道明尼資源 (D) 2016 Q1 法說會逐字稿

Good morning and welcome to the Dominion Resources and Dominion Midstream Partners first-quarter earnings conference call.

At this time, each of your lines is in a listen-only mode.

At the conclusion of today's presentation, we will open the floor for questions.

Instructions will be given as to the procedure to follow if you would like to ask a question.

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

Good morning and welcome to the first-quarter 2016 earnings conference call for Dominion Resources and Dominion Midstream Partners.

During this call, we will refer to certain schedules included in this morning's earnings releases 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 have not done so, I encourage you to visit the Investor Relations page on our website, register for email alerts and view our first-quarter earnings documents.

Our website addresses are dom.com and dommidstream.com.

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

Now for the usual cautionary language.

The earnings releases 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 reports on Form 10-K and our quarterly reports on Form 10-Q, for a discussion of factors that may cause results to differ from management's projections, forecast, estimates and expectations.

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

A reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measures we were able to calculate and report are contained in the earnings release kit and Dominion Midstream's press release.

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 first quarter and Dominion's earnings guidance for the second quarter and full-year 2016.

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

I will now turn the call over to Mark McGettrick.

Good morning.

Dominion Resources reported operating earnings of $0.96 per share for the first quarter of 2016, landing in the middle of our guidance range of $0.90 to $1.05 per share.

Earnings drivers were as expected with the exception of slightly milder weather, which was $0.03 per share lower than normal.

GAAP earnings were $0.88 per share for the first quarter.

The principal difference between GAAP and operating earnings was a charge relating to an organizational restructuring across our Company made to improve the efficiency of our reporting structure.

This one-time staffing charge will support lower labor expenses in the future.

The 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, EBITDA for the first quarter was $385 million, which was in the lower half of its guidance range.

Kilowatt hour sales were modestly below expectations, primarily due to mild weather.

Dominion Generation produced EBITDA of $610 million for the first quarter, which was in the middle of its guidance range.

Lower operating expenses offset lower merchant margins and lower-than-expected kilowatt hour sales at Virginia Power.

First-quarter EBITDA for Dominion Energy was $377 million, which was in the upper half of its guidance range.

Lower operating expenses were the principal driver of the strong results.

On a consolidated basis, interest expenses and income taxes were in line with our expectations.

Overall, we are pleased with the performance of each of our operating segments.

For the first quarter of 2016, Dominion Midstream Partners produced adjusted EBITDA of $24.9 million, more than double the level produced in the first quarter of last year.

Distributable cash flow increased 71% to $20.3 million, which was consistent with management's expectations.

Because of our strong cash position, we elected to accelerate certain planned maintenance activities at Dominion Carolina Gas that led to higher expenses in the first quarter that will not appear in future periods.

On April 19, Dominion Midstream's Board of Directors declared a distribution of $0.2245 per unit payable on May 13.

This distribution represents a 5.2% increase over last quarter's payment and is consistent with our plan to achieve 22% annual distribution growth for LP units.

In the next few days, we are planning to file with the SEC for an aftermarket issuance program for up to $150 million in DM common units.

As a reminder, we do not need to access the markets to fund Dominion Midstream's 2016 distribution growth.

However, should we decide to utilize this program, it would improve the trading liquidity of DM units, something that many of our investors have asked us about.

Moving to cash flow and treasury activities at Dominion, funds from operations were $1.1 billion for the first three months of the year.

Commercial paper and letters of credit outstanding at the end of the quarter were $3.1 billion.

We have $5.5 billion of credit facilities, and taking into account cash and short-term investments, ended the quarter with liquidity of $2.6 billion.

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

Our public financing activities so far this year have included $750 million of senior notes at VEPCO and $550 million of junior subordinated notes which were remarketed at the Dominion Resources level.

This remarketing was related to the conversion of common equity for the first tranche of mandatory convertible units issued in 2013.

The remaining $550 million tranche will be remarketed later this quarter.

In addition, we raised $750 million of common equity through a block sale in April.

$500 million of that sale has been earmarked for the Questar acquisition while the remainder was for general corporate financing needs.

We have a number of debt financings planned for the remainder of the year, including issuances at Dominion, Dominion Gas Holdings, and VEPCO.

In addition, you should expect us to issue incremental mandatory convertible units to support the Questar transaction, as we outlined on our year-end earnings call.

Looking ahead to the second quarter, Dominion's operating earnings guidance is $0.65 to $0.75 per share compared to operating earnings of $0.73 per share for the second quarter of 2015.

Positive earnings drivers for the quarter compared to last year are higher revenues from our growth projects, lower capacity expense, and an increase in solar related investment tax credits.

Negative drivers for the quarter are our refueling outage at Millstone, a return to normal weather, and share dilution.

Dominion's operating earnings guidance for the year remains $3.60 to $4.00 per share.

Combining 2016 actual results for the first quarter with second-quarter guidance produces year-to-date results that are $0.06 per share below last year's.

Because of this shake to earnings, we wanted to highlight the earnings drivers in the second half of 2016, which will allow us to achieve our annual guidance range.

Slide 8 shows 2015 six-month actual results of $1.72 per share, and the $0.06 per share projected decline for the first half of this year, primarily due to last year's weather and this year's Millstone outage.

However, we have some very significant growth drivers last six months of this year.

First, we expect to return to normal weather, which will allow us to pick up $0.09 to last year's results.

If you recall, the weather in the fourth quarter of last year was extremely mild.

We also will not have a Millstone refueling outage this fall; that picks up $0.07 for us.

The combined benefits of higher capacity performance revenues and lower payments to nonutility generators adds $0.16 per share to year-over-year results.

The majority of the benefit comes from capacity performance payments based on last year's auction results and will begin this summer.

Also, as we have said previously, we are constructing more solar projects this year, which produces an incremental $0.04 per share for the period.

And finally, our restructuring changes and normal growth produce $0.02 and $0.04 respectively of higher earnings for the six-month period.

We hope this breakdown of our growth in the second half this year provides clarity to achieving our 2016 guidance.

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

As of mid April, we are hedged 93% of our expected 2016 production at Millstone, and 8% for expected 2017 production.

Regarding Millstone, I would like to point out that multiple new England states, including Connecticut, have been discussing longer-term RFPs aimed at maintaining fuel diversity and environmental benefits.

I do not want to speculate on the outcome of these legislative discussions, but we will be an active participant in any future solicitations.

So, let me summarize my financial review.

Operating earnings were $0.96 per share for the first quarter of 2016, which was in the middle of our guidance range.

Operating results for Dominion Midstream Partners were in line with management's expectations, and adjusted EBITDA was more than double the level of last year's first quarter.

And finally, Dominion's operating earnings guidance for the second quarter of 2016 is $0.65 to $0.75 per share, and our operating earnings guidance for the year remains $3.60 to $4.00 per share.

I will now turn the call over to Tom Farrell.

Good morning.

Strong operational and safety performance continued in the first quarter.

Dominion was ranked number one in safety among electric utilities in the southeast.

OSHA recordables for each of our business units were roughly 1/2 the level recorded last year, and last year had tied an all-time Company record.

In fact, excluding contractor related incidents, Dominion Generation had zero OSHA recordables in the first quarter.

Our nuclear fleet continues to operate very well.

Net capacity factor of our six units was 96.2% for the first three months of the year.

The contribution of the Warren County power station helped our regulated power generation group achieve record net generation during the first quarter.

North Anna Unit 2 completed a 512 consecutive day run when it came off-line in March for its scheduled refueling.

This breaker to breaker run was a record for the unit.

As Mark noted in our second-quarter guidance, Millstone Unit 3 is currently in a planned refueling outages -- outage and is on plan to return to service this month.

Now for an update on our growth plans.

The 1,358 megawatt Brunswick County power station began commercial operations last week, completing a construction schedule that began in August 2013, and was completed ahead of time and under budget.

At the height of the construction, the station had more than 1,500 workers on site.

Brunswick power station is anticipated to have 43 employees and an annual payroll of about $7.5 million.

In the first full year of the station's operation, the fuel savings have been estimated to be nearly $100 million.

Those fuel savings will continue over the life of the plant, and the station is expected to save consumers over $1 billion.

Development and engineering continues on our next generation construction project, the 1,588 megawatt Greensville County three-on-one combined cycle power station.

On March 29, Virginia State Corporation Commission approved the CPCN and rate rider for the Greensville project.

Major contracts have been executed, including the combustion turbine supply agreement with MH Power Systems and the EPC agreement with Fluor.

These are the same organizations that just completed the Brunswick County plant located about five miles away.

We expect to receive the air permit from the Virginia Department of Environmental Quality by the end of this quarter.

The $1.3 billion project is expected to achieve commercial operations in late 2018.

Construction on our two large contracted solar projects, Four Brothers and Three Cedars in Utah, continues on time and on budget.

Dominion is currently overseeing the construction, and both projects are expected to be in service during the fall of this year.

Construction of the 80 megawatt solar facility on Virginia's Eastern Shore also commenced during the first quarter and is expected to be complete in the fourth quarter of this year.

The output from the Eastern Shore facility is under contract with Amazon.

We are also working on a number of regulated solar projects within the state of Virginia.

A hearing on the application with the Virginia State Corporation Commission for the construction of three solar facilities within the state was held in March, and a ruling is expected by July 1. If approved, these facilities totaling 56 megawatts would be in service by late this year.

Today, we will be filing with the State Corporation Commission for a CPCN for a 20 megawatt solar facility at the site of our Remington power station.

The output from the facility will be sold to the Commonwealth of Virginia, and the renewable energy credits will be sold to Microsoft, who will retire it.

We have a number of electric transmission projects at various stages of regulatory approval and construction.

Three of these were completed in the first quarter, including Phase I of the Loudoun-Pleasant View 500kV Rebuild.

We expect to place approximately $650 million of new transmission assets into service this year.

An application for Phase I of our (technical difficulty) Strategic Underground program was filed with the State Corporation Commission in December.

The filing, which includes a cost-benefit analysis, covers 400 miles of distribution lines to be converted by August of this year at a cost of $140 million.

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

Our Cove Point liquefaction project is approximately 64% complete, and there are about 1,600 workers on site.

Engineering is 99% complete, and 98% of the engineered equipment has been procured.

The project continues on time and on budget for a late 2017 in-service date.

We are continuing to work toward the commencement of construction on the Atlantic Coast pipeline and the related supply header project.

We made the formal FERC filings for these projects last September.

In March, after extensive consultation with stakeholders, we provided information to FERC on a group alternative to address agency and public input, and to avoid more sensitive areas in the national force.

Just this week, we received a supplemental notice of intent to prepare an environmental impact statement as modified to include the reroute.

This is a very positive development and we are pleased with our progress at FERC.

We anticipate getting a FERC order to allow us to begin construction by mid-2017.

Surveying and pipeline engineering is nearly complete and will be finished this year.

The material procurement is now over 70% complete, and we expect to finish the construction contracts this quarter.

We have modified the sequence of construction with our contractors.

As a result, the modest delay in permitting will not delay the completion of the Atlantic Coast pipeline or the supply header scheduled in late 2018.

We had one pipeline project online in December in South Carolina, flowing 45,000 dekatherms per day, and Western Access II went online in January with 450,000 dekatherms per day capacity.

We currently have an additional 11 pipeline growth projects underway with $1 billion of investment to move more than 1.5 billion cubic feet per day for customers by the end of 2018.

The majority of these projects are demand-driven, moving gas to end use power generation, or local distribution companies.

Turning to our farm-out activity, we have enjoyed significant success with our Marcellus and Utica acreage farm-out program which began in 2013.

Our current focus is on the portfolio of remaining Utica acreage packages and the prospect of restructuring a previously completed transaction.

While many producers are pulling back near-term drilling plans, there remains significant interest in several areas throughout our farm-out program.

We are currently in discussions with multiple partners, and expect to again realize significant value later this year.

On March 31, Dominion filed its base rate case for our North Carolina service territory, seeking approval of a $51.1 million increase in base rate revenues based on a 10.5% return on equity.

Most of the proposed increase is expected to be offset by reductions in the fuel factor and a two-year rider to refund excess deferred income taxes.

The Company has requested to implement the new rates on a temporary basis on November 1 with permanent rates to be in effect on January 1.

Finally, I want to update you on our pending merger with Questar Corporation.

Hart-Scott-Rodino clearance for the Questar transaction was received on February 22, and their shareholder vote is scheduled for May 12.

Merger applications were filed with the Utah and Wyoming Public Service Commissions and notice was provided to the Idaho Commission.

Technical conferences were completed last week and discovery is underway.

The Utah hearing is scheduled for August 22, and the Wyoming hearing is scheduled for September 14.

We expect to close the transaction later this year.

So, to summarize, our business has delivered strong operating an exceptional safety performance in the first quarter.

The Brunswick County power station is now complete and in service ahead of time and under budget.

The Greensville County project has been approved and site preparation is underway.

We continue to work toward FERC approval for the Atlantic Coast pipeline and the supply header project.

Construction of the Cove Point liquefaction project is on time and on budget.

And we are working towards a successful close of our combination with Questar Corporation later this year.

Thank you and we are ready to take questions.

Thank you.

At this time, we will open the floor for questions.

(Operator Instructions).

Greg Gordon, Evercore ISI.

Thanks.

Good morning guys.

As you -- you haven't -- you didn't talk about or reiterate your near-term or long-term earnings growth aspirations.

Can I assume that they all remain in place?

And if so, over the last three or four months, have there been any major evolutions in things that would be sort of going in or going out of the asset profile or the margin profile that have changed relative to what you thought three or four months ago?

This is Mark.

I would say nothing in the last three or four months.

We still have the same target growth levels that we've talked about historically, but what I would say that, over the last six or eight months, power prices in the Northeast have been weak.

We think they will recover as we move through 2017 -- or excuse me, move into 2017, but that's probably the one variable that's out there that has gotten more negative over the last six or eight months.

Okay.

And can you give us any sense of timing on the rest of the financing activity for Questar?

It will all be done between now and close, except for the DM equity, which I think I said on our last call that we have, as part of our bridge financing, taken out a one-year term loan that is effective at close for up to one year that gives us flexibility to access the DM marketplace when we want.

But the rest of the financing will be completed between now and close.

Great.

That's all for me guys.

Thank you.

Julien Dumoulin-Smith, UBS.

Good morning.

So, a couple of quick questions here.

First, you kind of alluded to it already in the prepared remarks, but can you elaborate a little bit on Blue Racer opportunities?

Where do you see that trending right now in terms of your quarter-over-quarter development?

Obviously, we've seen gas prices kind of come back a little bit here.

And then the second question related, what about Wexpro?

Are there opportunities to reinvigorate that investment plan either because of pricing improvements or perhaps, more importantly, because of developments on the land side or what have you?

With respect to Blue Racer, Blue Racer continues along its plan.

There haven't been any changes there.

It's a very insignificant part of Dominion's earnings.

But if there's -- it's doing as anticipated and as we expected it to do this year and it's contributing as it should to the earnings profile.

With respect to Wexpro, we're going to reserve all of our comments on what happens with Questar and what our plans are for Questar until after their shareholders vote and we have a chance to further our dialogue with their management team.

Got it.

And then unrelated, if you can talk about the renewals opportunity.

Obviously, you guys are trying to scale that in Virginia.

But given the extensions, how are you thinking about deploying further, especially solar assets, in 2017 and 2018 as you think about any potential pressures on your earnings growth because of commodity, etc.?

We are looking primarily in Virginia, both regulated and as you may -- as we discussed in the script, a couple of different sort of quasi-regulated opportunities that were risen.

Now, we are looking actively there.

As you commented, we are much more interested in solar than we are in wind.

We don't -- wind is not a good asset in the territories where we do business for producing power reliably.

Solar is better.

And we are continuing to look at 2017 and 2018 so far with respect to all of our other growth projects are all on time and on budget or ahead of time and below budget.

And we will see how we go along through time and see if we are going to deploy any additional capital into renewable projects.

Got it.

And a last quick clarification, the next biannual review process, obviously you have the latest ROE outcome.

When is the next time you could be called in?

2023.

Okay.

Thank you.

Jonathan Arnold, Deutsche Bank.

Good morning guys.

I'd like to just -- if you could, I'd like to understand the $0.16 CPE asset performance driver in the second half.

Can you just remind us?

I think you talked about this before, but does that persist into 2017 through the first half of the performance year?

And then does it also persist beyond the 2016-2017 year?

This is Mark.

Obviously, we have a huge pickup on their capacity performance auction that we think a lot of people probably overlooked in both 2016 and 2017.

The 2016 number on just capacity performance will be higher than it is in 2017, but when you combine that with note rolloffs, it will be about the same year-over-year.

And if you add on top of that the Millstone capacity in 2017 over 2016, we will actually have increased our total income associated with capacity from 2016 to 2017 when you combine those three together.

But we were a very, very large beneficiary, as you referenced year-over-year, at $0.16 for capacity performance.

It's $0.14 in the last six months, and there's about $0.02 worth of incremental rolloff of notes in the last six months.

That brings you to your $0.16 total.

So is there a roughly similar uplift in the first half of [2017]?

On capacity performance specifically, the number is lower, but as I mentioned, if you combine all of our capacity resources, Millstone and nub obligations, the number is actually higher.

Right.

But then as you roll into the next capacity year, sorry, I may have missed your answer here.

Remember how the capacity auction worked on PJM.

You had to cover 60% of your load in the first year, I think it was 70% of your load.

So the opportunity on capacity performance will get smaller as you have to cover more of your load moving forward.

So 2016 is the biggest year for that one single item, and it starts to whittle down from there, but we are quite pleased with the result for us.

Okay, great.

Thank you Mark.

And then on the -- just you referenced -- I think Tom mentioned at the end of his remarks there was a possible restructuring of one of the farm-out deals that you previously struck.

Can you give a little more insight into what you are alluding to there, what form that might take?

We did one last year, Greg, and it could be a variety of different examples.

Some of the cases, when we did the farm-outs, they were agreed to drilling schedules.

And if for example someone wanted to modify the drilling schedule, they would have to compensate us for that.

So that's the kind of activity we are looking at.

But the primary activity is in the traditional farm-out.

We still have a lot of Utica acreage and we have a tremendous amount of interest in it.

Okay.

So the restructuring would be a smaller item than hopefully entering into new ones.

May or may not be.

I wouldn't necessarily draw any conclusion, Jonathan.

Okay, great.

Thanks very much.

Stephen Byrd, Morgan Stanley.

Good morning.

I wanted to dig into the Connecticut legislation, and I guess just first perhaps try to understand the next steps involved.

And then we can discuss a little bit more about sort of how that would exactly function.

But just next steps, what should we be looking for there?

The legislation you are referring to was adopted in the Senate and has not yet been adopted by the House.

I believe Connecticut's legislature finishes their work today.

But I think this is part of the dialogue that's going on all through New England, and it's going to continue.

It's going on in Massachusetts, it's happening in Maine, it's happening in New Hampshire on how to deal with the carbon rules and existing carbon-free generation, which most obviously is the largest asset in New England.

It provides half of Connecticut's power when both units were operating in its normal operations, and Connecticut has very little prospect of complying with the Corporate rules if Millstone were to shut down at some point.

So, I think the legislature and the political hierarchy in Connecticut is aware of that.

We are following the legislation obviously closely, but I think, as part of an overall dialogue that will take place over the next few months in New England generally about how to protect these assets, of which I guess there are only two left that are still going to be running, Seabrook and Millstone, which is about twice the size of Seabrook.

Understood.

That's helpful.

And in terms of just is there a timeline in Connecticut through which we need to see either progress or for resolution, i.e.

is this fairly binary in terms of just deadlines for passage, or are there opportunities to hold -- for example I'm not sure special sessions or -- you mentioned an ongoing dialogue.

I'm just trying to think through what milestones we should be looking for there.

I think there's going to be an ongoing dialogue.

They recess or adjourn or whatever the right word is, they finish their work today.

Understood.

Is it possible to have a special session or some other opportunity for passage at a later date, or when would the next opportunity be if it weren't passed now?

There is certainly always a possibility for a special session in any legislative body, but I wouldn't expect it to continue over to the next regular session of the Connecticut legislature.

Understood.

Thank you very much.

Steve Fleischman, Wolfe Research.

Good morning.

Just to follow-up on that last question, when is the next Connecticut legislative session?

Is there still another one this year?

No, they reconvene in January.

January?

Okay.

And do you expect any legislation to get done today, or you don't think it's going to get done today?

I've learned -- I've been in my job long enough to never speculate on what's going to happen in a legislature.

Okay.

We'll --

I know the same conversation is going on in Massachusetts.

Okay.

And does their session still last for a while?

Yes, it sure does.

Okay.

Just to clarify, though, you mentioned looking at opportunities for long-term RFPs, fuel diversity etc.

So as the RFPs are currently structured, can you bid Millstone into any of them, or is it -- because I thought they only had to be new generation.

No, it's renewables.

As I understand the Connecticut legislation, it would be structured so that Connecticut -- Millstone would be allowed to bid as a part of the non-carbon or Renewable Energy components of these RFPs.

It's quite creative and I think appropriate.

It is carbon-free.

And it's baseload and they can't make their requirements without it.

And just to clarify, this has to be done through legislation?

It cannot be done through commission actions or things like that?

That's correct.

Okay.

And then just one question on -- and I apologize on the detail on this -- just on the capacity performance, to make sure I understand this.

So your Virginia generation is getting capacity performance on all the generations, but in this year, you only have to buy out 60% capacity performance from your utility.

But as that 60% goes to 100%, then they will match up and there won't be a benefit.

But there's a benefit from that mismatch, is that correct?

This is Mark.

That is almost correct.

The assumption, though, that you get a benefit for all of your generation is probably not correct.

Each company would have to make a decision on how much they wanted to bid in that generation against the capacity performance and hedge their risk for any units that might not perform.

So, we made that analysis, and based on the generation we bid in covering our loan requirements at 60% the first year, that access is the benefit that I referenced.

Okay.

And just going back to the first question on your kind of growth rates and targets and all that stuff, so you are reaffirming 2016, but in terms of the growth rates that you I guess re-mentioned when you announced the Questar deal, are those still good, or are you wanting kind of some of these pieces to come together before you reaffirm them?

I just want to make sure I clear what you're communicating.

They are still (multiple speakers)

Okay.

Great.

Thank you.

Michael Lapides, Goldman Sachs.

Thanks for taking my question and congrats on a good start to the year.

Two things.

One, can you talk a little bit -- I noticed you all took about a $70 million pretax charge related to severance.

Can you talk a little bit about what's going on there, and what your plans are Company-wide in terms of O&M, kind of what's embedded in guidance?

This is Mark.

The program that was referenced was really an effort across all the businesses and the corporate support areas to drive decision-making to a lower level, eliminate layers of management, increased spans of control, and make the decision-making really more efficient by having those fewer layers.

That was the focus.

We took a charge of about $70 million pretax, I think $43 million after-tax, and those labor costs will be recouped as the employees move on.

And so you will see a full year's benefit in 2017 and a partial benefit in 2016.

In terms of ongoing O&M, we are targeting a flat to CPI gross on O&M going forward.

It will probably be different year-by-year, and the only thing that would change on that of significance would be the outage period for Millstone where you might have two outages versus one in a given year.

But I look for us and for you to model flat CPI growth on O&M going forward.

Got it.

And real quick, can you talk about what was weather normalized power demand for Virginia Power, in the quarter and how did that differ versus your expectations?

Sales, weather normalized, for the quarter, were down about a little over 1%.

We have an annual expectation of a 1% positive sales growth for the year.

We still feel pretty good about that.

So that was a net for the first quarter.

April seems solid in supporting the 1% growth.

And we had -- we had actually pretty strong growth in all sectors but residential.

I would as always do on sales is when you are coming and comparing to a very significant weather season, we had a very strong first quarter of 2015 on weather and in late 2016, so the weather normalization process is not penny-accurate.

That's why we think 1% growth is still a good assumption for us.

Also, recall a 1% growth year-over-year, it only equates to about $0.04 or $0.05 a share for us.

Got it.

Okay.

Thank you Mark, much appreciated.

Paul Patterson, Glenrock Associates.

Good morning.

Just -- I apologize, but Michael Lapides might've asked this to a certain degree.

The ODI, it looks as though there is a $0.02 benefit in the second half of this year.

How should we think about that going forward and just in general the expense -- sorry, the organizational design initiative?

And how should we think about the expense associated with that, the one-time?

Do you think you might see more of that going forward, or how should we think about those things?

This is Mark.

I don't think you should think about additional programs going forward.

We took a one-time charge, as we always do.

It's a nonrecurring event, and disclose that.

And we showed on our breakdown on Slide 8 that we would expect to see lower operating expenses and labor due to lower staffing levels of about $0.02 this year for the last six months of the year.

And I would expect us to see probably $0.04 or $0.05 next year, which is supportive of the growth rate that we have out there.

Okay.

And that's it.

Actually, all the other questions were asked.

Thank you.

Thanks Paul.

Thank you.

This does conclude this morning's teleconference.

You may now disconnect your line and enjoy your day.