Idacorp Inc (IDA) 2003 Q2 法說會逐字稿

Good day, and welcome to the IdaCorp Incorporated 2003 second quarter earnings conference call. Today's call is being recorded. I would like to turn the call over to director of investor relations, Lawrence Spencer. Please go ahead.

Thank you. Good afternoon and welcome to our earnings conference call. We issued the release before the markets opened and filed our second quarter 10-Q with the SEC. Threes will be posted on our web site. With me today are Jan Packwood, IDACORP President, Lamont Keen, Idaho Power President and Chief Operating Office, Darrel Anderson, Vice President and Chief Financial Officer and Treasurer and other officers who will be available to answer your questions during q and a. We will keep our formal presentation brief to allow more questions about the company. Feel free to contact me directly if you have questions. Our presentation today may contain forward-looking statements, and it is important to note that the corporation's future results could differ materially from those discussed. A full decision of the factors that could cause future results to differ materially can be found in our filings with the Securities and Exchange Commission. I would like to turn the presentation over to Mr. Jan Packwood.

Thanks, Larry. Good afternoon. As I said in our earnings release this morning, our result goes so far this year do not meet our expectations. However, the outlook for the balance of the year remains in line with the forecast and despite the two consecutive quarters of negative results, we anticipate by year end our earnings will be consistent with our earlier projection. The negative results mask the progress being made in lowering our risk profile and maintaining liquidity while (inaudible) with the western energy crisis of 2000-2001. A reporting requirement associated with the zero tax rate for the year has been an added challenge and created a drag on earnings in the first two quarters. The effects of that reporting requirement should now reverse and become a positive influence during the remainder of the year, as Darrel will discuss in more detail later. Idaho Power's performance was down 2 cents compared to a year ago. We continue to work with below normal precipitation. That, of course, increases our reliance on the fire plants. We have increased maintenance costs. Lamont will talk more about that when he covers Idaho Power's operational challenges later in the call. The wind down of IDACORP energy continues on schedule. General and administrative expenses associated with continued performance on existing contracts, along with legal expenses related to regulatory and legal dispute, are the primary cause of the 11-cent per share loss during the quarter. He went to make steady progress in reducing our risk profile. Since the end of last quarter, our credit exposure has decreased an additional 32%. Liquidity requirements are 16% less. Capital at risk is 24% lower, and our VAR is 197,000, down from 6,196,000 the beginning of the year. The sustainability of the dividend is of great into to our investors. I want to provide some insight as to how we view the situation. The timing on IDACORP common stock is within the sole discretion of the IDACORP board of directors. The board reviews the common dividend rate to determine its appropriateness in light of our current and long-term financial position and results of operations, capital requirements, rating agency requirements, legislative and regulatory developments affecting the electric industry in general and Idaho Power Company in particular, competitive conditions, and any other factors aboard is relevant. Obviously, the company is challenged by operating result that is are significant by below the current annual dividend. With the wind down of IDACORP Energy, the long-term sustainability is dependent on the earnings and operating cash flow generated by Idaho Power. Idaho Power's earnings and operating cash flow on term depend on many factors. As always, the most significant are weather and hydroelectric generating condition, the ability to recover costs and rates, and capital spending requirements. The impacts of the lower than anticipated cash flows in 2003 expected increases in investment and utility plants in '04 and '05 and credit quality considerations are also factors being considered. Because of those factors, the company's ability to maintain the dividend at its current level is less certain, and it is possible the board may decide to reduce the dividend as early as 2003. However, based on our current situation, management certainly has no intention of recommending the elimination of the dividend. The board will continue to evaluate these and other factors in determining the appropriate level of pay there is out to shareholders. The board has made no determination at this time as to the long-term sustainability of the existing dividend on the common stock. So with that, I'll turn the call over to Lamont who can talk with you a little bit about Idaho Power's operations.

Thank you, Jan. Good afternoon, everyone. Our earnings of 31 cents per share for the quarter are below what I would like to be reporting but are not surprising given the operating conditions we are experiencing. Output for the hydroelectric power plants for the first six months of the year continue to suffer from the effects of low precipitation and strain flows. Actual gross hydrogen generation for this year through June was 3.5 million mega watt hours, approximately. This compares to 3.3 million mega watt hours during the same period last year and 3.0 million mega watt hours in 2001, both of which were drought years. Our hydrogen generation output this year is only 65% of the 5.4 million mega watt hours our hydro system would produce during the first six months in an average water year.

Precipitation levels continue far below normal. For June, precipitation was only 10% of average, and temperatures were one degree above average. Although July is not part of the second quarter, obviously, this same trend continued. Precipitation was 31% of average, and temperatures rose to nearly five degrees above average. As a result, consumption of electricity of our system increased because of high air conditioning and irrigation loads. During the record strain of nine consecutive 100-plus degree days between July 15 and July 23, our peak electricity demand on our system averaged 2842 mega watts, very near our all time peak low of 2963 mega watts.

We have encountered some outages in our thermal facilities this year. We have leaned heavily on the thermal generation fleet as we have managed our way through the last four years of drought, and they have performed well. These facilities are reaching the age, however, where significant ongoing maintenance is required as the [gym bridger ]units are 30 years of age and the (inaudible) average 20 years. I would also like to point out that during the recent hot spell, our gas turbines in Idaho which we’re installed in 2001 were online and operational. They played a key role during heavy load hours averaging 82 mega watts during peak demand periods. We have also had to rely on purchases from others to help us meet our customers' needs this year. Prices for electricity have not been as advantageous as last year, but they have been reasonable given the northwest region hydro conditions. The good news is despite below normal strain flows, record summer temperatures and unanticipated thermal plant outages, we are meeting the needs of our customers. Power supply, transmission distribution systems have operated effectively to meet the challenges we have faced this summer. You may remember that our most recent integrated resource plan, we indicated by the summer of 2005 we would need a new resource to meet our customers needs. We are evaluating proposal for construction of the power plant with a target completion date of May 2005.

Additionally, in accordance can the integrated resource plan, we recently entered into a five-year agreement with PPL Montana to purchase 80 average mega watts of electricity during June, July, and August beginning next year. Also, on the regulatory front, we previously indicated plans to file general rate case in Idaho this fall. We are presently putting that case together and intend to file the notice of intent with the Idaho commission shortly. It is targeted for mid-October, which should allow the final rates to be implemented with next spring's PCA rate adjustment. On the hydro licensing front, on July 18 we filed a formal application with the Federal Energy Regulatory Commission to realize (inaudible) sense our hydro electric complex project. It has a name plate capacity of 1167 mega watts. Our current license will expire in 2005, but it requires app cants to file two years in advance of the license's expiration date. We have been working on this application for more than ten years and conducted more than 100 studies in its preparation. To give you a feel for the magnitude of information in the filing, it required more than seven shipping boxes to contain the 45, three-ring, three-ring binders submitted to the FERC. I will turn it over to Darrel Anderson for a financial update.

Thanks, Lamont. I will review some of the highlights of the second quarter results. Our second quarter loss of 2 cents per share is a 10-cent decline from the second quarter 2002. We recorded a net loss of $900,000 in the second quarter this year, compared with net income of $3.1 million during the second quarter a year ago. These results include the effects of greater than expected losses at IDACORP Energy. We don't expect the losses to continue at these levels. Increases in operating level in the utility of $6.2 million and $1.1 million depreciation, operating expense increases included some of our nondiscretionary expenses and increases in pension, insurance, and thermal operating and maintenance expenses Lamont has already referred to.

Also included in those results are the tax referrals that are expected to reverse in the last two quarters of the year. With that quick overview, a short summary of contribution by subsidiary for the second quarter include, Idaho Power earned 31 cents per share compared to 33 cents a year ago. Idaho energy are recorded a loss of 11 cents a share compared to 32 cents per share during 2002 second quarter. IdaCorp financial increased its contribution to 7 cents per share, a 1 cent per share improvement. Ida tech's performance improved by 3-cent per share loss during this year's second quarter compared to a 6-cent per share loss in 2002. Ida West Energy registered a 1 cent profit in the recent quarter, the same as last year. The combined operations of Ida Common Velocitus recorded 3-cent share loss during the second quarter compared with a brake is even performance in the second quarter of 2002. The balance of the earnings per share are attributable to the holding company of which the majority represents the effects of the (inaudible) period tax benefit deferral.

If you add it up, the combination of the amounts I've relayed to you, you note the holding company recorded a loss of 24 cents per share for three months and 44 cents per share for the six months, mainly attributable to the tax benefit deferral. Along those lines, I want to recap our comments from the earnings release related to the effective tax rate. Generally accepted accounting principles require companies to apply an estimated annual effective tax rate to interim reporting periods, which in our case, had the effects of deferring significant enter periods tax benefit from the first to second quarters to later in the year. The accounting rules require the tax benefits be deferred to those quarters are expected earnings are realized. For purposes of reporting earnings by share per subsidiary, such each of our subsidiary's stand alone tax rates for the quarter has been used. The adjustment necessary to reach an estimated annual effective tax rate of zero for the consolidated group of companies has been recorded at the holding company.

I would now like to spend a little time talking about cash flow. Net cash provided by operating activities for the first half of 2003 was $137.5 million, an increase over the $123.9 million on generated in last year first six months. The increase is attributable to increases in cash received from Hydro Energy on contracts realized or otherwise settled, offset by decreased cash flows from Idaho Power. The decrease was driven by the timing of tax payment, partially offset by decreases in cash payment related to the voluntary load reduction program in effect last year. Looking forward to the balance of the year, net cash provided by operating activities at IDACORP is forecasted to be $218 million, down from our previous estimate of $225 million. At Idaho Power we are forecasting that net operating cash will be approximately $176 million, which, as we have compared to last year, estimate of $190 million.

The decline in forecasted operating cash flows is attributable to increased operating expenses at Idaho Power Company sp the timing of payments of certain working capital amounts, including income taxes, offset by increases in cash expected from the continued wind down of Ida Corp Energy. Capital expenditures for Idaho Power are expected to come in under the budgeted levels of $150 million for the year. As we look forward to the capital needs of the utility of 2004 and 2005, we forecast the capital requirements will grow to $215 million in 2004 and $200 million in 2005. The ultimate decision on whether these amounts will be spent will be based, in part, on the outcome of the current request for proposal for a new generating resource in response to Idaho Power Company's 2002 integrated resource plan. If Idaho Power Company is selected as the successful bidder with a self-build option, the generating resource would be expected to be funded through the issuance of a combination of long-term debt and, to the extent necessary at the time, new equity or equity like securities issued at IDACORP or Idaho Power Company. Our ability to generate sufficient operating cash flow and retain access to the capital markets in 2004 and 2005 will be directly dependent on hydrogen rating conditions, weather and the results of the general rate case filing.

The outcome of these factors will drive the level of reinvestment into the utility and returns to our shareholders. Switching gears to talk briefly about where we stand from a liquidity perspective. At June 30, 2003, IDACORP had $110 million in commercial paper outstanding against the $315 million available in its bank credit facility. Idaho Power company had $9 million in commercial paper outstanding against its $200 million facility. Since the beginning of the year, we have reduced total short-term borrowings by over $55 million. Subsequent to June 30, commercial paper outstanding and IDACORP has decreased an additional $50 million to approximately $60 million as a result of IDACORP financial refinancing $40 million of inter company borrowings on a non-recourse basis.

As we look forward with respect to our financing plans, as we previously indicated, we will look to refinance $49.8 million of 8.3% pollution control bonds in December. The company does not have plans to issue new common equity for 2003. Switching to earnings guidance. Our 2003 earnings continue to be dependent on the result of the Idaho Power Company. Our recent forecast indicates our 2003 IDACORP remains between 90 cents and $1.15. A breakout by business units results as follows. Idaho Power Company expects between $1.20 and $1.40. Idaho energy -- IDACORP Energy is forecast to lose 24 to 34 cents. The rest of the combined entities will earn between 10 cents to 20 cents per share.

Looking to 2004, our earnings estimates are dependent on the various factors we have previously discussed, including weather, water, and regulatory consideration. Because it is premature to determine the results of these factors, we are not in a position to provide you a meaningful 2004 earnings guidance range at this time. As these factors become clear, we will look to update you on the 2004 guidance. Before we start with your questions, we understand that you may want more information about the dividends. At this point, we have provided you with as much information regarding the dividend as we can provide. The board of directors is expected to address this issue again at its next regularly scheduled board meeting September 18 this year. We would now like to respond to your questions.

Today's question-and-answer session will be conducted electronically. You may signal us by pressing star and digit one. If you are using a speakerphone, make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that's star one to signal for a question. We'll pause for a moment to give everyone a chance to signal. We'll take our first question from David Thickens Depayment (ph) Capital Management.

Good afternoon, gentlemen.

David.

Skip over the dividend and ask a question about the health Canyon Furk application. You say that you're required to fire up the -- the license doesn't expire for another two years. Does that mean you expect it to be a couple year process before we get some kind of response back from Furk on changes in operating limitation and various other issues that always seem to come up with these Furk re-licensing.

Two years is the optimistic time frame for tows have any meaningful response, in all likelihood, if they're true to previous practice, it is take far longer than that. The typical process is the hydro operator operates under renewal of their license independent of a renewal application before the regulator. That doesn't mean as the process roles -- rolls along that the positions of the various parties won't be staked out. It is at least two years and, most likely, far longer than that before we would have any decision from FURK.

That really has no bearing on your filing of the general rate case this fall? If there are conditions or expenses that end up coming your way as a result of that re-licensing, that's something you have to address with the state regulators down the road?

Once they're incurred, yes.

Okay. I just want to be clear. I don't think the 10-Q had the new cash flow projections. I know it changed for 2003. Was that clear on the cash flow projections you gave in the 10-Q last quarter are substantially the same at this point for '04 and '05? You gave specific numbers in the SEC filings in the past. I didn't see them in the Q today.

The '04 and '05 numbers remain consistent. We haven't modified the '04 and '05 numbers because of the factors -- we don't know the change of the factors at this point. As we get closer, we will update the '04 and '05 numbers.

That 215 and 200 number, did I hear you correctly, does not include the self-build option?

No. Those numbers do include an estimate for a self-build option. Those numbers would change depending on the ultimate outcome of the current RFP process.

Could you talk a little bit about -- I don't quite understand what the large change in otherwise was in the segment breakdown. Can you talk about that? Was that the tax issue you were talking about?

Are you talking, David, other --

In the earnings breakdown.

If you look at other income, you mean?

Yes.

All right. The primary pieces of the change in other are included -- included in there from last year are the charges for the PCA. We had some life insurance benefits that went in during that same period of time. Those two items account for $4 million, I believe, of that other change.

Okay.

Carrying charges on the PCA and life insurance -- life insurance proceeds.

All right. I'll give someone else a chance. I may come back.

Thanks, David.

a reminder, that's star one to ask a question. We'll take our next question from James Bellessa (ph) from Davidson & Company.

Good afternoon. I would like to ask about the shape of the second half earnings given the tax effect you expect. Can you give us any enlightenment at to what rate of tax you might have or if you expect more of the tax benefit in the fourth quarter? How is it that you're looking at it?

Jim, it's really -- we will -- we expect you to recognize -- the entire amount will reverse the balance of the year. The issue does come down to timing. Today I cannot give you a good breakdown as to whether that's a 50-50 breakdown between the third and fourth quarter, 75-25-60-40. It is dependent on the amount of the earnings in the third and fourth quarter. I can't give you further guidance better than that

Typically, the third quarter would be the weakest of the full year's results? Would that be accurate?

No. I think the second quarter is the weakest on average. Third quarter generally because of the summer cooling loads, generally, should be a reasonable quarter.

When you had this conference call three months ago, did you anticipate the second quarter would be in a loss position and, therefore, the intra period tax benefits had to be deferred? Was that an expectation on your part, or was that something that developed as the quarter unfolded?

For instance, IDACORP energy came in at a higher loss than we originally expected internally. So the fact that we were close to earning and losing, that was part of it. We did have expenses that came in higher than we expected. So we did not anticipate the entire-- we weren't expecting the deferral to continue into the third and fourth quarters. It is a timing issue at this point.

Do you continue to expect -- you indicated that IDACORP energy, you didn't expect the losses, the most recent quarter would be persisting in the future. Do you expect losses for the next two quarters, or is there any chance that they could go positive in terms of earnings?

Are you talking about IDACORP energy, Jim?

Yes.

We do believe as it stands today, that IDACORP energy on an on going basis would lose some level between now and the end of the year, subject to some motivation effort that may happen with respect to the book itself. If you take a look at our guidance that we provided given where that guidance is today versus where they are today, we would say that they're going to lose another 5-cents to 6-cents the balance of the year.

If I copy the note correctly, your guidance for this was a 34-cent loss to 44-cent loss to IDACORP energy for 2003. If I'm looking correctly at my figures, you currently have under your belt a 39-cent loss?

That's correct.

So it sounds like it could go either way, plus or minus 5-cents?

That's right. That's fair.

Thank you very much.

You bet, Jim.

Once again, that's star one for questions. We'll return to David Thickens. Please go ahead.

Can you give me -- I don't want to tread where you don't want to. Can you give me some sense of what has changed in your outlook to drive the change in tone from management about the dividend? I mean, if we go back to your statements, we're certainly cautious but no where near kind of as pessimistic as they are in today's release. We go back to the release in May. I mean, the water condition came in close to the forecast that we had at the time of the last call. Back then and still you're talking about the key determinants of the earnings power of the utility being what the hydro conditions are next year and the outcome of the general rate case. Obviously, neither of which we have any new information that I'm aware of now versus the outlook of the situation back in May. Was it simply just the increased costs over the summer and the change in cash position that that drove from the hot weather and the outcome of trading, or is there something more?

No, David. We really attempted to lay it all out there in both the press release as well as in the Q as well as in the conference call today. It is really just a combination of the factors that we laid out that is driving why we wanted to clarify that for all of the investing community.

Okay. So it's more of -- your position hasn't changed. You would say you're stating it more clearly.

We're laying out what we believe are the driving factors to driving our liquidity and driving any decision with respect to the dividend.

Am I correct in that it's kind of end of the year at the earliest before we begin to get any sense of what the outlook for hydro conditions next year might be? You've got to get fairly far into the snow season, don't we?

David, our precept season starts November to February, March. That's the key four or five months. After that period, it can come at the beginning, end or throughout the season.

Jumping to the rate case, this notice of intent to file, do you have to put in there kind of a general outline of what you will be asking for and what you'll be -- how you'll be framing the GRC? I understand from our prior conversations there's likely to be a material change in methodology rather than targeting, you know, 100% of average, setting base rates on a lower number. Do we get some sense of the specifics as part of the intent to file, or is the intent to file what it sounds like, just a formal notification that you will get something more detailed in the future?

David, this is Lamont. It is the latter. It is a head's up to the commission and interested parties that something is in the works and will be arriving. It has to be filed 60 days in advance of a rate filing. It will have no specifics as to the make-up of the case.

Okay. Thank you, much.

We'll take our next question from Zach Schriber (ph) Ducan Capital.

Hi. I've been known to take good notes. I heard very, very, very clearly on the prior con fence call your assessment on the dividend was going to be based on things on which you have no more clarity on today than you had at that point in the last quarter conference call. Are you basing the outcome of a general rate case you haven't filed and hydro conditions for 2004 for which we have no clarity. What I'm trying to understand, to David's point is, what changed and why were we so misled in the last quart are conference call that it's going to be later 2003 to an early 2004 decision to follow a rate proceeding and the outcome and have some look on hydro? That's my first question. My second question is, how much stock does management actually own? My third question is, are we still spending money on Ida tech and is there any accountability on part of management?

Let me make sure I have your questions. The first one is, what's changed?

Yes, sir.

Jan Packwood The second I don't know is management ownership?

The third one is Ida Tech management. The fourth one is accountability question.

Jan Packwood; Okay. I'll start with the first one. As we have communicated in 10-Q and communicated in the press release and on this call, it really has been an evolution. We did indicate that there has been a decline in what we see as forecasted operating cash flow in 2003. That was a component. We also continue to talk about the water and the power supply side of things. We talk about the rate case. We also talk about credit considerations. We have provided communication because we are trying to be proactive as we look forward from the credit stand point. We're going to do everything we need to do from a credit per spec perspective to improve our credit quality. We don't have anything out there that says there is any credit action happening, but we believe it is important that we manage that aspect of our business. So what we've laid out, we believe, are all the factor that is we will continue to consider as we evaluate our ability to continue to not only reinvest back in our business, but, also, the ability to return an adequate return to our shareholders. From that standpoint, I would say nothing has changed other than that things continue to evolve. I don't have in front of me -- we'll get that information before we get to the end of the question on the rates of ownership. Actually, I have it here. Currently, management ownership is 318,161 shares as reported in our last proxy, and that's the response to that question. As related to the Ida tech question.

I would be happy to address that. Yes, we are continuing to invest in Ida tech and IDACOMM. It's whether you plan for the short-tem or longer term potential. The drain of those businesses are not viewed as that significant at this time when offset what we believe the potential is. Because we aren't in a dire or survival position, we will continue to have a balance portfolio as we go provide to provide opportunity in the upside fuel technology and in the data (inaudible) space in the future. Those businesses get the same level of scrutiny and evaluation as all other factors impacting the core business on a regular basis. So in terms of account A*BLT, that's in the eye of the beholder. We do our level base to lay out the rationale behind these and have a balanced opportunity for shareholder value going forward.

Zach, this is Darrel. Our focus with Ida tech is to look for additional partners to continue with the investment. We do not want to be the sole contributor, sole investor in Ida tech. By reference for the year, for the six months ended, for right now, at least, the total cash used for operating at Ida tech is $1 million. We continue to look for other sources of cash in order to fund that business going forward. We are looking to minimize our cash requirement to put into that business.

My last question has to do with the hint on the dividend coming down. It is not going to be eliminated, was your other statement. Is there anything we can talk about philosophically understanding that the dividend is clearly the (inaudible)discretion of the board of directors? What are the thoughts and recommendations that management will make to the board of directors when it comes to the dividend? What is the book value of the utility and what is the theoretical earnings power of this utility if we're going to allow a return on equity that's reasonable? Is there any ripple effects through the PUC, to be spending capital to change your generation portfolio at the same time when you can be hampering your access to capital given your retail ownership? That's a mouthful. How much equity is in the utility? I can do the math. Are there other political repercussions to the policy makers in the PUC which will be dictating further earnings to the company, at least in large part, as long as management executes the future? Are they aware it has the ability to, in the short term, jeopardize your action to capital which you may need in the future? Zach, I'm not sure where to start with that one, with your question. I think I'll address the easier question there. With our 10-Q being filed, the book value is $20 at the utility and $23 at the holding company. That's where those numbers are today. I'm not sure where to start with the rest of your question. It kind of covers the gamut.

from the top, from Jan Packwood, I would like to know Jan's view on the regulatory relationship with the commission, with the governor, thoughts on the future rate case, thoughts on the appropriate return, un-invested capital given you're going to come back to us and ask us for money at a moment in time when you're cutting -- when the major appealing characteristics of the security. What kind of thought process have you gone through? What kind of discussion have you had? Is this something that bubbles up to the level of the PUC and governor as you think about your access to capital and your need for capital?

This is Jan. We certainly think and discuss all of those things on a continuous and on going basis. A lot of what you asked is proprietary and we won't share it on the conference call. A broader perspective, I think I would characterize our relationships with the commission and the political infrastructure in the state as good. We certainly know each other. I think we've had a professional relationship with them, and that we have good credibility. We continue to operate on the premise we have an obligation to serve, we have an obligation to meet the growth. We have an obligation to retain a reliable electrical system that is congruent with utility practices. So we take those assumptions as given in defining our obligation. It's certainly up to us, then, to take our case to our regulators and to get rates and prices set accordingly. That's what we will do through this general rate case proceeding. The speaks (inaudible)of the tack advertises and strategies within the rate case proceedings we're not prepared to discuss today. That will become public. We won't attempt to use political coercion or anything else in the course of the rate case. We'll let the facts speak for itself and our policy and technical witnesses will do their best to lay out the case with the investments we've made in the test year. Since the last general rate case, we're prudent and entitled to a fair, just, and reasonable return on those investments. That part of the regulatory com pact has not changed. Until it is demonstrated that somehow it's different, we're proceeding on good faith we'll make our case and earn the appropriate return on the investments we've made.

Got it. I look forward to covering it very, very closely in the future. Thank you.

We'll take our next question from Leon Bob

Hi. It is Craig Lucas. Good afternoon.

Hi, Craig. I'm not going to give you a hard time, like everybody else. I just wanted to ask a question about capital expenditures at the utility. Can you talk about '04 CAPEX? Are we talking about $200 million or some other number?

We currently are forecasting cap ex at $215 million, which does include an estimate for a self-build option. A portion includes the self-build position, which has yet to be decided. In that number, you could -- for the partial year expenditures you might use 40 to $45 million out of that 215 that might relate to the -- a potential self-build. Obviously, that's not a one-year project necessarily. So that kind of gives you some boundary. The idea is we have a capital appetite that far exceeds our -- today that far exceeds what we can spend. We have to truly manage the resources as tightly as we can. So there is no shortage of demand for spending the capital on our system

Further clarification. In terms of '05 cap it will expenditures, are we talking about something like 220 as well?

No. $200 million as it stands today

The previous estimate I'm not sure where I got it from was 200. Is That doesn't, I believe, include the carryover impact of the self-build. Was there something else that made room for that?

No. 215 is the '04 number. $200 million is the owe 05 number which includes some impact of the carryover of the self-build.

Okay. One last little question. What is the regulatory strategy to be covered on the return of this incremental investment? Will there have to be an additional filing, or will this be dealt with in this upcoming filing?

Or will we find out when you file or something?

This is Lamont. I will respond a little bit. I think we've indicated at previous calls going to include as much of 2003 as we can. Some of that will be major adjustments for things that are completed or nearly completed this year. For expenditure that is are truly cap ex for 2004 and 2005, the way the rate mechanism works in Idaho is you have to spend it before you can earn on it. That would be a subsequent rate proceeding we would get a return on those additional investments. Always a mixed blessing is the only way you grow your core business is (inaudible) more than it generates. There is a lag between making those investments and when you get the return.

These are great investments and great returns relative to the non-regulated returns. We encourage that. It's wonderful. Thanks again.

Thanks a lot.

We will return to David Thickens. Please go ahead.

Hi, gentlemen. I want to get a clearer picture of the ongoing earnings power of the company and the utility in particular. I just want to make sure I got a couple of numbers right. We've got -- if I heard you correctly, about 760 million of book equity at the utility?

768,000,597.

As I recall, I didn't -- I don't -- I can't put my finger on this number now. I asked you in the last conference call what the equity base was at the time of your last rate filing or the rates you're operating under right now. Am I correct that was a number close to 600 million?

David, we're looking here at each other trying to decide what that number was. Yeah. I think it is around 600

So, I mean, we've got, you know -- before making any incremental capital investments, there's something in the neighborhood of $170 million of equity that you have invested in the business that you are currently not earning a return on, that you will be, as part of this full rate filing, seeking to capture a return on

Okay.

Am I doing -- is my logic making sense there?

It depends, David, on where you're headed.

Nothing under there is handed here. I'm just trying to step back and come up with a number. Out of the utility I can make my own assumptions about returns you'll be allowed and capital structure and potential equity going forward. I'm trying to have the pieces in place to come up with my own view of what the potential earnings out of Idaho Power Company are given the investment base you have today.

I think your rationale is logical.

Okay. That is all I have for now. Thank you.

Okay.

There are currently no questions standing by. Therefore, I would like to turn the call back over to the speakers for any additional comments.

I think that probably does it for today. I want to thank everyone for participating in this call. We will be back with you with further updates as our situation progresses.

Thanks, everybody. Appreciate it.

Ladies and gentlemen, this does conclude our conference today. We do thank you for your participation. You may disconnect at this time.