Energy Transfer LP (ET) 2004 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Southern Union Company First Quarter Fiscal Year 2004 Earnings Conference Call. My name is Kellera and I will be your coordinator for today. At this time, all participants under a listen-only mode. We will be that facilitating a question-and-answer session towards the end of the conference. If at any time during the call you require assistance, please press star followed by zero and a coordinator will be happy to assist you. As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call Mr. Richard Marshall, Vice President and Treasurer. Please proceed, sir.

Good afternoon. This is Rick Marshall I would like to thank you for joining us for Southern Union's Fiscal 2004 First Quarter Earnings Call. With me is Tom Karam, Southern Union's President and Chief Operating Officer, Dave Kvapil, our Executive Vice President and Chief Financial Officer, and Jon Graf, our Vice President and Corporate Controller.

Please be advised that a replay of this call will be available through Wednesday, November 5th, by dialing 888-286-8010 and entering passcode 60789597. I would like to welcome those also joining us by way of our live webcast. A replay of the webcast will be available on our web site at www.southernunionco.com. If you have not received a copy of our earnings release you can call 570-829-8928, or you may obtain it from our web site.

Today we'll be discussing our first quarter ended September 30th, 2003 results, and other significant events. Following our presentation, we'll -- we'll be happy to address any questions you may have. If you have any further questions after the conclusion of the call, please contact me directly at 570-829-8662.

Before beginning, I would like to caution you that many of the statements contained in our call may be based on management's current expectations, estimates and projections about the industry in which the company operates. These statements are not guarantees of future performance and involve risks. Also the company undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise. Such statements are intended to be covered by the Safe Harbor provisions of the Securities Act of 1933 and The Securities Exchange Act of 1934. I would also refer you to the cautionary statements regarding forward-looking information in the company's 10-K, as well as in today's news release.

I will now turn the call over to Tom Karam, Southern Union's President and Chief Operating Officer.

Good afternoon, everyone. Thank you for joining us on today's call.

And as I hope most of you are aware of, this morning we released our first quarter fiscal year earnings and we reported loss of 5 cents per share, as compared with a 16 cent per share loss in the prior year. In summary, these earnings are right on our profit plan. We remain on target with our guidance. There's no doubt that these results were -- helped significantly by the acquisition of the Panhandle; however, they include very little of the benefit from our integration process.

What we would like to do today is, I'll very briefly give you some high-level comments about our results and our integration process, and then turn the call over to Dave Kvapil to give you some detail behind those numbers, and then he'll turn the call back over to me, because I think at this stage in our company's transformation, we think it's important to give you some greater detail behind our LDC operations, our pipeline operations and to give you some clear understanding of the status of where our integration process and planning is.

As all of you can understand, this past quarter and particularly this past year have been a very busy year and we view it as a very productive year for Southern Union. During the quarter, we completed a tender offer and a debt redemption plan at our Panhandle Energy subsidiary. We refinanced the tender debt and the call debt with a new debt issue which will further reduce our interest costs and once again Dave Kvapil will discuss this in greater detail.

If I turn briefly to what the quarter's operating performance looked like, there's no doubt that we had a very positive impact from the Panhandle acquisition and in particular, the very stable, steady cash flow out of the pipes and as well as the trunk line LNG facility. And that facility, as you should all be aware is under an expansion project, a Phase One expansion project which we just recently commenced which will double the size of that facility send-out and increase by 50% its storage capacity. We expect that to be completed and to come on line generating revenue for our shareholders in January of 2006.

Our critical integration process is well underway, and in most areas we are either on or ahead of schedule. In regard to the Panhandle, once again, we are on track to complete most of the critical integration and system migration within the next 60 days. As of the end of September, we had already reduced the employee count at the Panhandle from 1195 to 1089. During the next several weeks, though, we will continue to take steps to shore up our balance sheet, to include selling some non-essential assets, and as we've repeatedly said, using the proceeds to pay down debt. In that vein, we are currently evaluating opportunities around our Sea Robin Pipeline to determine whether we can, in a non-dilutive transaction divest that asset. We'll be able to evaluate certain proposals over the next several weeks and we'll reach a conclusion very shortly thereafter.

Southern Union today is twice the size it was a year ago. We are 99% regulated. We continue to be focused on strengthening our balance sheet, and growing our earnings and cash flow. We are executing on our plan, both from an operating standpoint and from an -- an integration standpoint. We've often said that we like our business profile, and we are confident that we can deliver double digit earnings growth over the next few years.

As -- as you will hear from David, as he gives you some substance behind the numbers, almost at every turn, the -- the guidance we've given, the commitments we've made, we're making substantial progress in delivering on those commitments and then when we turn it back over to me, I will hopefully highlight for you some of the areas that will not only support the success of our integration progress and process, but also will support our reason for being very confident that we will hit our guidance this year and we will be able to continue to give guidance over the -- the two subsequent fiscal years of double digit earnings growth.

So with that, I will turn it over to Dave Kvapil to give you some -- some detail, and then I will come back online in a couple of minutes. David?

Thank you, Tom. Good afternoon.

As noted in our earnings release and in the supplementary information included in the form 8K which we filed with the SEC also earlier today. The company reported a first quarter loss from continuing operations of 3.7 million dollars, or 5 cents per common share. This compares with 2002's net loss of $9.2 million, or 16 cents per share.

As you probably know, having followed our company, we normally record a loss during this non-heating season quarter. However, as Tom noted earlier, the acquisition of the Panhandle Energy has contributed to our reduction in that loss amount, regarded in the quarter just ended September 2003. Because of the sale of the Texas operations, and the purchase of Panhandle Energy, both in calendar 2003, our statement of operations for the three month period ended September 30th, 2003, and 2002 are not comparable.

I will share with you some of the trends both positive and a few negatives within the company two operating segments. Those segments being our gas distribution segment or LDC and our gas transportation and storage segment which we refer to as Panhandle Energy.

While the LDC business is usually fairly quiet during the summer period our LDCs have experienced increases in several operating expenses. I will address those negative items first.

On a year-over-year comparison, pension and post-retirement expenses of the LDCs are up about $2.5 million in this quarter. Because of the deterioration in investment values over the past several years this increase and expense was expected. In addition, last year's cold winter, and higher gas prices has seen some small deterioration of aged receivables resulting in increased bad debt expense of about $1.5 million during this quarter. However, we believe that we are adequately reserved as we enter into the upcoming winter season.

Insurance premiums are also up slightly, about a half a million in this quarter. Additionally, our operating and maintenance expenses in the prior year have been reduced by certain environmental insurance refunds of about $3 million.

All of the items I've just noted were expected and considered in our 2004 profit plan.

On the positive side, the LDCs have seen a small increase in its operating margin, up about 2%. Likewise, gas sales volumes are up about 25%. Though that 25% represents a small number during the summer months, it's principally due to an increase in industrial loads and this is despite higher gas costs this summer over last year. This certainly is a positive trend.

Our transportation and storage segment, Panhandle Energy, provided significant improvement to Southern Union's operation in this quarter. The result of operations of Panhandle Energy reflect net earning contributions of about $20.1 million or 28 cents per share for the quarter ended September 30th, 2003.

Panhandle Energy's contribution to Southern Union includes several positive factors. Revenues from Panhandle are up 6.5 million in 2003 over the same quarter 2002. This is due to an increase in transportation revenues, which were the result of higher average reservation rates realized in 2003. We also experienced an increase in commodity revenues resulting from higher through-put. Through-put was up 14% in year-over-year quarterly comparisons.

Also impacting this quarter were increases in LNG revenues. Due to an increase in cargos received at the Lake Charles terminal. 30 ships were unloaded this past quarter compared to 13 in the prior year.

Lastly, equity losses of $1.8 million were recorded in the prior year 2002 at Panhandle, on investments that were not acquired by Southern Union. Panhandle's net earnings contribution also reflects an after-tax gain of $3.7 million or 5 cents per share on the early extinguishment of tender debt, which I will address in a moment.

During the quarter ended September 30th, 2003, Southern Union's other income and expense reflects a $1.2 million charge resulting from the exit of an energy-related joint venture in one of our LDC divisions. Additionally, included in Southern Union's prior year results, and not repeated in 2003, was a $17.5 million, or and after tax gain of 10.9 million, or 19 cents per share, on the settlement of the company's claims against Southwest Gas. This gain was partially offset by related litigation costs of $1.3 million net of tax or two cents per share.

Interest expense on our outstanding debt increased year-over-year, but included the additional debt acquired in the Panhandle Energy acquisition; however, year-over-year, our outstanding long-term debt balance, which excludes the Panhandle acquisition and the recent $125 million equity linked securities, reduced debt by about $175 million.

During this quarter we successfully completed over $378 million of tendered senior notes at Panhandle and redeemed over 139 million of outstanding Panhandle debentures. The senior notes repurchased pursuant to the tender offer and the redeemed debentures were refinanced with net proceeds from the private placement of $300 million of 4.8% senior notes due in 2008, and 250 million of 6.05% senior notes due in 2013. These transactions will reduce interest costs by about $6.3 million annually, and reduce the company's overall effective interest rate from $6.9, down to 6.0%. The offer and the sale of the 4.8 and 6.05% senior notes have not been registered under the Securities Act of 1933. However, registration of these notes will occur later this calendar year.

On October 8th, 2003, the company completed its 230 million dollar offering of depository shares with a coupon of 7.55%. Proceeds from this preferred stock issuance are being used to repay outstanding indebtedness and permit our redemption of all 100 million principal amounts of the 9.48% trust originated preferred securities originally issued in 1995. That redemption will be finalized later this week.

The issuance of the preferred stock and the use of the proceeds to repay indebtedness, and debt-like securities is further evidence of the company's commitment to strengthen its balance sheet, and solidify its investment-grade status. It is our opinion that the rating agencies ascribe a high equity content to the company's recently issued preferred stock. In fact, this rating, specifically stated that it viewed as the new preferred as providing 100% equity flexibility to the company's cash structure.

The company's cash flow from continuing operations before working capital changes was 35 cents per share, for the quarter ended September 30th, and significant improvement over the prior year which resulted in about a break even or a zero per share.

Because this is a loss quarter for the company there is no positive free cash flow from continuing operations to report. However, we define free cash flow as being defined as net earnings plus depreciation and amortization, less cap ex, and adjusted for actual income taxes versus accrued income taxes. However this negative cash flow or cash burn for the three month period ended September 30th, 2003, was only $12 million, compared with a $20 million burn rate in -- in 2002.

We are also on track for the 2004 cap ex budget. That budget is roughly split 50% for our LDC operations, and 50% for our transportation and storage operations at Panhandle.

I also want to bring you up to date that the company is in full compliance with the rules of Sarbanes-Oxley. We are currently in the process of documenting the necessary controls compliance required under section 404 of that act. We fully expect to be in full compliance with section 404 and the entire act by our fiscal year ending June 30th, 2004.

Our results for this quarter are on track with the profit plan and the fiscal year ending June 30th 2004. I will also reconfirm our guidance for 2004 at $1.28 to $1.42 per share. Likewise, I will reiterate our expected free cash flow for this fiscal year at $100 million. This, of course, excludes the LNG cap ex expansion, which is estimated to be about $60 million, and will be financed with some form of non-recourse debt in the future. The free cash flow total of $100 million, in addition to any realized sale of assets will be used to tire outstanding debt as we continue to improve our capital ratios.

I will now turn the call back over to Tom, who will give you some added insight into the company's operations. Tom?

Thanks, David. I think you can take a breather now. That was a mouthful to reiterate that we have been pretty busy this last quarter. What I would like to do now is to address and highlight some of the operational issues at the LDCs, the pipelines, and then discuss a little bit of the status of our integration.

If I can turn, first, to the LDC operations, there are a couple of points I would like to bring out. Next week, our Missouri Gas Energy operating division will file a base rate increase of slightly more than $40 million. I know that on previous calls we talked about a number of about $30 million and as we refined the numbers and started to look a little bit more closely about what our requirements are, that number is coming out at slightly higher than $40 million.

Our primary objectives include establishing rates that will provide us a reasonable opportunity to achieve a fair rate of return, and bring more certainty to revenue streams through a weather mitigation rate design. That's just a critical component of this rate case.

We will be seeking to achieve improvements in capital recovery by way of improved depreciation rates. We need to continue to make our case to the MPSC that we must earn a rate of return that provides a reason and incentive to invest in Missouri.

Also in Missouri, the governor recently signed legislation that will permit the MPSC, or the Missouri Public Service Commission to approve rate adjustments outside of a general rate case. Which will allow us to recover the costs of any mandates safety projects, either by the MPSC, or government, for relocation or safety projects through a non-weather-sensitive surcharge, basically a customer charge. This is a very significant issue.

We plan to make our first filing for this adjustment, this surcharge, around December 1st, which will become effective April 1st, of 2004. Under this initial filing with this legislation, we would expect that we might be able to generate $1 million in margin in this current fiscal year and moving forward to years beyond fiscal year 2004, we might expect filings of anywhere of $3.5 to $4 million in additional revenues. And then as we file future rate cases, those surcharges rolled into those rate cases.

There are really two benefits from this. Number one is you eliminate the regulatory lag in recovering when you have mandated projects that you have to do and also, obviously, it allows to you get almost what amounts to line item rate making, as it relates to those capital expenditures. So this is -- this legislation is a step in mitigating regulatory lag and it's important to us.

Generally, across our LDC divisions we've seen only a slight increase in our aged receivables. This increase, which is not material, could be mostly attributed to the higher cost of gas. But more importantly, for all of you, each of our divisions has adequate bad debt reserves, as we approach the winter season.

On the supply side, each of our LDCs has substantially completed their storage injections which gives us great comfort that we'll have adequate supply for the upcoming winter. So overall, the LDCs are performing well, and have spent a great deal of time in the last three months to prepare for the upcoming winter.

I would like to turn a little bit to the pipelines and to Trunkline LNG. As of today, both Panhandle Eastern Pipeline and Trunkline Gas Companies are fully subscribed for the winter 2003, 2004. Our storage is 95% contracted, by design, with the balance being used for our park and loan services which are generating additional revenues for the company.

At the Trunkline LNG which we've previously said is fully contracted, we've received 30 ships in this quarter. And we expect to receive a approximately 70 more between now and the end of fiscal year 2004. In comparison, if you took fiscal year 2004, our fiscal year 2004, we should be in receipt of 100 ships and if you take the same period, which would equate to a fiscal year 2003, there were only 81 ships received there. So you can see about a 20% increase in the imports.

The Panhandle is completing fourth year of a ten-year pipeline integrity program. While we're completing the fourth year, we are over 53% complete in the inspections that have been planned for the pipes. We intend to remain ahead of schedule on this most important issue. And the cost of this pipeline integrity is included, moving forward in our capital budgets.

The Trunkline LNG, I think we've released a press release not too long ago which stated that we received notice to proceed and have already started preliminary work on the Phase ONe expansion on the Lake Charles facility. We remain on schedule and on budget for completion by January 1, 2006. This expansion, which is actually contracted to the BG Group for 20 years, will roughly double the size of the facility, and will be materially accretive from day one. As we have said before, this expansion will be funded using non-recourse project finance.

On the contract side, we've received several questions about some of the specifics of our capacity contracts. We've seen a consist strengthening of our transportation contracts, for both a price and a quality stand point. As well as from a contract term perspective. In the aggregate, our current -- our current length of contract stands at about 3.7 years average. Up from the 3.2 years average prior to our acquisition. It is our objective in the near term to further improve this average to about four years in length.

Our contract length is misleading because in large -- because of the large volumes of the short haul seasonal business we do at the Trunkline Gas Company, as well as the gas coming out of Trunkline LNG which is mostly short haul; therefore, when you compare the Panhandle to other pipes in the industry, you would think that we have a much -- a much more at-risk or shorter contract portfolio. And that is misleading. We tend to think that we will always have a shorter length of contract simply because of the nature of our pipes.

However, having said that, we still expect to strengthen our length of contract to that four plus years. So in short, the Panhandle is seeing its L.DC and other major customers to begin -- to move from the short-term contracts of the late '90s, in favor of medium-term contracts and to be specific, this the 5 to seven year length of contract term.

And we're also seeing some pricing stability. And I think David alluded to that in some of the numbers in terms of the pipes transportation rate.

So from an operating perspective, we're well prepared for this winter season. And we're continuing with our integration efforts and we're poised to capitalize on what we hope will be a normal winter.

I would like to turn now and talk a little bit about where we stand from an integration perspective. We've had a great deal of activity internally on these integration initiatives. And what we've done from the outset is divide our work into two areas. The first being the creation of a single operating platform at Panhandle for the entire company. And the second being the integration of our LDC operations on to that platform at the Panhandle.

So it's slightly more than 100 days since we've acquired the Panhandle, most of our focus has been on the integration of that company. We now have in place, an experienced, motivated management team, which has been working seamlessly with the management of our other divisions throughout -- and throughout the company, to effectively execute on these strategies.

As I mentioned earlier, in September, we also completed a work force reduction at Panhandle as part of this integration. Which reduced its employee count from 1195 to 1,089. Effectively eliminating 106 positions or slightly more than 9% of that employee count.

Additional savings were realized as we reorganized the Panhandle's IT department. Prior to our acquisition, to give you an example, 15 of the Panhandle's IT resources were consultants, they were outside contractors, very high cost outside contractors. And since the acquisition we have replaced those contractors with ten full-time employees at significantly lower cost to the company.

So combined, the severance plan, the elimination of position, and the reorganization of the Panhandle's IT department, as well as all of the associated fixed cost reductions, have provided about 50% of what our near term cost saving expectations are. And more importantly, we've reduced the execution risk by well over 50%.

Panhandle, right now, is operating on the upgraded Oracle financial and AP system, which will be that foundation, of Southern Union's new operating platform. In addition, on a company-wide basis, we are streamlining certain system supported functions to the corporate group through a shared services plan that we've talked about on previous calls. As we have it structured, the shared services plan will provide for more cost efficient operations guided by common goals and a singular direction. To date, we we have commenced the process to include the following functions in our shared services group: IT, Purchasing, fleet management, telecommunications, and certain credit and collections activities. As an example of the effectiveness of these efforts, the corporate purchasing and the contract administration department has already negotiated corporate-wide contracts and signed several of them that will result in further cost savings not included in the 50% I talked about earlier. As further components of our shared services plan, we are developing a number proactive regulatory and legislative initiatives that we will institute company-wide in the very near future.

So in summary, our confidence in our ability to deliver on our earnings guidance remains high. Our strategy remains clear and simple, to grow as premier operator of regulated natural gas assets, and to provide you our shareholders with a strong company, with above average growth prospects. That concludes our prepared remarks. We'd be very happy to open up the phone call to questions that any of you on the call may have.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star, followed by one on your touch-tone phone. If your question has been answered, or you wish to withdrawal the question, please press star followed by two. Again, to ask a question, please press star one on your touch-tone phone. Your first question comes from Donato Eassey of Royalist Research.

Good afternoon, Tom, David. I basically have one macro question. That deals with the treatment and I haven't read through the 10-K that just came out, but is there any update you can provide us on the treatment of the swap and -- of the Texas properties for Panhandle for tax purposes?

Donato, we don't have any further information on that. Clearly, this is something that we sought out the best advice in the country to give us opinions that were on very solid ground. We're very confident that the approach we took is the right one, and is defensible, and -- but in terms of how the IRS deals with things, I don't -- we don't expect to have any feedback from from them, David do we?

No. Not in the short term.

Yeah.

Okay. Thank you. And congratulations on all this improvement.

Thank you very much.

Your next question comes from Casey Alexander of Gilford Securities. Please go ahead.

Good afternoon.

Hi, Casey.

Can you -- since this is the first quarter with the pipeline in it, can you give me some sort of feel for the seasonality, if any, of the pipeline business versus the seasonality of the distribution business?

Yes, we can and I think that's a great question and I apologize for omitting that in my prepared remarks. The pipeline business is a much more stable cash flow business. You should not look to see the wild fluctuations of seasonality that you see in the LDC business. If you recall how we explained the contracts and the revenue on the pipeline business, the vast majority of the revenues at Panhandle come from reservation fees, and those fees are spread evenly over the 12 months of the year. So while you will see certain fluctuations during the winter months from demand charges, you should not expect the extent to which you see the volatility in the LDC seasonality.

Okay. In reference to the expansion of the liquid -- the LNG facility, some people in Texas have been trying to build some LNG facilities and have been running into problems with environmental groups. Have you had any problem with that regard?

Absolutely none. Quite the contrary. The Phase One expansion which we've already begun the preliminary work on is already fully permitted and it's fully permitted and fully contracted and it's ready to go.

Okay. Can -- from the balance sheet perspective, you know there have been a lot of recasting. How much debt is now -- of the whole company is termed out, versus how much is now running as bank debt?

We -- we reduced our bank debt substantially. I will let Rick Marshall handle that since he's closest to those numbers. Can you answer that for, Casey.

Yeah we have a term loan that currently has principal outstanding of $186 million, and we've got revolving credit bank debt that is currently at $141 million. That's not reflected on the September balance sheet. The -- we'll shortly -- we'll borrow $100 million under those revolving lines of credit to redeem the preferred securities.

Mm-hmm.

But I guess if you -- if you look at it, you're roughly a quarter of a billion dollars on the revolving bank debt and another $180 million under the term loan.

Where was the revolver at, you know six months ago? Was it around 350, 400, something like that.

It was approaching that. It wasn't quite -- I don't think it was quite that high. As of -- as of September 30th, though, the revolvers were at about 300 -- well, 324 million.

Right. Okay.

Lastly, the shared services group. It seems to me that I remember somewhere in my head somebody telling me that in a regulated business, when you kind of centralize operations and save money, have you to give it back to the rate payers. Am I making a mistake in that line of thinking or does this savings to the ratepayers in that regard help you in your negotiations with the rating agencies? And with the people who you're filing, you know, for instance in Missouri on the base rate case?

Well whenever we file a rate case, we have to justify our cost of service, and what -- we're in a situation that in certain of our divisions, such as New England, we have a sharing mechanism in place already. To the extent -- in Missouri, we're still under-earning, quite frankly. So when you couple our -- the rate increase request that we'll file next week with whatever benefits Missouri rate payers may get from this consolidation, we're still hoping that we can get this to -- to a level of achieving a reasonable rate of return.

So your premise is theoretically correct. Things get a little bit more specific when you -- when you file a rate case, have you to justify your cost of service and then the next time, in most jurisdictions you have to justify your cost of service is not until the time you go back in for another rate increase.

All right. Okay. Well, thank you very, very good quarter.

Thank you.

Your next question comes from Mike Heim of AG Edwards. Please go ahead.

Thanks. Three specific questions. The first would be I just wonder if you could elaborate a little bit more on your comments about whether mitigation and the rate filing in Missouri do you see this being a traditional weather normalization rider or something with what McCleeds got?

Okay, why don't you give me all three, Mike and then we'll answer them.

The second one was your comments in Missouri on the pipeline safety project, I'm curious to see you talk specifically about, you know $1 million by April 1st. Is that additional costs that have already been spent or are you anticipating something associated with the Department of Transportation proposal?

No, that I can answer right now. Those are costs that have already been spent.

Okay.

We'll simply be filing for in December, and given the timing of it, if it comes into effect in April, we would expect that $1 million of that would hit this fiscal year.

Okay. And then the third and the final question is just kind of an accounting one. Usually, you know each quarter you have a line under the other incomes for dividends, which I assume is the on the preferred securities of subsidiary trust, the toppers, which I assume is the unit that got taken out shortly after the end of the quarter. What happened to that since that wasn't taken out until after the quarter? Is that buried somewhere else this time.

Yeah, Mike, I don't think that's right.

It hasn't been taken out, Mike. Its been called. It will be taken out at the end of -- well, later this week on Friday it gets pulled back in.

Okay. My question still is: What happened to that line item?

There's reasonably a new FASB that required us to reclass the deferred stock as well as the dividend paid on that preferred stock and classified as debt on the balance sheet and then interest income on the income statements.

Okay. All right. That makes sense. Any comments on the weather mitigation then?

Yeah, sure. I'm let Rick Marshall about that. He's been working closely with the guys in Missouri to talk about that.

I think you classified it correctly, Mike. It's more in line with the weather mitigation rate design that McCleeds received. It not your typical weather normalization, where there's a return of revenues or money to the rate payer to the extent that weather is colder than normal and vice versa, if it's warmer than normal. So what we're trying to achieve here is to get more of our revenue increase and more of our revenues from the customer charge and the early -- the earliest distribution charges that are assessed to rate payers.

Okay. And --

But it's basically becomes rate design improvement.

Okay. And you said filed probably next week, and then what, six to eight months something like that.

I think -- I think Missouri is 11 month, isn't it.

It can take longer.

Think if it's fully litigated it can go as long as 11 months but if we settle it, it's whatever we come to terms. I would think that's probably a good barometer, 9 to 11 months.

Okay.

And part of the reason we are taking the approach in Missouri that we are, is because the dent has been established. We're not uncomfortable following the lead of McCleeds with respect to that rate design. That's why we have such a a higher degree of comfort because the precedent has been established. We're a natural gas distributor in the same state as they are, and we should expect the same treatment. So thank you for the question.

It seems a good decision for McCleeds, so I hope it works out for you and that's all the questions I have.

Ladies and gentlemen, if you would like to ask a question, please key star one on your touch-tone phone. There do not appear to be any further questions. Sir please continue with your closing remarks.

I would like to thank everybody for their interest in Southern Union and hopefully when we get together again in three months we will have even better news to talk about. Thank you again.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.