Energy Transfer LP (ET) 2005 Q1 法說會逐字稿

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  • Operator

  • Good day, ladies and gentlemen, and welcome to the Southern Union Companys first quarter 2005 earnings conference call. My name is [Rayeka] and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be conducting a question and answer session towards the end of today's conference. [Operator Instructions] As a reminder, ladies and gentlemen, 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. Jack Walsh, Director of Investor Relations. PLease proceed sir.

  • - Director of Investor Relations

  • Thank you and good afternoon. This is Jack Walsh. Thank you for joining us for our first quarter 2005 investor call. Presenting on today's call will be George Lindemann, Chairman and CEO of Southern Union; Tom Karam, President and COO; Dave Kvapil, Executive Vice President and CFO, and Rob Bond, the recently named President and COO of our Integrated Pipeline Operations. A replay of this call will be available for one week by dialing 888-286-8010 and entering passcode 44879878. I'd like to welcome those also joining us by way of our live webcast. A replay of the webcast will be accessible through our website at www.southernunionco.com. If you have not yet received a copy of the earnings release issued on Monday you may request a copy by calling 570-829-8928, or you may obtain it through our website. Today we will be discussing results for the first quarter ended March 31st, 2005, significant events and outlook. Following our presentation we will be happy to address your questions. If you have any further questions at the end of the call please contact me directly at 570-829-8622.

  • Before beginning I would like to caution you that you many of the statements contained in our call today 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 statement regarding forward looking information in our earnings release. I'll now turn the call over to Mr. George Lindemann. Mr. Lindemann?

  • - Chairman, CEO

  • Thank you. My name is George Lindemann, and I am Chairman of Southern Union. Before turning the meeting over to Tom and Dave to review the results, I would like to introduce Rob Bond to you as the new President of Panhandle Energy and CrossCountry. Rob has been with the Company for sometime and has been heading up all our sales and marketing at Panhandle before this time. And Rob will be talking to you later on in the meeting to bring you an update of what's going on in our Pipeline division. So with that out let me turn over this meeting to Rob to -- to Tom and Dave who will bring you up to date on first quarter results. Tom?

  • - President, COO

  • Thank you Mr. Lindemann. Good afternoon. I'd like to thank everyone for joining us today. I, too, would like to welcome Rob in his newly appointed position as President and COO of our Integrated Pipeline Operations. We know he will do a great job.

  • For those of you who follow the Company, you should know by now that on Monday morning we issued an earnings release where we reported first quarter earnings of approximately $88 million, or $0.86 a share, compared with $71 million, or $0.92 per share for the same period in 2004. These earnings reflect results that are entirely consistent with our internal projections and also with our earnings guidance of $1.45 to $1.55 per share for calendar year 2005. I think across all of our business segments we had performance that was strong and hit our budget targets, with the exception of our Missouri Gas LDC operation which had an 11% weather degree day deficiency which resulted in it falling below its margin targets. I think Dave will speak to that a little bit more.

  • These results also reflect the continued migration of our asset mix to pipeline transmission and storage and LNG. And I think you should expect a much more linear earnings pattern for the Company as compared to the LDC business alone which is much more up and down.

  • As you know also within this first quarter we completed our permanent plan of finance to fund our investment in CrossCountry Energy Holdings of approximately $590 million. We were very pleased with the efficient access to the capital markets and our ability to maintain our investment-grade ratings. Without stealing all of the thunder from Rob Bond's presentation, I'd like to tell you that we are very much on track, on budget, and on time with our integration of CrossCountry into the Panhandle Energy organization, and we fully expect to meet all of targets that we've previously indicated. So what I'd like to do now is turn the call over to Dave who will then turn the call over to Rob, and then we'll open the call up for questions where Mr. Lindemann, myself, Dave, and Rob would be happy to answer any questions. David?

  • - EVP, CFO

  • Thank you, Tom. Good Afternoon everyone and thanks for joining us on this, our first quarter ended March 31st, 2005, earnings call. As noted in the earnings release which was issued Monday, and as Tom just mentioned the Company recorded net earnings available for common shareholders of 87.9 million or $0.86 per common share, and that's based on weighted average shares outstanding. This compares with the three months ended March 31st, 2004 net earnings of 71 million or $0.92 per share. Additional information and detail on these results may be found in the Company's Form 10-Q which we filed with the SEC yesterday. That filing is also available on our website.

  • Let me provide some insight into our numbers and an explanation for the variance between the 2005 and 2004 three month periods as well as some additional information about the Company's two operating segments. Those segments being our gas transmission storage and LNG operations through Panhandle Energy and its 50% equity investment in CCE Holdings, and our second segment, or LDC, our local gas distribution operations in Missouri, Pennsylvania, Rhode Island and Massachusetts.

  • The improvement in net earnings between the three months ended March 31, 2005, versus 2004 of 17 million is due principally to two factors. The additional income of 10.7 million, that's 15.3, and then net of the tax from our equity investment in CCE Holdings, and the result of a lower effective federal and state income tax rate. Our effective rate in 2005 is 30% versus an almost 38% in the prior year. This reduced effective tax rate results from our ability to get the dividend received deduction on dividends from Citrus Corp, which is an investment held by CCE Holdings, during 2005 and the anticipated reversal during 2005 of an 11.9 million deferred tax asset valuation allowance which was associated with Southern Union's initial investment in CCE Holdings. Other factors that contributed to this positive variance included a reduction of various corporate and LDC segment operating expenses of about 5 million net of tax. And in this 5 million we include a reduction in the distribution segment bad debt expense of 2.1 million as compared with the prior year.

  • These positive contributions to earnings were partially offset by the interest expense that we incurred as a result of the bridge loan in connection with our investment in CCE Holdings until the time we affected the issuance of equity and equity units in February of 2005. That added expense was about -- interest expense was about 2.2 million net of tax. Another negative factor in the quarter was the write-down of our remaining investment in a non-regulated entity, Advent Networks, of 3.1 million after tax. . As you recall, we took a significant reserve on that at December 31, but Advent recently filed bankruptcy so we wrote off the remaining investment of 0.5 million and then another $4 million of a related bank guarantee. We no longer have any investment in Advent on our books.

  • Earnings per share are also impacted by the change in weighted average shares outstanding during these periods as a result of these recent equity offerings. The weighted average shares outstanding increased by about 25 million shares period over period, and I will speak more to these equity investments in a few moments.

  • Our transportation, storage, and LNG segment, which includes Panhandle Energy and our interest in CCE Holdings, generated earnings before interest and taxes of about 78 million during the current quarter versus about 69 million in the prior year. CrossCountry, which primarily includes the results of Florida Gas Transmission and Transwestern Pipeline, contributed approximately 15.3 million to the consolidated EBIT or earnings before interest and taxes for the period, which is -- which was in line with our expectations, and, of course, was not included in our results prior to the acquisition of CCE Holdings in November of 2004. Panhandle by itself contributed 62.9 million of EBIT for the current quarter versus approximately 69.7 million in the prior year. Though Panhandle's income was down its core operating results are basically stable. Operating revenues were down about 2.8 million, primarily as a result of lower interruptible, or IT revenues. This was a result of a reduction in volume which overall were down about 1%, and that was due to warmer weather, and a lower market value for IT services during the period. In addition, our LNG revenues were down slightly, about a half a million, but there was a corresponding decrease in LNG variable operating costs. Overall Panhandle's operating expenses, other than depreciation and amortization, increased about a half a million over the 2004 period due to a non-reoccurring net fuel over-recovery in the 2004 period of about 1.1 million, but we're otherwise down in the current period. Panhandle's depreciation and amortization was up 3.4 million but this was due to a $3.2 million adjustment recorded in the 2004 period to reflect the impact of the final appraisals received on Panhandle's assets. And this was, of course, dictated by purchase accounting. Greater detail on Panhandle's results can be found in the Form 10-K which is also filed with the SEC yesterday.

  • Our gas distribution segment which includes our LDC operations in Missouri, Pennsylvania, Rhode Island, and Massachusetts generated EBIT of 90.2 million during the current quarter versus 85.0 million in the prior year. The LDC operating revenues improved mainly due to the results of the $22.5 million annual rate increase affected in Missouri in October of 2004. During this quarter we added in excess of 8.5 million in operating revenue attributable to that rate increase. This, however, was partially offset by warmer than normal weather in Missouri this past winter. Weather in Missouri, as Tom mentioned, was about 85 -- 89% of normal in 2005. LDC operating expenses other than depreciation and amortization decreased about 5 million from the 2004 period due to, as I mentioned earlier, the 2.8 million reduction in bad debt expense, 2 million of lower employee payroll and benefit costs, and a $1.3 million reduction in outside service, information technology and certain subcontract labor costs. These items were partially offset by a 1.5 million of increased outside service fees related to environmental matters. LDC depreciation and amortization was up 1.2 million, but this was due to normal growth in plant. As noted earlier earnings from our investment in CCE Holdings, which is recorded on the equity method, was 15.3 million pretax or $0.10 per share.

  • Let me talk a little bit about some of our balance sheet at this point. Our net long-term debt level has been reduced by almost 100 million since June 2004, and by almost 6 million since December of 2004. Other than the 100 million of debt related to our equity units issuance which I will discuss in a moment. In February 2005 the Company undertook two security offerings, the proceeds of which were used to repay the bridge loan used to finance a portion of Southern Union's investments in CCE Holdings and to repay borrowings under the Company's credit facilities. On February 9th, 2005, the Company issued 14.9 million shares of common stock at $23 per share, resulting in net proceeds to the Company, after underwriting discounts and commissions, of about 332 million. On February 11th of 2005 the Company issued 2 million equity units at a public offering price of $50 per unit resulting in net proceeds after commissions and transaction costs of 97.4 million. Each equity unit consists of a stock purchase contract for the purchase of shares of the Company's common stock and initially a senior note due February of 2008. The equity units carry a total annual coupon of 5%. Each stock purchase contract issued as a part of the equity unit carries a maximum conversion premium of up to 25% over the 24.61 issuance price of the underlying shares in the Company's common stock. In July 2004 the Company closed on a public offering of common stock and issued 4.8 million new shares of stock at that time. Net proceeds of 87 million from the offering were used to repay debt and other general corporate purposes. In addition the Company sold 8.2 million shares in connection with a forward sale agreement that was settled upon the close of the CCE Holdings investment, raising an additional 142 million.

  • The continued reduction in our outstanding debt balances evidences our commitment to the rating agencies that we continue to strengthen our balance sheet and solidify our investment grade status. Our debt to cap ratio at March 31st, 2005 is now at 54%. A year ago it was at 65%. These numbers reflect exclusion of short-term debt. The Company's traditional cap ex budget for calendar 2005 is consistent at approximately 150 million. That is split 75 million for our LDC maintenance and expansion and about 75 million for our pipeline transportation operations. In addition our cap ex budget for our LNG expansion for calendar 2005 is an additional 107 million.

  • As noted earlier the Company's Board of Directors elected to change our reporting period from a June 30th fiscal year end to a December 31st calendar year end. In making that change the Company accelerated its requirements for comp compliance under Sarbanes-Oxley Section 404. Unfortunately we were not able to complete the SOX 404 audit prior to filing our Form 10-K in March, but we expect to file an amended Form 10-K-A in June 2005 to include the related SOX 404 certifications.

  • As previously announced, our earnings guidance for the 2005 calendar year is in the range of $1.45 to $1.55 per share. We are again reconfirming this guidance to you today.

  • In summary, we are confident of our ability to deliver solid earnings. We are dedicated to growing our regulated natural gas assets and to provide our shareholders with a strong company with above-average growth prospects. I'm now going to turn the call over to Rob Bond. Rob?

  • - President, CEO Integrated Pipeline Operations

  • Thank you Dave. Today I'm going to give you an update on the two main areas of focus relating to Southern Union's pipeline operations. First I'll talk about the progress we have made on the entire transition initiative, and second I'll discuss the various expansion projects that we have underway. Integration of the Panhandle and CrossCountry operations is going very well. The new combined Company will be known as Panhandle Energy. UNder the Panhandle Energy umbrella, the pipelines will continue to operate using their individual names because that's how they're known to their customers and that's how the are known in the areas in which they operate. The process of moving all the Houston employees into one building is well underway. The first move took place in mid-April and there's another move expected for the end of the week. We expect all the employees to be in a single location by the end of June when the first phase of the transition initiative will be complete. The IT system migration project is continuing to move forward on time and on budget as everyone moves on to a common platform. The Phase II transition initiatives include combining the day to day policies and procedures that govern how we operate. While these initiatives are ongoing and targeted to be completed by the end of the year, we have made very good progress and have already implemented a new transaction approval authority.

  • As we move forward with our integration efforts we also remain focused on growth and continue to expand our business. Currently we have three major expansions in the construction phase, another that was just completed and put into service, and one that was just announced, and several others moving through the development phase. The three major expansions under construction are all related to the Trunkline LNG terminal. Phases I and II of the trunk line LNG expansion are designed to triple the current send-out of the capacity at eh terminal to 1.8 bcf per day of sustained send-out and 2.1 bcf per day of peak by mid 2006. This capacity is fully contracted to BGL&G Services through 2023. The third project under construction is the trunk line loop which will provide additional take-away capacity from the LNG terminal to Trunkline LNG -- to Trunkline Gas Company's main line. We started construction on the 23 miles of 36 diameter pipeline on April the 15th and it will be ready for service in time to handle the additional send-out from the plant later this year. We have just completed our Transwestern Pipeline San Juan lateral expansion, 72 miles of 36-inch pipeline that went into service May 1st on time and on budget. This project will add an additional 375 million a day of capacity for our customers to move supply out of the San Juan and Rocky Mountain areas to our main line.

  • The new project that was just announced is our north Texas expansion on the Trunkline gas system from east Texas into Louisiana. There's an enormous amount of gas that's currently being produced in Texas that needs to move eastward. We are planning an open season later this month to gauge interest, but we do expect to see a project that will increase capacity around 400 million a day and cost between 70 and $100 million. On Florida Gas and on Transwestern we also have projects in the development phase, Florida Gas Transmission is currently preparing a certificate application for another expansion Phase VII, which will add 160 million a day of capacity. This project will move gas from the proposed Cypress project near Jacksonville, Florida and deliver into the central Florida area. Transwestern is negotiating with its customers to construct a new lateral off of its main line into the Phoenix market. This will add another 500 million a day of capacity into the Phoenix area. We've add successful open season and anticipate negotiations to be completed by the end of the summer for a hoped in-service mid-2007.

  • It's an exciting time for Panhandle Energy, for Southern Union and the energy industry. Although energy prices have been high, the need for infrastructure remains very strong and our strategy is to insure that we access new supply and move that gas to market. With that I will turn it back over to Tom Karam.

  • - President, COO

  • Thanks, Rob. That was an excellent report. At this time we'd like to open up the call for those listeners who may have questions of anyone on the management team.

  • Operator

  • [Operator Instructions] And your first question comes from the like of Craig Shere from Calyon. Please proceed.

  • - Analyst

  • Hi. Couple of questions here. David, maybe you can help out. What should we think -- in terms of the 11.9 million tax reversal is that like one-fourth each quarter? How should we be thinking about the impact in this quarter, and can you quantify the impact of weather in terms of earnings per share this quarter?

  • - EVP, CFO

  • Let me answer the first one. The reversal of that valuation is spread out over the entire year, so you estimate your effective tax rate, and that's been applied. But remember that a significant portion of our earnings does occur during this first quarter. So as you might compare it to the guidance that we've given compared to what we've earned in the first quarter then that effective rate will still be used throughout the year.

  • - Analyst

  • So it's kind of a weighted average.

  • - EVP, CFO

  • Yes.

  • - Analyst

  • And the weather?

  • - EVP, CFO

  • Weather was impacted probably a little bit in each of the various divisions as there was some mention about Panhandle's interruptable service that does impact -- I think it impacted theirs about 2 million. Where we were hit probably the hardest was in Missouri where we had 89% of weather. We believe it probably hit us about $0.03 or $0.04 there. Our other LDC operations in Pennsylvania and in New England were at or slightly above normal this year.

  • - Analyst

  • Okay. And you all had a favorable, I guess court decision that might lead to improved terms for your Missouri rate case that you got. Any progress on that?

  • - President, COO

  • No conclusion has been reached as yet. It's still under reconsideration by the Missouri Public Service Commission and I think that they're weighing whether they appeal or not to preserve the record. But we fully expect that we'll continue to dialogue with them but Craig, I don't think we can give you an estimated date for completion yet.

  • - Analyst

  • Okay. Thank you.

  • Operator

  • Your next question comes from the line of Gordon Howald of Natexis. Please proceed.

  • - Analyst

  • Great, thank you. Hi guys. Rob, you and I talked about the anomaly at the Lake Charles LNG facility back in March when the utilization was very low, a lot of cargoes apparently were diverted back to Europe, I think specifically Spain. Were results at Trunkline in the first quarter negatively impacted by a lack of throughput? Maybe as a follow did you know is there any earnings variability at Trunkline or is all that capacity, including the capacity on the Phase II expansion effectively sold to BG under like a straight fixed variable type of rate making? Thanks.

  • - President, CEO Integrated Pipeline Operations

  • The simple answer is really no. Trunkline LNG and Trunkline Gas Company contracts with BG are straight fixed variable design. There is a certain percentage of the peaking that is available for IT shipments and incremental transportation. So to the extent that there is some utilization above the sustained level then does it create some incremental revenue, primarily downstream on Trunkline Gas Company. But in general the answer to your question is, no, it did not significantly impact the earnings at Trunkline LNG or Trunkline Gas Company.

  • - Analyst

  • Is that access capacity more of -- that IT potential more than 10%, less than 10%, just a range of approximations?

  • - President, CEO Integrated Pipeline Operations

  • Well currently the sustained send-out is 630 million a day and it can peak up to 1 bcf per day. So we were running well below the 630 during the first quarter of this year.

  • - Analyst

  • And the 630 is what's fully contracted?

  • - President, CEO Integrated Pipeline Operations

  • That's correct.

  • - Analyst

  • Got you, and for Phase II the same type of proportions?

  • - President, CEO Integrated Pipeline Operations

  • Yes, although as a percentage the peeking comes down some from -- when we go for Phase I we'll be at what is it Gary? We go to a bc -- or 1.2 with peaking of 1.3, and then when we get Phase II in we will have sustained of 1.8 bcf and peaking of 2.1.

  • - Analyst

  • All right. Very clear. Thank you very much.

  • - President, CEO Integrated Pipeline Operations

  • Thank you.

  • Operator

  • And your next question comes from the line of Mike Heim of A.G. Edwards. Please proceed.

  • - Analyst

  • Thanks, Rob, as we get toward the later stages of some of these LNG expansions can you just refresh our memory what the possibilities for further expansions are and when we really start to hit capacity maxing out?

  • - President, CEO Integrated Pipeline Operations

  • We're currently in discussions, Mike, with BG on a number of different projects at Trunkline LNG, a couple of which we consider to be infrastructure projects, those designed to enhance the existing facility then of course we're also talking to them about their needs for future expansion. I think there is a genuine interest there but I think it's a little bit premature at this stage for us to anticipate what the -- when that will occur and what the final form might be.

  • - Analyst

  • What is the ultimate bottle neck? At what point do -- is it land space? Is it other issues that really constrain things?

  • - President, CEO Integrated Pipeline Operations

  • At this time I think the projects are largely supply driven, so I think it's largely driven by BG's ability to either procure additional LNG upstream or to develop additional equity LNG. We certainly have the space at Lake Charles to continue to expand. We certainly have room for one more expansion on the current side -- on the north side of the Turning Basin where our facility is currently located. And then we've also secured a lease on the south side of the Turning Basin so there will be some additional room for other infrastructure type projects.

  • - Analyst

  • Dave, just want to confirm Advent's completely done here? They are in bankruptcy. We have no other guarantees on lines of credit I take it?

  • - EVP, CFO

  • No, Mike, we're all done with that. Everything is off the books. We have written off everything.

  • - Analyst

  • Is it PointServe completely off the books?

  • - EVP, CFO

  • I'm sorry?

  • - Analyst

  • Is PointServe completely off the books?

  • - EVP, CFO

  • No, we still have a small investment there of about 2.2 million, but it has that value.

  • - Analyst

  • Okay. All right. Thank you.

  • - EVP, CFO

  • Thanks.

  • Operator

  • And your next question comes from the line of Rebecca Followill of Howard Weil. Please proceed.

  • - Analyst

  • Good afternoon. Four questions for you. The first, on the synergies that you talked about when you closed the merger, can you walk us through the timing again to realize them and just the timing when you start to first realize them versus the timing that you feel like you have fully incorporated the assets and get the full benefit from them? Second, can you walk us through on the management fee when -- at what point of the year do you start to analyze that? Is that once a year? And so is it next year or at the end of this year when we start to see it? Third, could we get the average share count that's built -- diluted share count that's built into your guidance numbers? And then on the CrossCountry acquisition, can you talk a little bit about the seasonality of the earnings, how we should model that going forward? Thanks.

  • - President, COO

  • Thanks Becca. Rob and Gary why don't you handle the synergy question as it relates to the flow in of that 25 million and the state of play with respect to all of the execution on that and how comfortable we are that the 70% that we've told the market will actually fall in '05.

  • - President, CEO Integrated Pipeline Operations

  • Well, the plan is largely executed on the first 70%, roughly $17 million worth of synergistic value. The vast majority of that has been -- has already occurred. There a couple of steps left to occur but they are -- there's a plan in place that will happen during June, so I would say certainly by the end of the second quarter we will be -- have fully met our target for 2005 and then we'll continue to work on our 2006 plan to take us from the the 17 million up to the 25 million dollars of total synergistic value.

  • - Analyst

  • So we should see -- by the third quarter really start to see an impact on the numbers.

  • - EVP, CFO

  • Yes, and there's been some impact that's already been realized in the first quarter even.

  • - Analyst

  • Can you tell us how much?

  • - EVP, CFO

  • It would run -- it's probably something less than the 25% of the total because as Rob indicated some of the steps are -- benefit us more in the second half of the year, so, you know, something probably in the 15% of that full-year amount is probably recognized in the first quarter.

  • - Analyst

  • Okay.

  • - EVP, CFO

  • And that's, of course, split between -- there's some portion of it that is in Panhandle and a portion of it that is in CrossCountry.

  • - President, COO

  • Gary, would you also address Becca's question about the management fee and how we account for it, when do we start to accrue for it in CCE.

  • It's actually -- there's different rules for the recognition of the recording of the expense versus the recording of the receipt of the fee from the income perspective. So CrossCountry is analyzing whether or not it's on target with the projections that would generate a fee expense to CrossCountry, so there's a fee that -- that expense is recognized throughout the year. Cash-wise, though, it's paid out after the year-end, after the final determination of whether or not the targets have been achieved, and so the recognition of the income side of that to Southern Union would be -- is dependent upon where we end up for the full year and there wouldn't be any recognition until the fourth quarter.

  • - President, COO

  • Thanks Gary. For the third question the average share count, Rick, do you have that handy?

  • - VP, Treasurer

  • Yes, it depends on -- a number of things can move it -- options or exercises, its some where between 106, 107 million shares.

  • - President, COO

  • Okay. and then the fourth question that Becca asked relates to the seasonality of the earnings and income from CrossCountry. Rob do you want to give Becca a flavor of that?

  • This is Gary. We have -- the trends were probably slightly heavier weighted towards the middle two quarters on CrossCountry is the way our numbers are shaking out for the full year so we're probably slightly under 25% for the first and fourth quarters and slightly over for the second and third, but it's not --

  • - Analyst

  • It's not huge then.

  • Not talking about huge swings.

  • - Analyst

  • Okay.

  • - President, COO

  • Becca, I think I gave in the overview the fact we expect that we'll have much more linear earnings although not strain-line linear moving forward. A lot of the peaks and valleys will begin to be shaved off.

  • - Analyst

  • Great, thank you.

  • - President, COO

  • Thank you.

  • Operator

  • [Operator Instructions] And your next question is a follow up from the line of Craig Shere of Calyon. Please proceed.

  • - Analyst

  • As a follow-up to Becca's question, have you all disclosed what you management -- what the EBITDA earnings bogey is for you to receive your management incentive fee from the joint venture?

  • - President, COO

  • We've not disclosed that, Craig.

  • - Analyst

  • Would you be interested in doing that?

  • - President, COO

  • No, we wouldn't. We typically do not disclose specific budget figures and obviously that management fee will be triggered off the approved budget of the CCE, which we are not 100% owner of to begin with, but secondly we're just not inclined to begin to disclose specific budget figures beyond our earnings guidance.

  • - Analyst

  • Do you think that you're in a position where you have better than a 50/50 chance of getting some incentive fees?

  • - President, COO

  • To the extent that we continue to confirm earnings guidance you should assume that that's consistent with our budget.

  • - Analyst

  • So your stated guidance would be in line. If you exceed it, then you would be above budget, roughly.

  • - President, COO

  • I think that's a fair statement.

  • - Analyst

  • Okay. Thank you.

  • - President, COO

  • Right. Thank you.

  • Operator

  • [Operator Instructions] And at this time you have no further questions.

  • - Director of Investor Relations

  • Well, with that, I would like to thank everyone for joining us and hope you continue to pay attention to Southern Union as we navigate this wonderfully profitable business for you. Thank you very much.

  • Operator

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