安特吉 (ETR) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Entergy Corporation second quarter 2009 earnings conference call. One note that today's call is being recorded.

At this time for opening remarks and introductions I would like to turn the conference over to Ms. Michelle Lopiccolo of Investor Relations. Please go ahead.

Good morning and thank you for joining us. We'll begin this morning with comments from our Chairman and CEO Wayne Leonard and then, Leo Denault, our CFO will review results In an effort to accommodate everyone with questions this morning we request that each person ask no more than two questions. After the Q&A session I will close with the applicable legal statements. Wayne?

Good morning. Actually I'm not sure why I say that. It's just out of habit. I'm looking at the screen that shows the current stock price and it's starting out to be anything but a good morning at least for us. Hopefully we can address any issues of concerns in our comments and in your questions to follow. I'm begin with the review of regulatory developments at the utility says since our last update.

Starting with storm recovery for hurricanes Gustav and Ike Entergy Texas was encouraged at the end of last week it reached an agreement in principle that should resolve all issues in storm cost recovery case through an unopposed settlement. The parties expect to finalize and file the agreement this week which should permit the PUCT to vote on the settlement the following week. In its case Entergy Texas requested the PUCT to determine the $577.5 million in system restoration costs are reasonable and necessary and that this amount plus carrying costs is eligible for recovery through securitization. Assuming the settlement agreement is finalized and adopted by the PUCT in considering the provisions of the agreement including the timing of the securitization, collection of insurance proceeds and other offsets Entergy Texas anticipates recording an increase in nonfuel O&M expense not to exceed $0.02 per share. While the agreement in principle had no finding of improvements that would be the net costs of settlement versus our litigation position.

In addition, ETI initiated the financing order request in mid-July seeking authority to issue 627.8 million of transition bonds in November which includes 50.3 million of carrying costs plus an incremental amount to cover the cost to execute the related financings. Recalled that the 2006 registration pertaining to hurricane Rita did not require the inclusion of carrying costs whereas the legislation enacted in 2009 does require inclusion of carrying costs that the utilities weighted average cost of capital last approved by the PUCT.

Pursuant to the evergreen legislation passed earlier this spring the PUCT must issue a financing order by October 14, a date targeted to be accelerated by three weeks under the agreement in principle. In Louisiana a joint storm filing was made in May. The filing seeks recovery of $241.9 million for Entergy Gulf States, Louisiana and $392.3 million for Entergy, Louisiana. After considering interim financing from storm reserves and projected carrying costs the net retail request is $412.6 million for both companies. In addition, both companies are seeking to replenish storm reserves in the amounts of $90 million for Entergy Gulf states Louisiana and $200 million for Entergy Louisiana. Pursuant to the procedural schedule established in July the companies plan to submit a supplemental filing around the middle of August recommending a method of cost recovery.

Taken in total the requested net cash requests for both Louisiana companies is just over $700 million including storm damage, costs recovery, carrying costs and storm reserve replenishment. Options under consideration spread the cost impact on customers over several years through either traditional based rate recovery or securitization with two securitization methods available. The first securitization method is pursuant to act 64 where the utility issues the bonds. Second is pursuant to act 55, the alternative and most economic method successfully used for securitizing costs following hurricanes Katrina and Rita. Under this alternative method the state issues the bonds. The procedural schedule calls for hearings in March 2010.

In other regulatory updates the LPSC unanimously accepted Entergy Louisiana's recommendations and issued an order finding the Company's decision to place the Little Gypsy project in long term suspension of three years or more was in the public's interest and prudent without prejudice to issues including timing of the decision, project management, cost recovery and whether the projects should be canceled or abandoned as opposed to merely suspended. The quarterly monitoring plan was also indefinitely suspended. Instead Entergy Louisiana is working cooperatively with the LPSC staff keeping them informed about suspending the project and terminating current projects related to the project. On or before September 1, Entergy Louisiana will either file an application setting forth the project costs eligible for recovery or alternatively will file a report on the status of efforts to terminate the project in an orderly way to be followed later by a cost recovery application. The estimated costs at this time approximate $300 million.

On or before December 15, 2011, Entergy Louisiana will report the LPSC and staff whether or not it intends to reinitiate the project including a detailed discussion of the basis for that decision. In Texas long sought clarity was obtained regarding the state requirement that Entergy Texas move to competitive framework for retail customers. Consistent with legislation enacted in June mandating that Entergy Texas cease all activities related to transition to competition and withdraw its plan on file with the Public Utility Commission of Texas on June 30, Entergy Texas filed a petition requesting dismissal of its TTC plan. On July 30, 2009, the PUCT dismissed the TTC proceeding without prejudice to refile.

Entergy Texas can now move forward implementing generation in transmission plans to meet its customers' needs knowing it will not become part of the Electric Reliability Council of Texas. While estimates varied incremental capital costs interconnect to ERCOT ranged from around $500 million to $1 billion. Regarding other rate proceedings, Entergy Mississippi obtained the needed $14.5 million rate increase as part of the settlement with the MPSC in its only rate plan filing. In turn Entergy Mississippi dismissed the Mississippi Supreme Court appeal of the 2007 FRP filing.

In addition, the MPSC issued an order authorizing an audit of Entergy Missouri steel adjustment clause by an independent audit firm. Entergy Mississippi was also pleased to receive the Governor's Cup award in a large business category for its work in its communities. Mississippi Governor, Barber stated Entergy Mississippi represents the finest in corporate citizenship and demonstrates an unwaivering commitment to improving the quality of life for citizens across the state. Entergy Mississippi was nominated by the Heinz county economic development district.

In Arkansas on July 2, Entergy Arkansas filed a notification with the APFC that it intends to file an application for a general change in rates, charges and tariffs within 60 to 90 days. In Louisiana Entergy Gulf States Louisiana and Entergy Louisiana continue to work with the LPSC staff to renew formula rate plans and resolve outstanding issues. The companies were encouraged that they were able to reach an interim rate agreement approved by the LPSC while continuing to work through the remaining issues. The parties will report back to the LPSC in September on the status of negotiations. Under the interim agreement current base rates will remain in place but the LPSC approved capacity cost adjustments. At Entergy Gulf States Louisiana the net increase in capacity costs of $5 million annually will be deferred for future recovery. At Entergy Louisiana the net decrease in capacity costs of $17 million annually will be used to increase the storm reserve accrual.

In addition, Entergy Gulf States Louisiana and Entergy Louisiana will implement a new environmental adjustment clause effective for the August billing cycle. This rider was created by the LPSC to reflect recovery of costs necessary to comply with the clean air interstate rule and demonstrates continued constructive regulations by the commission. Finally, in New Orleans pursuant to its comprehensive rate settlement on July 2, Entergy New Orleans filed the energy smart plan proposal that included progressive energy efficiency and site management programs. The energy smart plan is the result of a comprehensive and ongoing process among the Company, the counsel and various other community stakeholders that considered a complex set of energy efficiency issues. The program commits $3.1 million annually to provide incentives to residential and business customers for energy efficiency and conservation efforts.

Entergy New Orleans has projected that up to 7,300 participants could benefit from energy smart incentives annually. The New Orleans City Council expected to vote on this proposal in September. At Entergy nuclear employees earned 2 of the 14 top industry practice awards given out annually by the Nuclear Energy institute. Since the program's inception Entergy Nuclear has been honored with 17 top industry awards. Regarding license renewal, Vermont Yankee took another step forward when the Nuclear Regulatory Commission issued its supplemental safety evaluation for license renewal. Additional confirmatory analysis determined Vermont Yankee met all applicable requirements. In addition, the Atomic Safety Licensing Board rejected the last remaining contention associated with the confirmatory analysis and terminated its proceedings in July.

The New England coalition who had initiated the contention has since appealed directly to the NFC to overturn the ASLB. While NRC license renewal is still possible around year-end the latest appeal could delay renewal into next year. At the Pilgrim Plant the NRC continues its review of the Pilgrim Watch appeal. Last November Pilgrim Watch filed an appeal with the NRC regarding the ASLB ruling in favor of Pilgrim on the contention related to the adequacy of the Barry Pipe AD management program. The NRC requested additional legal briefings which have been filed and license renewal is anticipated before the end of the year. The end point license renewal process also continues. In its comprehensive reliability plan published May 19, 2009, the New York ISO underscored the importance of Indian point to its generating supply in New York.

The ISO's plan noted that unexpected retirement of either Indian point 2 or 3 at license expiration would cause an immediate violation of the reliability standard in 2014, retirement of both units would cause a severe shortage in resources needed to maintain bulk power system reliability resulting in the probability of an involuntary load interruption by 2018 that is approximately 40 times higher than the reliability standard requires. In order to mitigate those retirements approximately 1,000 megawatts of capacity would need to be installed in zone G through K for each retired unit. This finding is consistent with the previous decision by the New York Public Service Commission that they needed a limited review of the proposed spinoff transaction and associated financing given the critical nature of Indian point.

Since December parties to the proceeding engaged in settlement discussions with consideration to changing markets and specific concerns to the party's further enhancements would develop for the reorganization proposal. While Entergy viewed the settlement discussions as productive, ultimately Entergy concluded it was necessary to formally request a schedule and process for bringing the review to a conclusion. On July 13, Entergy proposed to file an amended petition reflecting the enhancements put forth in the settlement discussions for the New York Public Service Commission's consideration. Broadly speaking, the amendments are intended to further enhance the financial flexibility and strength of Enexus while at the same time preserving the Company's legitimate business reasons for pursuing a spinoff.

While Entergy believes the initially proposed terms were more than adequate to meet the standards established for regulatory approval, nonetheless in an effort to move the process along and eliminate any reasonable basis for concern, financial enhancements have been added to the plan. The enhanced structure Enexus reduces long term bonds by $1 billion. Added in incremental adds -- incremental cash on hand of $500 million and requires a minimum ongoing liquidity level of $350 million. Facilitating these enhancements while preserving Entergy's financial objectives includes a modification of the proposed tax free exchange process.

We always communicated the potential for structuring transactions something other than a straight spin depending on what made the most sense at the time. Instead of a straight spin Entergy now proposes a partial spinoff -- partial splitoff transaction. Approximately 80% of the Enexus shares will be distributed to Entergy shareholders at the time of the spinoff and the balance will be placed in a trust for the benefit of Entergy and its shareholders for a fixed period of time. During the course of that time period Entergy expects to exchange the remaining Enexus holdings in a tax free exchange for Entergy shares. Enexus shares not ultimately exchanged, if any, will be distributed to all Entergy shareholders in the same manner the previous shares were upon the spin. Consistent with the extended time to consider the transaction and the enhanced terms of the plan, the Company believes it is very reasonable to request procedures and a schedule to enable the report of the presiding administrative law judges to be issued in time for the Public Service Commission to issue a final order no later than its regularly scheduled November meeting so that the proposed reorganization can be accomplished by the end of the year. This schedule also aligns with the extension obtained from the NRC for six additional months to execute the spinoff before having to refile for approval. And with excess on financial markets in increasingly attractive terms certainly compared to what we've seen since last fall.

Consistent with their constructive past practice of confining the case to the relevant issues and moving the process forward in an orderly manner as directed by the New York Public Service Commission the ALJs issued a ruling on July 29, noting the extended time it has been allowed and the substantial effort by the Company to comply with discovery and comments during this period. The ALJ's indicated that they will determine the schedule and procedures after the Company files the amended petition making it clear to everyone what has been changed, added or deleted and what exactly remains compared to the original filing. Essentially asking for a redline version to avoid any confusion and expedite the review. The Company expects to make this filing around August 10.

While the spinoff has clearly taken longer than initially anticipated in large part as a result of the tumultuous financial market conditions experienced last fall as well as a longer regulatory approval process than originally expected both the Board and the management team remain committed to pursuing this initiative as in the best interest of our stakeholders. The value proposition remains and in some instances it is even stronger or more clear today given events transpiring since last fall. At the same time as you all understand, as shareholders you still own the nonutility nuclear plants and the underlying value continues to accrue to you. As you know, we have reduced our earnings guidance for 2009.

In my 11 years as CEO at Entergy we've always set aggressive but achievable targets. This is the first time we have reduced financial guidance for operating performance. You may recall that we refined guidance in 2004 when we announced the sale of Entergy-Koch trading and we suspended guidance in 2005 after hurricane Katrina entirely changed the landscape. I guess I should say it literally changed the landscape but except for that year and that event we have never missed bottom line Entergy annual operating earnings targets. Given gas trends and nuclear trust impairments despite our best efforts to make up the shortfall in some other ways the reality is we can't get there and not put our operations at risk. That is our customers or our assets. We acknowledged that in lowering guidance for 2009 and I assure you it was not a good day for any of us.

We've taken great pride in meeting our goals over the years and missing both -- missing the targets for both 2009 earnings and the timing and closing the spinoff has been very disappointing to say the least. All I can say is we are committed to getting back on track and achieving our aspirations. Now let me turn the call over to Leo. Leo?

Thank you, Wayne. Good morning, everyone. In my remarks today I will cover quarterly results and our cash flow performance followed by a revised 2009 earnings guidance and outlook for the rest of the year. I will close with some thoughts on long term value opportunities for both Entergy and Enexus.

Starting with our financial results for the quarter on slide two, second quarter earnings decreased compared to a year ago driven by lower results at Entergy nuclear. However, I would like to point out that through the first half of 2009 we would be close to our original earnings expectations but for the two factories Wayne mentioned of Entergy nuclear, a sustained decrease in market value on certain decommissioning trust investments and significantly lower realized power prices in our own unsold position versus the forward prices at the end of 2008. To date our efforts to find positive offsets have not overcome the magnitude of these two developments. That said we continue to pursue accretive opportunities to mitigate these effects over the rest of the year.

The lower as reported results at Entergy nuclear in the second quarter 2009 were partially offset by higher as recorded earnings at utility, trend and other in the non-nuclear wholesale assets business. As reported earnings include two special items related to our rolling revenues position for the spinoff. Third-party expenses incurred in both periods at utility, parent and others to execute the spinoff transaction and incremental dissynergies reflected in the Entergy nuclear segment results in 2009. Both of these items are excluded from operational results.

Slide three presents the facts that drove the quarter on quarter results. Utility, parent and others modest operational earnings decline was primarily the result of lower net revenue and higher expenses that offset the benefit of lower income taxes during the quarter. The decrease in income taxes is consistent with our previously stated expectations for overall 2009 effective tax rate of approximately 37% versus the 38.4% statutory rate. Utility net revenue was down in the second quarter of 2009 primarily due to a regulatory charge. The May third quarter resulted in trapped costs as a result of inconsistent state commission allocations of the 2007 rough production cost equalization payment between the former Texas and Louisiana jurisdictions of Entergy Gulf States.

Weather was not a significant driver versus second quarter 2008 after considering both billed and unbilled sales periods. Sales volume statistics and the weather impacts on EPS reflect near normal weather build through much of the quarter quarter as opposed to warmer than normal weather last year. However, the second half of June saw some of the highest daily average temperatures throughout our service territory in 10 years. This warm weather at quarter end was primarily reflected in unbilled sales.

On weather adjusted basis the weak economy continues to affect utility sales most notably in the industrial segment. As we mentioned last quarter, facility and demand charges paid by industrial customers that do not vary with volume tempered the revenue effect of the reduced sales. These fixed charges were approximately 50% of industrial gross margin during the second quarter. The biggest and lasting impact occurs when customers go out of business. While we took write-offs for two large customer bankruptcies in the quarter, both customers continue to operate. In addition, we're starting to see some positive trends for the hardest hit industrial sectors of chemicals, refineries and primary metals and despite some delays the prime industrial expansions for this year remain on track. However, recovery will depend in large part on how the economy fares for the rest of the year and beyond.

Turning to Entergy nuclear quarterly results were below the prior year due primarily to lower revenue from additional planned and unplanned outages and a significant impairment recorded on certain decommissioning trust fund investments. Again this quarter the decline in production stemmed largely from the front end loaded refueling outage scheduled this year. Refueling outage days at three plants resulted in an additional 59 outage days over the one refueling outage we had in the second quarter of 2008. Lower revenue was partially offset by a reduction in operation and maintenance expense as costs were deferred for resources supporting the fueling activities. The next refueling outages for the nonutility nuclear fleet are planned for the spring of 2010, a year in which we have four nuclear units scheduled for refueling versus three in 2009.

Decommissioning trust fund impairments recorded this quarter were significantly higher than impairments recorded in the second quarter of 2008 results. Accounting rules require that unrealized losses sustained over a period of time must be recognized as an other than temporary impairment. Specifically the rules called for an assessment of possible impairment each quarter. Looking at each individual decommissioning fund and within each fund assessing the market value of each investment versus its historical cost basis. While broad market indices have rebounded strongly since the early March lows those recoveries have not made up for the loss in market value against the historical cost of the investment. This loss was created by market conditions in 2008 and early part of 2009. Finally the non-nuclear wholesale asset business' results improved this quarter due primarily to lower income taxes.

Slide four recaps our cash flow performance for the quarter. Operating cash flow increased by $177 million compared to the same period last year driven by deferred fuel contribution of $350 million at the utility, lower income tax payments of $93 million at utility parent and other and a reduction in working capital of $28 million at the non-nuclear wholesale asset business. Offsets include $160 million increase in utility working capital and at Entergy nuclear lower revenues of $62 million due to additional outages and refueling outage costs and spinoff of synergies of $52 million.

Looking ahead our overall liquidity position remains very strong as shown on slide five. In fact, our outlook on liquidity enabled us to substantially reduce our outstanding revolver balance. Untapped revolver capacity now stands at just under $1.6 billion at the end of the second quarter compared to $725 million last quarter and we still have nearly $1.3 billion in cash. For the year we continue to project net liquidity resources above $2 billion.

Projected 2009 liquidity uses continue to include the completion of the roughly $600 million remaining under our share repurchase programs. Consistent with prior statements, that share repurchases were expected to be weighted towards the second half of 2009. No share repurchases were made through June 30, of this year. After the close of the second quarter, however, our projected solid liquidity position enabled us to resume share repurchases suspended since the fall of 2008.

Slide six details our revised 2009 operational earnings guidance of $6.20 to $6.80 per share announced last month. As reported earnings guidance is now $6 to $6.60 a share reflecting $0.14 of spinoff to synergies and the $0.06 of spinoff transactions costs incurred year-to-date. Like any year some events have turned against us since the time we initially set guidance while others have been positive.

We planned for a range of outcomes in guidance and, in fact, widened the range this year to reflect a larger unsold energy position pat Entergy nuclear. As the year has unfolded however the combination of two specific market events caused us to revise our guidance, first unprecedented financial market conditions triggered recognition of additional significant decommissioning trust impairment of $0.19 per share in the second quarter of 2009 top of the $0.05 recorded in the first quarter. That outcome was not reflected in our initial guidance because of the inherent difficulty in predicting financial market performance, particularly in these uncertain times. Though some companies treat impairments as special items, we report them within our operational results.

Also power prices on Entergy nuclear's open position declined significantly during the second quarter averaging in the low $30 per megawatt hour change. Current market conditions reflected in published power prices wen we revised our guidance suggest the balance year pricing around the mid $30 per megawatt hour range. Considering results for the first half of the year we now expect the average 2009 price for Entergy nuclear's merchant position to approach $40 per megawatt hour. A drop in nearly $20 in megawatt hour from the level originally assumed in guidance.

In spite of these challenges the shift we've made in our revised 2009 guidance range is less than implied based solely on the decommissioning impairments and lower prices. While we continue to face pressure on utility sales compared to initial guidance assumptions, we can see other opportunities to make up some long lost ground in 2009 including achieving constructive regulatory outcomes with the utility, operating the nonutility nuclear fleet safely and efficiently now that the refueling outages are behind us, pursuing efforts to control spending while protecting value, and executing our share repurchase program while maintaining our financial flexibility and strength. While we are disappointed that we are unable to hold onto our original guidance range, you can be assured that the management team remains committed to achieving positive outcomes on the variables it does control.

Before closing I'd like to offer some thoughts on what has changed and more importantly what hasn't changed since we originally announced our plan for the spinoff in November of 2007. We continue to see multiple levers to create long term value in both of our businesses as illustrated on slide seven. Through both high and low price environments Enexus has opportunities for growth. The non-nuclear fleet is well positioned to benefit as the economy rebounds and a carbon constrained world becomes a reality. In contrast acquisitions when prices are low could add to EBITDA while expanding product offerings, reducing risk and improving credit. The amended petition we will file next week in New York will demonstrate enhancements to Enexus' already robust financial strength and flexibility. The pursuit of opportunities at Enexus will be more efficient once the separation is complete. In some cases efforts to enhance the financial profile of Enexus would not be possible in our current structure.

For the utility our earnings story remains unchanged. With underlying growth of 3 to 4%. We have ample investment opportunities that benefit customers and meet our obligations to serve. In addition, we continue to see another 3 to 4% from recapitalization of Entergy from the spin. The new split off structure is simply a different means to the same end. We still expect to use a portion of the proceeds from the spinoff transactions to reduce debt at Entergy and repurchase Entergy shares. However, now the full extent of the share reduction will be achieved through a combination of traditional repurchases and the splitoff feature whereby Enexus shares initially held in trust are expected to be exchanged for Entergy shares. The exact mix of debt and equity retired will ultimately depend upon a number of factors including free cash flow at Enexus through the date of the spinoff and future stock prices of Entergy in Enexus.

While we affirm Entergy's post spinoff aspiration of 6% to 8% per year annualized earnings per share grow through 2012, we continue to explore a line of sight to grow the utility even more through additional capital deployment and improving ROEs at each utility operating Company. The point of view driven Company requires discipline and flexibility to adjust our tactics along the way as the business environment changes. Our five year financial aspirations for Entergy and Enexus that we set back in 2007 are essentially unchanged. What also hasn't changed is our belief that the potential value proposition for the spinoff remains strong. And now the Entergy senior team is available for your questions.

Thank you. (Operator Instructions) We'll go first to Greg Gordon with Morgan Stanley.

Thanks. Good morning, guys.

Good morning, Greg.

As we look at the new guidance, well, the recently articulated guidance range, you guys go through a lot of detail on pages five and six of the -- of your quarterly press release, but one of the things that you say on page six is that the -- and I presume this is all to the middle of the range, that you presume normal weather and retail sales growth of just under 3% as drives for the utility but when I look at the weather adjusted sales year to date for the utility, I don't remember what page it's on here -- they're down a little more than 1% on residential and a little less than 10% on industrial. Does that mean that we're trending towards the lower end of the new guidance range right now if we were to annualize those types of sales numbers?

No, Greg, it doesn't. Those sales levels are things that we might, in the normal range of guidance we're actually working to overcome. So it's taken into consideration when we set the new guidance range where sales levels will be going forward.

Thank you.

Next we'll go to Paul Patterson with Glenrock Associates.

Good morning, guys.

Good morning, Paul.

I wanted to touch base with you on the spinoff and Vermont, the decommissioning issue and I guess the contract negotiations and just where you see those heading and when do you think we'll get some sort of clarity on that?

Okay, Rick.

Morning, Paul. Similar to what we've been doing in New York, we've been having a variety of conversations with the parties up in Vermont to work towards a new PPA that would be factored in with their certificate of public good we have to get from both the commission and the legislature and as it relates to the -- I mean those things are moving along and we have a schedule of meetings that we've laid out to see if we get to some agreement on that. As it relates to the decommissioning I think it's within the second week of August we'll be filing with the NRC a plan to deal with the minimum funding requirement shortfall that we have in Vermont.

Well, I guess what I meant was the license extension issue. I mean it seems like since you wrapped up on the contract negotiations and dug this sort of -- then we've got the spin in there as well. Do you think there's a possibility for a global settlement here in terms of getting all those issues resolved or?

Yes, definitely. I mean we're really dealing with both issues up there, both the PPA negotiations and the spin itself. So, the time frame that we're looking at is we'll get those completed and orders out of the commission before the end of the year.

And then in terms of New York and the new structure that we're talking about in general, has there been in terms of rating agency or what have you, have they reassessed what the Enexus situation might be because of this, these enhancements that you guys have made? And could you share those with us?

Paul, this is Leo. Obviously we continue to have dialogue with rating agencies about where we're headed, the entire Company, Entergy, Enexus pre and post spin. The details of those we really wouldn't get into, but it's safe to say that we have a continuing dialogue with them all the time regardless of our strategies and the kinds of things that we'd be looking at we'd inform them of and provide them that kind of information.

Okay. Thanks a lot.

(Operator Instructions) We'll go on to Goldman Sachs, Michael Lapides.

Hey, guys, actually a couple of questions on the utilities. First of all, notice in the appendix for -- that has the authorized rate of returns for the various utilities that the band is a little bit different in Mississippi than in it previously had been. Can you address that? Can you also address in Louisiana the formula rate plans and whether the current structure of the formula rate plans give you an opportunity to actually earn your ROEs in future years?

Okay. Well, hi, Michael. How are you? This is Gary. I guess I'll really start with Louisiana first because, when we looked at where we are and I think the formula rate plans have served us well in both jurisdictions, but they're calculated differently. In Louisiana, though, we really are focusing on where the target is normally set to the bottom of the band once you're below it is trying to make improvements that allow us to set that closer to the midpoint of the band as part of what we think is important is this FRP going forward to allow us to be able to have the opportunity especially in the costs environment to get closer to that target ROE and we have focused on that. In Mississippi it's actually calculated each time and it's based on a number of different calculations that they've done and as it floats from year-to-year based on the inputs to that.

Okay. Thank you.

And there are no further questions at this time. Ms. Lopiccolo, I'll turn things back over to you.

Okay. Thank you, operator, and thanks to all for participating this morning. Before we close we remind you to refer to our release and website for Safe Harbor and Regulation G compliance statements. Our call was recorded and can be accessed for the next seven days by dialing 719-457-0820, replay code 4219567. This concludes our call. Thank you.

Once again, ladies and gentlemen, that does conclude today's conference. We thank you for your participation. You may now disconnect.