Energy Transfer LP (ET) 2005 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third-quarter 2005 Southern Union Company earnings conference call. My name is Nika and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (OPERATOR INSTRUCTIONS) 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 conference, Mr. Jack Walsh, Director of Investor Relations. Please proceed, sir.

Thank you, Nika, and welcome to Southern Union's third-quarter 2005 investor call and webcast. Presenting on today's call will be George Lindemann, Chairman, President, and CEO; Julie Edwards, Senior Vice President and CFO; and Rob Bond, 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 pass code 274-57781. 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 today, you may request a copy by calling 800-321-7423 or you may obtain it through our website.

Today we will be discussing results for the third quarter ended September 30, 2005, (technical difficulty) events and outlooks. 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 1-800-321-7423.

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. 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 (technical difficulty) 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 today's earnings release. I will now turn the call over to Mr. George Lindemann. Mr. Lindemann?

Thank you very much and good afternoon. People asked me after the last call; they said, you sounded very stiff. The reason for that is I am scripted, because of all of the new laws and I am reading off a script. I would like to begin by first addressing an announcement yesterday that Tom Karam, our President and Chief Operating Officer since 2001, has decided to resign from the Company. Tom's vision has played an essential part in the growth and transformation of Southern Union since he joined us in '99. Tom and I have worked closely together over the past several years, and we have changed the strategic direction of the Company in an attempt to generate value for our shareholders. We wish him well as he focuses his future effort on other business ventures and devotes more time to his family and personal life.

We also look forward to maintaining our relationship with Tom as he will continue to advise the Company on business development and other strategic issues. I have assumed Tom's responsibility as President.

Next I would like to give you a brief overview of the quarter. We're very happy with the results of our transportation and distribution segments. The Company has increased EBIT by almost $42 million compared to the prior year. This quarter has shown across the board our business growth, as well as our continued growth in our investment in CrossCountry Energy.

Julie Edwards, our CFO, will give you specific details as to our financial performance and earnings and our guidance in a minute. Following Julie, Rob Bond, President of our pipeline operation, will give an overview of our current business as well as the many significant growth opportunities that we see in our future. Once Rob is done we will be happy to address any questions you might have.

Before handing the call over to Julie, I would like to discuss a vital topic that has been of interest to our investors over the last several months. We have been asked repeatedly about our current dividend policy and when we would switch to a cash dividend from our current stock dividend. Even though we have billions of dollars worth of projects that will materialize over the next several years, we feel comfortable that our recapitalization and our free cash flow projections will support a modest cash dividend. Therefore, we have recommended to the Board of Directors that we initiate a $0.32 annual cash dividend beginning in '06. The Board is currently reviewing our recommendation.

In light of the potential change in our dividend policy, the principal message we want to send to investors is the same. We continue to be a growth company and a growth story, even though we are a utility. As Rob Bond will tell you, we have many significant growth opportunities that continue to separate us from our peers.

Normally we would have a slide show going on at the same time, and they always forget the final slide in the show, which is in four years we have the GE buyout, which gives us 100% of Transwestern and 50% of the Citrus pipeline. So keep that in mind. Now I would like to hand the call over to Julie Edwards for a discussion of financial highlights of the quarter. Julie?

Thank you, George, and good afternoon, everybody. The Company earned $15.2 million or $0.13 per share on an EBIT basis -- on an EBIT of $61 million in the third quarter of 2005. EBIT as discussed includes the earnings from our unconsolidated investments. This compares favorably with a loss of 11.4 million on EBIT of 19.2 million in the third quarter last year.

In terms of the breakdown of these results, the transportation and storage business -- specifically the Panhandle, Trunkline, Trunkline LNG, and Sea Robin operations -- were up $7.8 million on an EBIT basis. This increase came from both the revenue and cost sides of the P&L, with increased reservation revenues of 6.7 million and decreased operating expenses of about 1.7 million. The majority of the decrease in cost is related to savings from the integration of the CrossCountry operations into the Panhandle organization.

To refresh everyone's memory, we expected total synergies of 25 million from the integration of these two pipeline systems, with roughly 17.5 million occurring in 2005 and another 7.5 in '06. These synergies will be shared across Panhandle and CrossCountry. We remain on target to deliver these synergies.

In addition to these improved results, you're seeing the continued impact of the late 2004 investment we made in CrossCountry Energy. In the quarter, our 50% interest in this business contributed approximately $22 million to Southern Union's EBIT, or $0.13 per share on a per share income basis. For the nine months, the impact of this investment has been approximately 57.4 million to pretax income. The performance of CrossCountry in the 10 months since we have invested in it is consistent with our expectation from that investment.

Our distribution business, which serves approximately 950,000 customers in Missouri, Pennsylvania, and New England, generated a loss before interest and taxes of 2.4 million in the quarter, compared to a loss of 17.6 million one year ago. So while we still incurred a loss in this segment, we turned in a substantial improvement of $15.2 million. Almost all of the improvement came from Missouri Gas, as the Pennsylvania and New England divisions were relatively flat year-over-year.

Missouri gas benefited from two items which might be viewed as nonrecurring or nonoperational in nature. These were a $5.4 million pension deferral, which was allowed by the October 2004 rate case in Missouri, and a decrease in property taxes, which aggregated 7.1 million. Roughly 5 million of each of these items is expected to recur; so the unique benefit to the quarter was about $7 million of sustained long-term value to the segment.

The LDC businesses also booked higher net operating revenues of 4.3 million, largely due to the new rates in place in Missouri since November of '04, while gas sales and transportation volumes remained relatively flat. In terms of degree days, the Missouri market is 5 percentage points behind last year through the nine months; while Pennsylvania and New England are approximately the same.

In order to complete the picture for you and identify another unusual item in the quarter, we took a charge related to the departures earlier in the period of two former executives, Jack Brenner (ph) and Dave Pawpul (ph). This charge totaled $3.8 million and overshadowed the ongoing reductions we're beginning to realize in the corporate activities of the Company.

Interest expense was up 2.6 million from a year ago, and is related to the debt financing of our investment in CrossCountry and a slightly higher LIBOR rate on our borrowing. Our current debt-to-cap, based on Southern Union's calculation, which gives equity credit to our preferred stock in the mandatory converts, is 50%. We're very comfortable with our current and projected capital structure; and as George has mentioned to you, we feel it is appropriate for our Board to reevaluate our dividend policy.

Our basic share count has increased to 111 million shares, with diluted shares outstanding increasing to 114.9 million. This increase stems primarily from the financing of our November 2004 investment in CrossCountry.

In terms of capital investment this year, we have invested 212 million through the nine months in our operations. Of this, 150 million was spent in the transportation and storage business, which included approximately 74 million on the expansions of the LNG facility. We expect to spend an additional 18 million on the LNG expansions through the end of the year, as well as an additional 24 million in 2006. Approximately 62 million has been invested so far this year in the distribution business. We expect our total CapEx level for '05 to be approximately 285 million.

The third quarter continued to benefit from a downward adjustment in our effective income tax rate to 29%. This was due to three factors which we spoke about last quarter. The planned reversal of $11.9 million deferred valuation allowance related to the CrossCountry Energy investment; the recognition of an 80% dividend received deduction on expected dividends from Citrus Corp. in 2005; and the benefit of the Medicare Part D tax free subsidy. For 2005, we expect the average tax rate to be about 29%, and going forward in 2006 and beyond approximately 35%.

At this point, we are comfortable tightening our expected 2005 earnings guidance to the range of $1.41 to $1.46 per share. This is consistent with our prior guidance. This outlook includes the estimated revenue loss and expenses related to the impact of Hurricanes Katrina and Rita, which caused modest damage to some of our facilities late in the third quarter. In total, we estimate that the revenue and expense impact of these hurricanes will be in the range of $0.06 to $0.10 per share.

Some of these impacts will be felt in '06, such as the late startups of the LNG facility expansions; and there are some uncertainties surrounding the timing of reconnection of select producers to the Sea Robin Pipeline. For 2006, we expect earnings per share to increase by approximately 10% over '05 to the range of $1.55 to $1.65 per share. I will now turn the call over to Rob Bond, President and Chief Operating Officer of our Integrated Pipeline Operations.

Thank you, Julie. Since our last conference call in August, we have had three major hurricanes in the Gulf of Mexico that have gone directly over portions of our facilities. So first I will give you a discussion on our operations; second, I will talk about the various expansion projects that we have ongoing; and finally I will conclude my remarks with an update on the integration of the companies.

There was no major damage to our systems for any of the hurricanes, Katrina, Rita, and most recently Wilma. However, Rita, because it was the furthest west, had the greatest impact on our Trunkline and Sea Robin offshore systems, as well as our Trunkline LNG terminal. As Julie discussed, we anticipate modest revenue expense and capital impacts from the hurricanes.

Anticipated expenses and capital costs primarily include the repair and replacement of equipment that was lost or damaged, and the potential abandonment costs for certain facilities that may be impacted by producer decisions about whether to rebuild their platforms and reconnect their gas to Sea Robin's system. Until these decisions are made, there will continue to be reduced flow in the Sea Robin system.

In addition, the onshore gas processing, dehydration, and liquid separation facilities have received water damage from the flooding during the hurricane, and some are not yet operational. This also has reduced the amount of available gas for our system. The liquid separation facilities came back on in mid-October, and we anticipate a dehydration facility to be returned to service within the week. So while gas flow in our system has been increasing, there are still some restrictions because of the lack of processing.

There was no major damage to the Trunkline LNG terminal in Lake Charles. In fact the Lake Charles terminal resumed send-out within a week of Hurricane Rita, and the ship channel was reopened to vessel traffic within 10 days, allowing cargoes to arrive at the terminal. However, some delays in the completion of Trunkline LNG's Phase I and Phase II expansions are expected as a result of the hurricane.

Based on the ongoing discussions with the contractor for the expansion projects, we estimate a range of the potential delay to be from five to eight weeks. But as I said, those discussions are ongoing. We will let you know as we learn more about the timing of those delays.

As you know, the expansions are designed to triple the current send-out of the capacity of the terminal to 1.8 Bcf per day, with a peak day send-out of 2.1 Bcf per day. Phase I was scheduled to go into service by the end of year, and Phase II was scheduled to be in service by the middle of the year. We are also evaluating further improvements of the LNG terminal that will make the operation more efficient and beneficial to our customer.

We continue to move forward with the expansion of Trunkline Gas's system out of East Texas and into Louisiana. There is an enormous amount of gas being produced in Texas that needs to move Eastward, as indicated by our open season earlier this year. In fact, the open season and the subsequent negotiations showed that there was more interest than we initially anticipated; and so we are evaluating whether there is a need for even more capacity than we originally planned. We will continue to work with our potential customers to negotiate contracts and are beginning to prepare our FERC prefiling.

In early October Florida Gas filed with the FERC for a Phase VI expansion. This project will add up to 160 million a day of additional capacity from El Paso's proposed Cypress project near Jacksonville, Florida, and deliver it into the Orlando area. We plan to build approximately 30 miles of pipeline looping in several segments and to install additional compression. We expect this project to be online in the second quarter of 2007.

Transwestern Pipeline is continuing its negotiations with customers to construct a new lateral off of our mainline into the Phoenix market. Phoenix is one of the fastest-growing cities in the country, and this project would add another 500 million a day of capacity into the area. The project would include building approximately 260 miles of pipeline along with an additional expansion of Transwestern's San Juan lateral. We have our right of ways and are working with landowners now to survey property for the route. We hope to file with FERC and begin a prefiling review of the project very soon, with a targeted in-service of early 2008.

Lastly, let me comment on the integration of Panhandle and CrossCountry's operations. They're going very, very smoothly. The buildout of our office space is scheduled to be complete by the end of the year. In fact, some of our corporate employees that are located here in Houston are scheduled to move into their space this weekend. The information technology system migration project, that we have talked about earlier, is continuing to move forward on time and on budget, as everyone moves on to common systems and a common desktop platform.

Next week will mark the one-year anniversary of the acquisition of CrossCountry, and I am very, very pleased with the way the integration has progressed and how far we have come. We have some very, very good people and we have some great projects that are in the works that will ensure Panhandle's continued success as a leading energy provider. With that I will turn it back over to George Lindemann.

We are now open for questions, so if anyone has one, please.

(OPERATOR INSTRUCTIONS) Sam Brothwell of Wachovia Securities.

A couple of quick questions. George, in terms of your recommendation to the Board on the dividend, I assume that if that were adopted that would eliminate the current stock dividend. Is that correct?

That is correct. It will break the hearts of many investors, but that is what we're going to do.

Can you share with us the recommended timing on that?

It will be in next year, starting the quarter ending March.

Okay. Rob, you mentioned the expansion of the pipeline in Arizona. Are you guys running into any of issues with the Navajo Nation that El Paso is?

You know, our right-of-way is not up for renewal, as is El Paso's. Our most recent negotiation with the Navajos was over the expansion of the San Juan lateral that went in service in May. So we continue to discuss and have ongoing dialogue with the Nation; but we're not in the same position that El Paso is.

When would that be up for renewal?

Late 2009, if memory serves me correct.

Okay, thank you very much.

David Schanzer of Janney Montgomery Scott.

Congratulations on a good quarter, and one vote of confidence for the cash dividend. Actually my question does deal with that. Would it be safe to say that should the Board approve this dividend that, going forward, dividend policy would be predicated on some sort of payout ratio of the regulated LDC businesses?

I don't think we're going to tie the dividend payment to anything special. As more funds become available, we will certainly look to increase the cash dividend.

Okay, but it wouldn't be tied necessarily to the LDC businesses?

No.

Thank you.

Mike Heim of A.G. Edwards.

Rob, could you add a little bit more color on the comments that the legacy pipeline revenues were up because of higher rates and higher capacity? Is this recontracting longer-term stuff, or more shorter-term the weather helped you out type of a situation?

I think it's been predominantly due to the success that we have had on Panhandle Eastern system out of the midcontinent. We're seeing both the tenor of those agreements and the rates in those agreements go up, as the market from the midcontinent to the Midwest (multiple speakers) has expanded.

Are you seeing the length of contracts getting longer?

Yes, we are. In fact, I think most of our contracts are now in the five-plus year range, where historically we probably ran more three to five.

Okay. Maybe a couple management questions. Mr. Lindemann, is it your intent to act as CEO on a more permanent basis? Or is this just a (multiple speakers) basis? Also are you still looking for a Senior VP of utility operations?

We have a Senior VP of utility operations in place now, Mike German. We have a, I think, a great team down in Houston now, consisting of four people. Two of them are on the phone; and the head of our legal department, who is not on the phone; and the head of our engineering department, Gerald Mullens, (ph) who I don't think is on the phone either. But we have a very strong management team, so I think we're in very good shape.

Okay, thank you.

Lance Itis (ph) of Clayon (ph).

Another vote of confidence on the cash dividend. But also, my sort of a follow-up to that question about the management term. You have had some turnover in management recently. I am just wondering if you think there is a cause of that. Maybe just because the sector is sort of hot, that people are recruiting aggressively. Or maybe you guys are even thought of as a good place to recruit from, because you're obviously, I think, a very well-run utility. But just if you could collaborate on that.

I think if I use Tom, of course he had family problems of aging parents on both sides. And of course that our operations have now moved to Houston, required him to be excessively away from home. In other cases, you had a Company that grew at a phenomenal rate; and in some cases, guys who did an excellent job at a smaller company could not perform at a larger company. That doesn't mean they are not competent people. It just means that the scope of work became too big for them to handle.

I think that happens in many companies, and most companies don't grow as fast as we grew. So I think that is a large reason why we have had the management turnover we had. We went out and got people who are used to running big company operations and are comfortable doing it.

Okay, thank you.

Peter Monaco of Tudor Investment Corporation.

Apologies if you addressed this, since I joined the call late. Could you just remind what budgeted annual maintenance CapEx is across the complex of assets? And then color in what the latest updated forecast of growth spend is over the next couple of years.

Julie, do you want to take that one?

Certainly. Our 2006 budget is in its preliminary stage and has not been formally approved by the Board. So these numbers are preliminary. But based on where we are, it looks like the maintenance CapEx for the LDCs in aggregate will be in the range of about 65 million; and for the transportation segment in the range of about 120 million. That is net to our interest, in other words, 50% on Transwestern and a quarter on Citrus.

In addition, and Rob talked about the projects, we do obviously have for the next two years a pretty healthy spend rate, because we do have so many great opportunities in front of us. All in, and these numbers will move around about, though, we could be somewhere on an approved project basis in the order of about $200 million of project spend in '06. Then going forward to '07, it probably will be more, because the Phoenix expansion is expected to have most of its expenditures in '07. So in that year the number could be as high as 400 million.

Excuse my ignorance, Julie, could you just roughly break out the 200 and 400 between your equity commitment and what would be debt financed?

At this point, I really can't do that, Peter, because the timetable of the expenditures on these really needs to be mapped out as we look at it. But generally, you have identified, there will be the need to do some debt financing.

Obviously we will keep the capital ratios in line with what I'll call our comfort zone, which is currently we're at the 50% rate, and we feel pretty good there. So I think it is reasonable to look at something in that ballpark or lighter, in terms of the additional debt financing on the projects.

Thanks a lot.

Anatol Feygin of Banc of America Securities.

Julie, can I bother you for kind of your initial thoughts on refinancing the debt that you guys have maturing over the next three years or so? It is roughly $1 billion. Some of it is relatively low-cost paper. Kind of how do you think about that, especially in the context of these expansion opportunities that you have at the various subsidiaries?

I'm going to start that, and then I'm actually going to turn this question over to our true expert on this, who is our Treasurer, Rick Marshall, who is here in Houston with me today. But the short answer is, the bank deals that we have, you probably noticed in September we refinanced the SUG bank facility; and basically that was to take advantage of improving market rates from the bank lenders.

We also are considering and evaluating some of our other bank lines. I think it's reasonable to expect that we will refinance those down, simply to take advantage of a good market, better rates, probably some better terms. So the bank debt, clearly we are going through looking at working with our existing bank group to come up with some better deals for our shareholders.

As it relates to some of the longer-term capital, I'm going to ask Rick to talk a little bit, because we do have some interesting opportunities next year that's probably what you're thinking about. So Rick, if you want to address Anatol's question, please.

Anatol, most of the refinancing that is due over the next couple of years, other than the Senior Notes that were part of the equity units that are due in 2006, which aggregate $125 million, are going to be done at the Panhandle Energy level. At this point we have not made a determination what the tenor is going to be with respect to those refinancings.

But in March of 2007, we have got a couple hundred million coming due at Panhandle Energy, and about $255 million of a bank term loan that currently exists at the -- not exactly the Panhandle Energy level, but at the Trunkline LNG level.

At this point, we have not made a definitive determination as to how long we're going to go out with those refinancings. I expect that we will see, based on today's rates and where we are today, I would expect that we would go out a little longer than we had historically.

So at this point, no desire to project finance any of the -- either the LNG terminal -- at the LNG terminal level or at the pipeline, for some of the expansions?

We will take a look at it, but I don't think that that is our first preference.

Okay, thanks, everyone.

John Troxel (ph), Southern Union.

Future expansion plans and earnings contribution of LNG.

As we talked about a little bit, we do have some plans for some near-term capital projects that are designed to make the existing facility much more efficient. Then there is also some gas conditioning at the LNG terminal that is being considered.

We have, I think, on previous calls said that we have designed all of our existing facilities and will continue to design new facilities to ensure that we have room for a Phase III project. We have discussed that with our customer, and while we think that a Phase III project will ultimately happen, we don't believe that it is likely that we are going to likely announce that in the next year or so. Our expectation is that perhaps that is something that gets built towards the end of the decade.

Okay, thank you.

Andrea Feinstein (ph) of Southern Union.

Just a couple of questions, please. Can you provide a little bit more detail in terms of what your expectations are for delaying the LNG facility? Could you also provide us a little bit more color in terms of today's announcement or last night's announcement on the departure of the COO?

First, the second part of the question I think we answered; and the first part I am not sure what the question is.

When are you expecting the facility to actually resume its prior schedule? And what is your current completion, the expectation given the delays that you have noted thus far?

As far as answering the second question, just any other detail that you could provide at this point to give a clear picture as to the decision that drove his departure would be helpful.

I will take the first part of that. On the delay, clearly we had a force majeure event that impacted our contractor at Phase I and Phase II. We have worked diligently with our contractor over the last three or four weeks to get a schedule together that we believe is good for both of us.

I think what we have announced is that is going to impact the schedule from five to eight weeks, I believe. These are expectations; we're still negotiating with our contractor. But we believe that it will be somewhere in the eight-week range for Phase I and somewhere in the five-week range for Phase II.

To the extent that those expectations get firmed up or look to change from current expectations, are you going to clarify that with the Street or put out any kind of revised timeline once that has been determined more firmly?

Certainly if it is materially different than what we have announced on this call, we certainly would do so.

Okay, great. And on the second, any incremental information you can give us on his departure or on his continued relationship with the Company going forward?

Tom will continue to consult with us for two years. And the balance (ph) I think are rather personal reasons of his own.

Okay, thank you very much for your help.

Greg Schultz (ph) of SAB Capital.

I was pretty pleased with the transport segment. I wanted to get a feel for what you think, given the renewal rates you're seeing and sort of the volume growth, putting aside any expansion projects, what do you think sort of the organic systemic growth on Panhandle is over a two to four-year period?

That is a little bit tough to speculate on. The contracts renew -- there is a certain percentage of your portfolio that comes up for renewal each year, but certainly not your entire portfolio. So while we have -- even if the market rate were to expand some more, it would only be a percentage of that that you were able to renew in the subsequent year.

But I feel generally good about the position that Panhandle is in. I feel very good about where Trunkline is, given that it is positioned along the Gulf Coast to take advantage of the increasing production that we see coming out of Texas, as well as the access that it will have to the new LNG facilities that are being constructed along the Gulf Coast. I think positions it very, very well for the future.

Florida Gas is basically fully contracted for long-term; so there is really not a lot of upside for FGT. In fact, we need to continue to build or to layer on capital projects to basically cover the growth that continues to occur in the state of Florida.

Then Transwestern I think is also positioned well for the continued development of Rocky Mountain production. Much of that in the southern Rockies, the Piceance Basin, etc., as that gas pushes down into what we traditionally call the San Juan Basin and accesses Transwestern's system, I believe that that will present opportunities for Transwestern to grow, whether that is delivering that gas back to the East and to the Texas intrastate market; or whether that is more traditional West flows into California at our Needles point.

So I like the position of the pipeline, and I like the diversity that the various basins that we access on one or more of the pipelines gives us in order to -- so that if there are opportunities, we will have assets in that area to help or to try to exploit that opportunity.

Just one follow-up on something that was asked before. I think, Julie, you had talked about 200 million project spend next year above your sort of maintenance level. I know I guess 80 of that is going to be the Texas Trunkline. What are the other pieces? Sort of ballpark.

Let me get my schedule back out and I will talk to you about it. The biggest single piece, actually, as I look forward in the capital projects is the PEPL piece. That is really more than half of it. Slightly more than half.

What is that?

I am sorry, the infrastructure enhancement project we call it, which is basically the IEP work.

That is the project that we were discussing, enhancing the facility at Lake Charles to make the terminal more efficient.

Okay.

Then you've got another piece on the East end enhancement you were just talking about. Then there are some carryover pieces. Obviously, the LNG expansions. So those are sort of the major components of approved projects for '06.

Are you -- the infrastructure enhancement, is that the -- do you get a return on that, or is that just part of your BG?

No, that will be something that we would need to agree with BG on prior to announcing our filing for.

Thanks.

Casey Alexander of Gilford Securities.

The LNG plant, how is it running now, sort of in terms of what type of traffic is BG putting into the plant at this point in time?

I think we have eight cargoes scheduled for November, and then maybe as many as 10 scheduled for December. That is always subject to change, but that is the current forecast. As BG's operations in Egypt have come on line, we expect the terminal to be much more highly utilized than it was in 2005.

What is the monthly cargo capacity of the terminal?

10 to 12 cargoes per month would be the current capacity.

That would be the most it could take?

Right, there are about -- most cargoes you can say average about 3 Bcf; somewhere between 2.8 and 3.1 Bcf per ship.

Okay, all right. Just to be contrary, I will throw in my lament of the loss of the stock dividend. Thanks very much.

Casey, thank you; but you're not the only one who laments it.

I am sure I am not.

Nick O'Grady (ph) of Sandhill (ph) Asset Management.

Sorry to keep beating on this CapEx again. You're talking maybe net 385 million budget next year, and then that's going up to I guess 585 over the next couple years. Is that right? Is that the right way to think about it?

Except that I would not say next couple years; '07 is a very, very heavy spend year, and then it should come back down in 2008.

Got it. But just to make sure I am understanding this right, that 200 million, I just didn't know about the IAP. So that is also technically rate baseable with BG; so you would earn whatever your typical ROE is on that as well?

Subject to the final negotiation with BG; but yes, your expectation is correct.

Okay. Thanks so much. And I like the dividend.

Ben Segal of Winchester Capital.

You have done a great job transforming the Company. The question I have for you is, going forward, what kind of opportunities are you looking from an investment point of view?

We look at every conceivable acquisition that can make any sense to us. We don't close our eyes to anything. We're always available. When they come along we will evaluate them quickly, and I think we as a Company can move faster than any company in the industry,

Okay, thank you.

Scott Pearl of Seneca Capital.

George, I think you know our feelings on the dividend. I guess a question for you guys, with high gas prices heading into the winter, how you see liquidity shaping up for that?

I didn't know your opinion on the dividend. Do you want to state it one more time?

For everyone to hear.

I would rather not.

Okay.

The question really of what happens with bad debt and liquidity in LDCs, in this high natural gas price market, we are in relatively good position. It obviously will be a hardship on every consumer, probably most of us in this room and on the call, in terms of expectations of price increases.

Fortunately, in Missouri, for example, because we have hedged a lot of the gas and have been able to buy it from low-cost basins, we expect our increase to be only about 27%. So while that kind of is still a big number, in the grand scheme of things it is not huge.

In New England, we have a tracker that allows us to automatically collect increases in bad debt. In PG Energy, forward purchases and storage have also allowed us to forecast an increase in the high 20% range.

So I think that customers in our markets probably won't be as adversely impacted as in other markets. That being said, we have slightly increased our bad debt expectations as we planned our budget for 2006.

In terms of liquidity, because we recently did redo the SUG revolver, the parent revolver, which actually includes the LDCs as part of the same operating business, we have got plenty of liquidity. So we don't foresee any issues regarding in that matter for us at all.

So within your guidance of 10% growth, you have factored in any movement around in the bad debt.

That we have.

Thank you.

(multiple speakers) also factored in slightly higher borrowings to take care of the additional working capital outlays that we experience in a high commodity price market.

Great, thank you.

(OPERATOR INSTRUCTIONS) At this time I'm showing no further questions.

I just want to thank everyone for attending, and I hope we have been able to answer all the questions. As you heard, the dividend question is still up in the air, but we will still do the $0.32. Thank you all for attending.

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

Thank you.

You're welcome, ma'am.