup emergency diesel generators maintained both units in a safe and stable condition until offsite power was restored.

We continue to make progress on our growth plan.

Construction of the 1,329 megawatt plant Warren County combined-cycle plant is progressing on schedule and on budget.

Start-up and commissioning activities are underway, and one of the combustion turbines completed first-fire last week.

The project is about 90% complete and is expected to be in service during the fourth quarter.

Last August, we began construction of the 1,358 megawatt combined-cycle facility in Brunswick County, Virginia, and expect that plant to be in service by mid-2016.

Currently there are about 680 workers on the site.

Procurement is 92% complete, and all major equipment has been delivered.

Overall construction is about 20% complete and is on time and on budget.

The conversion of Bremo units 3 and 4 from coal to natural gas was completed during the second quarter, on time and on budget.

Construction is also on schedule for six solar projects totaling 139 megawatts purchased earlier this year from Recurrent Energy.

Long-term power purchase, interconnection, engineering, procurement and construction as well as operation and maintenance agreements have been executed for each of the projects.

All of these facilities are expected to reach commercial operation later this year.

In the second quarter, Dominion acquired two solar development projects in Tennessee and announced plans to acquire a seventh project in California later this year.

These acquisitions will bring our total solar generating portfolio to 232 megawatts.

Once constructed, all of these projects are expected to qualify for the Federal investment tax credit.

We are working on identifying and acquiring additional solar projects to support our plan to grow the Company's solar portfolio by up to 250 megawatts this year.

At Dominion Virginia Power, we have a number of electric transmission projects at various stages of regulatory approval and construction.

During the second quarter, $394 million of transmission assets were placed into service, including the Mt.

Storm to Doubs 500kV rebuild project, which was finished a year early.

The year-to-date in-service total is over $500 million.

Electric transmission's capital budget for growth projects, including NERC, RTEP, maintenance- and security-related investments continues to remain strong through the remainder of the decade.

Progress for our growth plan of Dominion Energy continues as well.

Construction is underway on the Allegheny storage project, and we've begun to accept injections.

Construction is also underway on our Natrium to market project.

Both of these are on budget and on schedule to commence full service by November.

We have had continued success in providing incremental transportation service as a result of the growing production within our region.

We describe these as producer outlet projects, taking advantage of the flexibility of Dominion Energy's pipeline network to provide incremental services with shorter lead times and relatively small capital investment.

Dominion Energy signed precedent agreements for two new expansion projects during the second quarter, the Monroe to Cornwell project and the Western Access II.

Since last year, we have announced nine such projects totaling just under 2 billion cubic feet per day by 2016.

Two of the projects, Whitey Receipts and Lebanon 2 were placed into service in June, both on time and on budget.

Our last call, we announced the Dominion Southeast Reliability Project, a non-binding open season for firm transportation services through a new pipeline extending from the Marcellus and Utica production regions to markets in Virginia and North Carolina.

This proposed, 42-inch pipeline would extend approximately 550 miles.

The Southeast project is designed to provide initial service of up to 1.5 billion cubic feet per day.

The response has been very strong.

We are in negotiations with multiple parties and hope to secure the necessary agreements to solidify our project plan within the next 60 days.

Subject to the conclusion of negotiations, we expect to submit a FERC pre-filing in the fourth quarter, with firm transportation service available as early as November 2018.

The Utica region continues to be very active.

Through the middle of July, a total of 1,386 horizontal Utica permits have been issued, and 942 wells have been drilled, an increase of 33% in wells permitted and 39% in wells drilled so far this year.

The number of producing wells has increased by 75% from 270 to 472, also in just the past six months.

A second 200 million cubic feet per day processing plant at Blue Racer's Natrium facility became operational in the second quarter, and based on new wells coming online, should be at full capacity soon.

Fractionation capacity at Natrium will be expanded from 46,000 barrels per day to 126,000 barrels by March of next year.

In addition, a 200 million cubic feet per day processing plant at Bern, Ohio, is presently under construction and is expected to begin in operations in the fourth quarter.

Now an update on our Cove Point project.

In May, the Maryland Public Service Commission approved the CPCN and air permit.

Last week, we received approval from the state's board of public works to construct a temporary pier.

On May 15, FERC issued its environmental assessment.

We expect to receive a FERC order approving the project in the next few weeks and begin construction shortly thereafter.

The Cove Point liquefaction project is expected to begin operations during the fourth quarter of 2017.

Before we answer questions, I want to comment on the recent greenhouse gas emission goals introduced by the Environmental Projection Agency.

As you know, EPA has proposed guidelines for states to follow in developing plans to reduce CO2 emissions from existing power plants.

We, like other utilities, are evaluating the guidelines in the proposed state reduction targets.

We certainly believe it will increase the industry's utilization of natural gas for power production, which in turn should increase the need for pipelines and other related infrastructure.

As the states develop and the EPA approves their respective compliance plans, we will continue to evaluate the challenges and the many opportunities these changes will bring.

To summarize, our Business has delivered strong operating and safety performance in the second quarter.

The Warren County and Brunswick construction projects are proceeding on time and on budget.

Our Blue Racer joint venture, Dominion East Ohio and Dominion Transmission, continue to capitalize on the growth opportunities in the Marcellus and Utica shale regions.

We look forward to receiving our remaining regulatory approval to begin construction of Cove Point construction liquefaction project.

Finally, we look forward to our initial public offering on Dominion Midstream Partners later this quarter.

Thank you, and we're ready to take your questions.

(Operator Instructions)

Our first question will come from Julien Dumoulin-Smith with UBS O'Connor.

Can you hear me?

We can hear you.

Excellent.

First, just a little bit of clarity on the Southeast project, if you could?

Can you talk a little about the competitive dynamics?

Obviously, you're talking about a pretty expedited timeline here to get details.

Could you just frame it a little bit, where you're thinking about those customers and how you're seeing competitors frame up?

It seems like you're down at the end of the fairway here in terms of getting the project off the ground, though.

Good morning.

We are, as I said, in negotiations with a number of parties.

We expect to, assuming they're successful, conclude all that within the next 60 days.

It's a big pipe.

It's 550 miles; 42 inches is a big pipe.

Initial sizing would contemplate 1.5 billion a day of capacity.

That, necessarily, means we're concentrating on end users rather than producers.

There's two ways to go about this.

One is to get demand from producers, but producers got to sell it to somebody.

So, our concentration is on developing a pipe that would be useful for end users.

We'll have to see how it go, but we expect to conclude all of that within about 60 days.

Excellent.

Could you just clarify quickly?

When it comes to in the next few week, what exactly is your expectation for approval?

This is in theory outside of the context of an opening meeting, for Cove Point?

Your point, Julian, of course, assumes correctly that FERC does not have a public meeting in August.

Their next public meeting is in September, so the answer is, to your question, is yes.

FERC actually does most of its orders these days, Julien, outside of public meetings.

The comment period closed in June.

All the comments have been posted, and they're going through their work.

They work very diligently at FERC year round, so we're hopeful that we would get what you would call a notational approval in next few weeks.

If not, that would take us to the public meeting in September.

Excellent.

The last little detail here, you're almost at the solar mile marker you set for yourself here.

Why 250 in terms of total megawatts?

Is there a potential to scale up the renewals business a little bit more, or is that really what the tax appetite calls for?

It doesn't have anything to do with the tax appetite.

We thought 250 was a number that would allow us to get real experience with a variety of different technologies in different places to see how they would work.

We're continuing to evaluate our solar strategy as we go through the balance of the year.

Excellent.

Thank you very much.

Thank you, Julien.

Thank you.

Our next question will come from Greg Gordon with ISI Group.

Thanks, good afternoon.

Julien covered a couple of my questions.

Can you talk a little bit about what you're seeing in terms weather-normal demand?

I'm sorry if I missed it, if you earlier in the presentation, I hopped on a little late.

In particular, it looks like industrial sales were up quite substantially in the quarter.

Have you seen your business get back on track after the setbacks we saw last year because of the government issues?

Greg, this is Mark.

Actually, we're a little disappointed with sales year to date.

We had hoped to be, on a weather-normalized basis, about 1.5% sales growth this year over last, and we're lagging that down around 1%.

We have seen very strong industrial sales growth, although again, industrial for us is a pretty small piece of the pie.

We've also seen extremely strong data center growth.

At the same time our residential and smaller commercial growth has lagged what we would have expected to be the growth rate.

Right now, we're looking at about 1%.

We hope these other two areas recover as we go out throughout the year.

To just remind you of the sensitivity, a 1% change in sales for us, depending on customer class is between $0.04 and $0.05, so it's manageable for us, but we'd like to see it a little stronger

Okay, so you're talking about $0.02 or $0.03 issue if you're 50 basis points behind?

If we finish up 1% versus 1.5%, that's right.

Do you have any sense of what's driving the shortfall in residential?

Is it just slower than expected growth in housing?

Is it higher than expected conservation?

Is it distributed BG, or is it too difficult of analysis to nail that down?

I think we'd lean much toward the housing is not recovering quite as quickly as we thought.

Although, we have growth in new connects year over year, it's not like we've had historically.

We're going to need to have more new housing starts to be able to achieve the residential growth rate that we want.

Okay.

Can I ask one follow-up question on the pipeline project?

Your body language here is pretty strong on being able to get to the finish line on a rather large project.

There are competing projects in the region.

What gives you the confidence that you have the competitive advantage on this pipe to bring it to commercial viability?

Well, Greg, first, good morning.

There's a lot of gas -- there's a lot of infrastructure needed to get out of the basin.

I wouldn't necessarily conclude that only one pipe will ever be built out of the basin.

You've got to draw your own conclusions.

We had a very successful open season, and we are working hard to conclude it within the next 60 days.

Thanks, guys.

Take care.

Thank you.

Our next question will come from Steven Fleishman with Wolfe Research.

Hi, good morning.

First, I know every fall you guys give your 5-year CapEx update, and I'm sure now is not the time to go through the details of that.

Maybe at a high level, you could talk a little bit about thematically where things are headed there?

Steve, you're correct, we typically give an update on a 5-year capital outlook in the fall.

We would expect to continue that trend this fall.

I think by way ever comparison, as we come in, of course we'll add another year to it, but we expect our capital expenditures actually be up over the 5-year period from what you saw last year.

We've announced a lot of new projects, particularly in our energy business.

We've announced the solar projects this year.

So, we would expect CapEx to be up as we present this fall.

Okay.

Then just one technical issue, you mentioned normal weather in terms of your guidance for Q3 and the rest of the year.

It seems like it's been anything but that.

As you're thinking about the weather issues for the rest of the year, do you have ability to offset if things are a lot below normal this summer?

Or should we just assume it just is what it is, and you'll update us as we get to the end of the quarter?

Yes, I think it's a little too early, Steve.

It is true in July, weather has cost us about $0.03 for the month, but August is a strong month for us.

September can be an unusually strong month depending on what the weather pattern is.

It's not inconceivable that that would be made up just in weather as we go through the rest of the summer or the rest of the year.

I think we'll hold for an update on that until we see a larger piece of what the quarter's is going to look like and what the forecast for the fourth quarter is going to look like.

Okay, great.

Thank you very much.

Thank you.

Our next question will come from Dan Eggers with Credit Suisse.

Hey, good morning, guys.

Just following up on the pipeline question with the end-user demand being the driver for contracting.

Is that customer base picking this up because they're trying to get to a cheaper form of gas, or is this incremental demand that they're trying to service with new gas generation and that sort of stuff?

I don't think we should talk to what our customers are contemplating.

As we said when we talked about Southeast pipe, and as we have gone around and spoken, not only to customers but to the communities involved and the political establishments that will be affected, it's important -- the Southeast needs more reliability.

There's no question the Greenhouse Gas Rule is going to move people to more gas.

It's just going to happen.

Southeast does not have enough pipeline infrastructure to deal with that situation.

One single pipe can get challenged for operational issues, and you just can't -- that's not going to be tolerable for folks as we go through the next few decades.

I think reliability is a very important part of it and having access to a different basin in the basis potential differentials between what folks have been used to for all these years, the Gulf of Mexico, et cetera, having southeast access to the Marcellus and Utica makes it very attractive.

That's why you have all these competing projects.

Let's see how it goes.

I think it's a combination of reliability, concern about expansion potential for various fleets, and having access to a different basin.

Like I said, as you all have noted, there's lots of projects.

Maybe ours won't come to fruition.

We feel good about where we are, and there may be others.

Okay, thank you for that.

Then, Tom, the Artificial Island transmission project was the first test of our order 1,000s going to work.

Given that it went to an incumbent with the rights-of-ways, how do you guys think about these transmission opportunities outside of your footprint?

Is that affecting maybe some capital allocation decisions?

Dan, good morning.

This is Paul Koonce.

The initial decision went to the incumbent, but last week, the PJM Board sent a notice to the four finalists, Dominion being one, that they would like to take a second look at PJM managers' decision.

We're still very much engaged on the opportunity presented by Artificial Island.

We have, in the past, challenged PJM manager decisions and prevailed.

We can't say for certain that we'll do so again, but that decision about who builds Artificial Island is still an open question.

Okay, thank you.

Last question on guidance for the quarter, with the $0.03 negative in July, does that calibrate us to a little bit below the midpoint from a starting point to today, or did the range already take into account the $0.03 drag in July?

Dan, it's Mark.

We always put ranges out based on normal weather.

It's just been our practice, so if that $0.03 holds and there's no offset in other areas, that would guide you to below the midpoint.

Let's see what the rest of the quarter presents itself in terms of weather and other earnings drivers.

Very good.

Thank you, guys.

Thank you.

Thank you.

Our next question will come from Paul Fremont with Jefferies.

Thank you very much.

My first question relates to the 250 in solar.

Can you give us an idea of what that would do your effective tax rate next year?

Because this year, I think you're like at a 32% projected tax rate?

Our assumption on that, Paul, is that virtually all those projects will be completed in 2014, so for the effective tax rate for next year that wouldn't be an impact.

Well, I'm saying, with the production tax credits, wouldn't that -- that would presumably lower your effective tax rate next year?

Most of the tax credits associated with these projects are one-time credits, investment tax credits that wield take in 2014.

Okay.

Can you just give us a sense at what is driving the decision to either stay at 250 megawatts or potentially move to a higher level in terms of solar projects?

We're looking across all of our -- as we do constantly, we're going through a process looking to all of our capital allocation, what all of our opportunities are.

Solar we think is going to be an increasing part of the energy infrastructure mix.

Being able to do it at utility scale we think is going to be important, particularly with this -- and we thought that a couple years ago, which is why we started down this path.

In particular, because of the proposed greenhouse gas rules in the four pillars or cornerstones, whatever you want to call them, that EPA has set out as guideposts for state, we think solar could be useful across our service territories.

Not like it is in many other part of the country, but we ought to be able to do some advances here.

We're learning.

We're learning about installation and the maintenance, et cetera, as we continue to look at whether we will deploy it elsewhere.

The short answer to this state, we're going to continue to evaluate it.

We may decide to stay at 250.

We may decide to expand it.

We'll know more about that later in the year.

Hey, Paul.

This is Mark.

Just to give you a data point on that, this is not new for us.

If you recall eight or nine years ago, we built several wind projects early in the development period for the same reasons that Tom just outlined on solar.

We elected not to expand the wind program because it didn't fit our business profile going forward.

The solar development scale here is at about the same level as we started wind.

We'll just see what happens to it going forward.

My last question is, with respect to the construction of Cove Point, do you have any provisions with the contractors guaranteeing that it'll be completed in 2017?

Paul, this is Paul Koonce.

We have a good EPC contract.

We have a certain amount of time built into the schedule to provide for certain permitting delays and none of that has been impacted to date.

Okay, so there's nothing that is -- it's sort of ironclad in your contract that it needs to be completed by the end of 2017, but right now everything looks as if it will be completed by 2017?

Everything is right on schedule.

Thank you.

Thank you.

Our next question will come from Matt Tucker with KeyBanc Capital Markets.

Good morning, just another question on the timing of Cove Point and the then IPO.

You mentioned you'd move forward with the IPO after receiving FERC approval.

You'd, of course, still need the final DOE on FTA approval to move forward with the project.

I'm just curious how you're thinking about that, and what would give you the comfort to move forward with just the FERC approval in hand?

We have the DOE approval.

We got it a year ago.

Okay, I was under the impression that was the conditional approval and you'd still need a final approval after receiving the FERC approval?

Well, I can understand your confusion, but that word appears in all these final approvals because there's a -- in the law, it can be suspended if something, if a variety of things happens.

DOE has said it's never going to do that.

So, I think that's a technical term they use in the DOE permits, but we have the final approval, which we got last September.

Once we get the FERC final order, which is a construction permit in effect, we will proceed.

Got it, thanks.

On the Southeast Reliability project, I just wanted to clarify 1.5 billion is both the expected volume and the CapEx?

No, it's just the volume.

I said capital and I'm correcting myself, I hope quickly, and I appreciate your pointing it out.

The 1.5 billion a day in demand, in throughput.

The capital will be more than that.

We'll talk about that, assuming we conclude these negotiations, which we hope in the next 60 days, we'll have more details about the capital and how it will all play out.

When should we expect to hear more on that?

Will you make an announcement when you have the agreements or should we just look for the pre-filing to signal that?

Well, we'll just have to let that sit.

Assuming we conclude the negotiations, part of the negotiations would be talking to the customers, et cetera, about how they want to go about announcing.

We don't do things unilaterally in complex projects like this.

Okay.

Would you say that this project is contemplated in your long-term earnings guidance, consistent with it, or could it present upside?

Not included in our present plan.

Got it, thanks.

Just one last question, to follow up on the Artificial Island project.

I believe part of the reason PJM is going back to the final four was because one of your competitors there offered to backstop the project.

Is that something you'd be willing to do, and do you think that will be necessary to win the project?

This is Paul again.

We did notice that LS Power does offer to cap.

That brings to bear a philosophical question as to the quality of the construction.

It's such an important part of the energy infrastructure, the electric grid, how the Commission deals with that is an open question.

They also wanted to revisit, we believe, a alternative solution, which we put forward, which would be less costly, technically more interesting.

So I wouldn't base the PJM Board's decision totally on the price cap that LS Power offered.

I think there's a number of elements there that they want to review.

Thanks a lot, guys.

Very helpful.

Thank you.

This does conclude this morning's teleconference.

You may disconnect your lines and enjoy your day.