NorthWestern Energy Group Inc (NWE) 2013 Q4 法說會逐字稿

Good day, and welcome to the NorthWestern Corporation year end 2013 financial results conference call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Travis Meyer. Please go ahead, sir.

Thank you, Melissa. Good afternoon, and thank you for joining us for the NorthWestern Corporation financial results conference call and webcast for the year ended December 31, 2013. NorthWestern's results have been released and the release is available on our website at www.northwesternenergy.com. We also filed our 10-K after the market closed yesterday.

My name is Travis Meyer. I'm the Director of Investor Relations and Corporate Planning. Also joining us on the call today are Bob Rowe, President and CEO; Brian Bird, Vice President and Chief Financial Officer; Heather Grahame, Vice President and General Counsel, Kendall Kliewer, Vice President and Controller; and John Hines, Vice President of Energy Supply.

Before I turn the call over for us to begin, please note that the Company's press release, the presentation, comments by presenters, and responses to your questions may contain forward-looking statements. As such, I will remind you of our Safe Harbor language.

During the course of this presentation, there will be forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often address our expected future business and financial performance and will often contain words such as expects, anticipates, intends, plans, leaves, seeks, or will. The information in this presentation is based upon our current expectations as of date, unless otherwise noted.

Our actual future business and financial performance may differ materially and adversely from our expectations expressed in any forward-looking statements. We undertake no obligation to revise or publicly update our forward-looking statements or this presentation for any reason.

Although our expectations and beliefs are based on reasonable assumptions, actual results may differ materially. The factors that may affect our results are listed in certain of our releases and disclosed in the Company's public filings with the SEC.

Following our presentation today, those who are joining us by teleconference will be able to ask questions. The archived replay of today's webcast will be available beginning at 6:00 PM Eastern time today, and can be found on our website at www.northwesternenergy.com under the Our Company/Investor Relations/Presentations and Webcasts link.

To access the audio replay of the call, dial 888-203-1112, then access code 9765306. Again, that's 888-203-1112, access code 9765306.

I'll now turn it over to our President and CEO, Bob Rowe.

Good afternoon, and thank you all very much for joining us. I hope you all had good holidays with your families.

We've received some positive feedback to the change in the format of the presentation for these calls, and Travis gets primary credit for that. Also, we enjoyed meeting with a number of you at our analyst day in December and the feedback after that, as well. I'll touch on a few of the highlights. We'll come back and discuss these then in more detail.

Obviously, the first and biggest bullet is our proposed hydro acquisition that we announced in September of 2013, that $900 million purchase of 11 hydro facilities and a storage reservoir that will be dedicated to serve our Montana customers. Natural gas acquisition in December of 2013, and we're very pleased with the way that is playing out for the benefit of our customers at this point. We placed the Aberdeen Generating Station into service for our South Dakota customers earlier in 2013.

We received a natural gas delivery rate adjustment in Montana effective on April 1 of 2013. And we successfully accessed the capital markets to fund our investment projects and extend our debt maturities, including the sale of equity of almost $57 million last year, extending the debt -- the maturity of our revolving credit through November of 2018, and issuing $100 million in 15- and 30-year mortgage bonds in December of last year.

Already this year, we've received an upgrade from Moody's in January. We're very pleased with that, of course, and then, as you know, the Board has now declared an increase in our quarterly stock dividend payable March 31. That's a 5.3% increase from $0.38 to $0.40 per share.

And now I will turn the presentation over to the very best Chief Financial Officer in the sector, Brian Bird.

Wow, Bob, thanks. Good afternoon.

The next slide talking about summary financial results shows net income for the year of $94 million compared to $98.4 million the previous year, a reduction of $4.4 million. And on a diluted EPS basis, $2.46 per share this year versus $2.66 per share prior year. I'm going to get into each of these items in a bit more detail with the following slides.

With that, moving over to gross margin, from a gross margin perspective, we are effectively the same in gross margin, approximately $675 million this year that we had in 2012. And typically, I wouldn't be all that excited about gross margin being exactly the same. But when you consider we had approximately a $48 million benefit in our results last year as a result of the gain on the CELP arbitration decision, that was actually a very, very good year in terms of gross margin for us in 2013.

In fact, if you exclude the CELP arbitration, we had a $7.6 million increase in gross margin for the year. And that increase is primarily made up from increases in volumes in both our gas and electric business. You might recall 2012 was a very mild weather year for us, so we did get some recovery in volumes this year.

We did add additional natural gas production during the year and had a full year effect from some assets we put in place the prior year. We did have a natural gas rate increase, $6.6 million attributed to that.

We had a full-year benefit from Spion Kop this year, about $5.6 million associated with that. We did not have as big an impact, if you will, from the DGGS that we had last year, $5.1 million associated with that, and other growth in our electric transmission business and natural gas transportation. Those items primarily -- those increases there more than offset the CELP arbitration decision. So, again, very, very good gross margin growth, if you will, on an adjusted basis.

Moving ahead to operating expenses, operating expenses were up $6.2 million, or about 1.2%. But in fairness, when you exclude the MSTI -- we did have MSTI impairment in 2012 -- when you exclude that, our operating expenses were up about $30.2 million, or 6.4% on a year-over-year basis. Of that $30.2 million increase, half of that would be associated with increases in property taxes and depreciation, you can see as the bottom two bullets on this page. We expect to see higher property tax and depreciation as we continue to invest in our business.

The other half is associated with increases in our OG&A, or operating, general, administrative expenses. As you can see on that page, some of the first items, the DSIP expenses were up $12.4 million. I would look at labor a couple down from that, up about $4.4 million.

We anticipated increases there, and we've planned that in light of we knew we would have a decrease in our pension, employee benefit costs. And those costs, you can see that minus $15.4 million down below, really effectively offset one another and were planned for as we looked ahead. So as we layered in DSIP expenses that offset pension, that helped.

So where were with the remaining increases in OG&A, we did have $4.4 million of Hydro Transaction costs that we did incur. We also had costs, again, a growing business, we have incremental operating costs, incremental gas production costs were part of those expenses. Again, that pretty much covered the remaining increase, if you will, of that $30.2 million that I talked about earlier. All in all, I think from our perspective, that increase in expenses, again, is primarily attributed to a growth in our business and in making investments in parts of the business we think makes sense for customers.

Moving forward to the next slide, kind of taking you from operating to net income, at the top of the page, you note, it says operating income, a decrease of $6.2 million. If you really adjusted those two things I adjust on the prior two pages, backing out the CELP gain and backing out the MSTI write-down from the prior year, actually operating income would be up $18 million on a year-over-year basis versus the down $6.2 million. So, again, feel good about what we're doing from an operating income perspective as a business.

Below operating income, interest expense was higher. We did have higher interest expense associated with bridge fees that we had to put in place associated with the Hydro Transaction. We also did, as Bob pointed out earlier on the call, issue some long-term debt, so we did have higher debt costs on a year-over-year basis. And interest on some of the amounts that are subject to refund, that we'll mention later.

In terms of other income, I think people know that there are increases that you'll see, and we call our non-employee directors deferred comp. That shows up as an increase in our OG&A. That is offset with increases in other income, that's shown here. We also had higher capitalization of AFUDC that helped have an increase in other income on a year-over-year basis that partially offset the increase in interest expense.

Net-net, income before taxes was $108.3 million versus $116.5 million the prior year, or down $8.2 million. That resulted in tax expense. The differential there, we did have lower tax expense, partially from the lower pre-tax income but also from a lower effective tax rate. We had a 13.2% effective tax rate in 2013 versus 15% in 2012. So, again, net-net, $94 million in 2013 versus $98.4 million in 2012.

Moving ahead on the next page, to the balance sheet, not a lot of movement there. I would point out, though, from a PP&E perspective, as the Company continues to invest in the business, PP&E went over $3 billion in 2013. Shareholders equity actually went over $1 billion in 2013. So a bit of milestones associated with the balance sheet there.

The thing we do highlight at the bottom of the page, and measure that we continue to focus on from a credit perspective, debt-to-capital, we like to be within the 50% to 55% range. We ended the year much like we did last year, slightly above that, but because of how cash flows work in our business, we typically see that highest number at the end of the year. Our average debt-to-capital for 2013 on a quarterly basis was 53.8%, well within our 50% to 55% guidance that we like to think about from a credit perspective.

Moving on to the next slide, in terms of cash flow, one thing I did want to point out, make sure people did see, our cash provided from operating activities was down quite a bit from, in 2013 versus 2012. That $57.5 million decrease was primarily driven by three things. The first and foremost was a $34.2 million decrease in collection receivables, and that was primarily as a result of $20 million associated with billing delays.

We did put in place a new customer information system during the year. The good news, that was not much of a news item at all. We had a very, very successful transition to our new customer information system. But in fact, we did plan to stop collections for a period of time, as we put that into place.

We understood there would be billing delays. That, as a result, did impact our business by about $20 million during the year. We are now back up to full speed in both from a billing perspective and collection. And we do expect recovery of that shortfall in 2014. We also had increased revenues during the year that also impacted the increase, or excuse me, the decrease in cash was associated with collections from customers.

The other primary driver is approximately $17 million of under collection of supply costs. I think people are aware that that can swing either way on a year-to-year basis, but in fact, that under collection impacted cash flow by approximately $17 million. And higher interest payments of $6.5 million were the primary drivers there.

I think from a capital perspective, we invested nearly the same amount of capital on a year-over-year basis, primarily the difference is really the difference in growth projects on a year-over-year basis. Last year with investments in Spion Kop and the Peaker versus investments this year, for instance, in gas production, were the primary differences, if you will. Maintenance CapEx is very, very similar on a year-over-year basis.

Moving forward to our adjusted EPS schedule, we, on an adjusted basis, we moved from $2.46 to $2.50 a share in 2013 compared to 2012 on an adjusted basis, $2.37, a significant increase. You can capture that really at the bottom of the page, of about a 5.5% increase on an adjusted basis. We certainly talked about earlier on the call, on a GAAP basis, we're down 7.5%, as shown on the bottom half of the page, as well.

The other thing I would point out here is on a quarter-over-quarter basis, we were ahead of year-over-year results on adjusted basis in each of the first three quarters. You might recall when we adjusted our guidance, we did note there was some additional expenses we expected to incur in the fourth quarter and that did result in -- impact our fourth quarter results. Another thing that did, as well, is you may have seen our tax rate came in at 13.2%.

Had that tax rate came in at our forecasted 12%, the $0.75 adjusted EPS number you see for the fourth quarter of 2013 would have been $0.78, and right in line with what we had seen from the prior year. That also would have increased a $2.50 adjusted diluted EPS for 2013, up to $2.53. That would have moved us smack dab in the middle of our adjusted guidance of $2.45 to $2.60.

Reason that tax rate did creep up is, we didn't have as much repairs expense deductions as we thought. And primarily as a result, we did have to slow our capital investment in December in light of some very difficult weather. And, thus, we didn't get as much work done there as we initially planned, and that really had the major impact on our tax rate.

With that, I would move you forward, thinking about 2014. Again, reaffirming today, 2014 guidance of $2.60 to $2.75, as you would expect to hear from us, normal weather, of course, is taken into consideration in that guidance range. We are not -- we are excluding anything associated with the Hydro Transaction. That means we are excluding any costs that we might incur in preparation for the hearing, and ultimately closing the transaction, assuming a regulatory approval. And we are certainly excluding any revenue that might occur if there were a regulatory approval there.

We also are excluding any impact with any FERC decision, and your guess is as good as ours in terms of when we would get that decision. Last thing I would point out, tax rates here, as a result of bonus going away from our perspective, primarily it changes our tax rate going up in the range of 14% to 16% in 2014.

We do show drivers off to the left-hand side. We put a bit of finer touch on those than we had in previous calls associated, preparation of our guidance.

We showed you before, we've tightened that in a bit. You can take a look at that. Lastly, I would leave you on this page that we do continue to provide a targeted 7% to 10% total return for our investors on a going-forward basis.

With that, I'll turn it back over to Bob.

Thank you, Brian. On Slide 13, this is the story of our investment, actually, since I joined the Company in 2008. We feel very good about what we've done for all of our stakeholders.

You see at the top the increase in rate base. These are Company-wide figures, inclusive of full-year 2013. It's a little different from what some of you have seen before.

Over that period are investments in the rate base dedicated to serve our customers Company-wide, again, almost 13% GAAP diluted EPS of almost 7% -- 6.7%. But at the same time that we've been investing in the infrastructure that serves our customers, we have been very thoughtfully, I think, managing the bill impacts to those customers. So you see, again, these are Company-wide averages, the electric retail revenue on a megawatt hour basis for typical residential customer has only increased about 2.5% over this period. And natural gas retail per dekatherm has actually declined 6.1%.

So we are investing in our system. We are producing a return for our shareholders, and we are managing the costs that are faced by our customers. I'll move through some of the subjects that in some cases are (inaudible) some are a little bit newer. The first issue, of course, is the long-standing open issue we have at the federal Energy Regulatory Commission concerning cost recovery on the federal portion -- federal jurisdiction portion of Dave Gates Generating Station.

As most of you know well, we've been, we have requested reconsideration of a FERC administrative law judge decision. We have not yet received that decision. We are under ex parte restrictions in terms of communications with the Commission. There is no schedule, we do know that it is not on the FERC Commissioners calendar for this month. Their open meeting, I think, is in fact this Thursday.

We have a cumulative deferral at this point of $24.5 million, as of the end of December 2013, and continue to defer revenue of about $700,000 a month. We do continue to bill our FERC jurisdictional customers on interim rates that have now been in effect since January of 2011. These are, of course, subject to refund plus interest.

Very importantly, DGGS is a three-unit gas-fired turbine designed to have two units operating, one unit in operating reserve. Two-unit availability has been 98.3% since it came on line and it has been allowing us to meet our obligations as a balancing authority, specifically to meet CPS2, the control protocol Standard 2. So the plant is doing exactly what it's supposed to do for the network and for our customers regardless of jurisdiction.

The next page, the Big Stone and Neal Air Quality projects, these are two coal plants that serve our South Dakota customers. Both projects moving along extremely well. On the Neal side, the project was actually substantially completed in 2013, ahead of schedule, and the plant, and the project is currently in service. On the Big Stone side, we expect the project to be completed by 2016, and we're actually very pleased with both project management and budget management at Big Stone. We're very encouraged with how that project is going.

Moving to the natural gas side, and as I think most all of you know, we are really unique in our ability to use our extensive natural gas gathering storage and transmission system and its adjacency to the traditional long asset life gas production asset. So we did finalize our third natural gas production acquisition, which we refer to as Bear Paw South, an acquisition from Devon, on December 2. And that involved the purchase of 63 Bcf of proven reserves and an 82% interest in the Havre Pipeline, a total of $68.7 million. This is our largest natural gas acquisition.

Also coming over were 29 employees added to our 14 already current gas production employees. Just by coincidence, we were up in Havre doing the onboarding for the new employees from Devon in December and it turned into the coldest day in Havre, Montana, just below the Canadian border, since the late 1930s. Great people we're acquiring, in addition to the assets, and they really will help us strengthen our gas production capabilities.

The Montana Commission approved the structure of the transaction in October of 2013. So we now manage an additional 900 wells and 82 miles of transmission in the Bear Paw Basin. So we have now interests in over well over 1,000 gas production wells.

We will be continuing to use our natural gas tracker to recover costs in a way similar to Battle Creek and the Bear Paw North project. A 20-year levelized price for Bear Paw South was around $4.10 per dekatherm. We're very pleased with our results, as we've seen what the market has done here most recently. Based on 2014 estimates, the transaction increased the owned supply for our Montana retail gas customers from 8% of the gas we've delivered to our Montana customers to about 32%.

And you will recall we've discussed the relatively -- the predictable depletion rate in these kinds of acquisitions. And in fact, the depletion rate that's reflected here is really exactly consistent with what we had anticipated coming into the year. So the field is really performing just as we had hoped and expected. Turning to a little bit bigger picture review on slide 17, we do have about an 18% unfilled position to reach our targeted 50% owned supply, and then, again, add to that the depletion such as I just described.

Also, we continue to be interested in, where it makes sense, in acquiring gas production to take some of the fuel risk out of our Dave Gates Generating Station and the leased Basin Creek facility, again, to provide some long-term fuel price stability for our electric customers, as well as for our gas customers. And interestingly, our -- even now as we go into the current year, our weighted cost of owned gas is under the current cost projections for the next year. At the bottom of the page, you see the chart with the, again, relatively stable E&D gas prices at the bottom, and then the volatility of the market.

There were those who thought that volatility was gone forever, as experience of the last several months certainly confirms that volatility is very much alive and well in the gas markets. And we feel very, very good about what we have been able to do for our natural gas customers as a result.

Slide 18, the Distribution System Infrastructure Project, this is a major initiative in our Montana system. Both gas and electric focused on (inaudible) infrastructure, maintaining reliability, proactively managing safety, building capacity in the system and making the system ready for the adoption of new technologies.

We are very pleased with where we stand here, as well, after two years of ramp-up. 2013 was our first year of full production in DSIP. The project team, I think, is doing a tremendous job.

We had a, it turned into nearly a half-day discussion with the Montana Commission just several weeks ago as we gave them an update on the DSIP project. Very, very lively and good discussion there. Again, we're pleased with the Commission's understanding of, and, we believe, support for that effort.

Turning to the pending Hydro Transaction. Slide 19 just summarizes why we think this is really an historic and tremendous opportunity, first and foremost for our customers, for the communities that we serve in Montana, many of which are adjacent to these facilities. And virtually everyone in our Montana service territory cares a lot about the rivers and lakes that are related to this system, and a great opportunity for our employees and certainly for our investors, as well.

We're moving ahead on a lot of different fronts, including the human resources area. Some great meetings with the employees that we hope will be coming over once the transaction closes, and, obviously, an awful lot of work on the very critical regulatory front. We plan to close into permanent financing of up to $500 million of debt, $400 million of equity, and up to $50 million of free cash flow. If for some reason capital market access is limited, we do have the option of closing into a $900 million already committed bridge facility with Credit Suisse and Bank of America Merrill Lynch.

Page 21, a little bit of an update. As you know, we announced the transaction in late September. I had a good pre-filing informational meeting with the Montana Commission in mid-October, secured the bridge facility, filed the application for approval on December 20. This was a comprehensive application, factoring in the testimony, exhibits and work papers. I believe the total size of the application would equal right around 5,500 pages.

So a very thorough application. Also filed the required applications with the FERC in early January. These are license transfers and we'll be seeking antitrust approval of the transaction in the second quarter.

The Montana Public Service Commission has set a hearing, currently for July 8, and right now we are in the middle of the discovery process. And as of right now, we are actually responding to, through the data request process 555 questions. That's questions and sub-questions. So it's a complicated and, obviously, a very, very serious process.

We give you the URL for additional information and we do look forward to a Commission decision by mid-September of this year. Finally, just to touch on a couple of other highlights from 2013. The first item is very, very important to us. It was the best year for safety at NorthWestern Energy in terms of fewest lost time incidents and OSHA-recordable events of any year on record. And this is what was also, I think most of us would agree, the busiest year on record really across the Company. So I could not be more proud of our employees for that record.

Second, and nearly as important, we had the best customer satisfaction scores, again, in our history in 2013 from J.D. Power. Next, we continue to provide very high electric reliability, first quartile in South Dakota, second quartile overall. And do keep in mind that as we're doing these DSIP projects, that does involve taking some customers out of service as we go in to do the work.

I mentioned the first full year of DSIP investment. We are on track for our five-year plan. The project management team continually evaluates and makes necessary modifications in that plan. So from a project management perspective, I'm also very pleased with where we are.

We -- and Brian touched on the transition issues -- as we converted to a new customer information system, or so-called e -- electronic -- CIS, and very pleased with the outcomes, the functionality that we've achieved through that, and with the process. I think because we did so much of the work internally, it was such a high level of engagement, we got the system that we need and we did it very cost effectively.

We were, again, for the third time, named as one of Forbes' most trustworthy companies out of a universe of publicly traded companies of I think around 8,000. We clawed and scratched our way onto the fortnightly 40 lists of the best utilities in the United States. Very pleased with that, again, reflecting, I think, sustained value for our shareholders.

And another one that I think was very meaningful to us, we submitted our ethics program to an evaluation by Corpedia, which is a subsidiary of the New York Stock Exchange, and received an A for our corporate ethics program. This is a living document. It's the starting point for our strategic analysis, for any initiatives. It's something we train on. You'll see it on our employees' desks as you travel around the Company.

That put us in the top 2% of all energy and utility companies. So, again, thank you for your interest and your support for the Company.

And now we'll open it up to your questions.

(Operator Instructions)

We'll take our first question from Brian Russo.

Hi, good afternoon.

Hi, Brian.

Assuming the hydro transaction is approved, and you get a full-year contribution base rates in 2015, can you just remind us of your dividend policy and when might you -- how should we view future dividend increases as earnings step up with the hydro assets and rate base?

Hello, Brian. It's Brian. I would tell you that we think seriously about our 60% to 70% payout. We think that's an important payout to be competitive to attract capital as we compete for capital with other utilities. And our expectation is we continue to provide a dividend of 60% to 70% payout basis, with or without the hydro transaction.

Right. So, assuming the hydro transaction is completed and -- should we assume a February dividend, of 2015, dividend announcement, in line with your current announcement on the dividend?

Yes, I think that's typically how we've done things, Brian, and that would be my expectation. My guess, if there's an approval and a closing part of that, there would be discussion at the October Board meeting. But historically, we've talked about dividend policy in February.

Okay, great. And then, the CapEx table in the 10-K starts to moderate post-2016, and it seems that you guys are going to be in a positive free cash flow position after dividends. So, I was just curious what your thoughts were on cash redeployment back to shareholders, or are there longer-term investments that you can make at the utility that's not reflected in that CapEx?

That's a good question, Brian. I think we tried to point out in the disclosure there that there are certain projects that we continue to evaluate, particularly on the transmission side of the Business, potentially on the energy supply side of the Business.

But particularly when you get out into 2017, 2018 time period, we're not sure exactly what those projects are yet, and what the amounts are. So, until we identify what those projects are, you are going to see a tapering off of our capital investment. It is our expectation, though, that on a going-forward basis, when we get some idea of what those projects would be, we could see those numbers increasing upwards again.

Great --

That actually goes to the point we were making, too, in terms of trying to manage our capital investment back in the infrastructure in ways that produce value for our customers, and manage overall customer costs. But clearly, we will have a number of areas that we need to focus, again, if we are successful in the hydro transaction. That's true really across the Business.

One other thing, Brian, I would point out, and we've mentioned this before. If, for instance, we did get out in the 2017, 2018 period, and we did put ourselves back into pretty positive free cash flow position, we have been paying at the low end of that 60% to 70% band, and our expectation is we would probably move up within the 60%, 70% band, again, to return capital to shareholders if it's not necessary to invest in the Business.

Okay, great. And then, just curious, the $100 million of debt that you issued in December of 2013, does that satisfy your debt issuances for 2014?

From our perspective, that was primarily terming out what we had in our revolving credit facility and to help fund our gas production investments during the year. We take a look at that on a year-to-year basis. Our expectation -- the primary debt capital that would be raised in 2014 is going to be associated with the hydro transaction, again, assuming an approval.

Understood. Thank you very much.

Thank you.

(Operator Instructions)

And we'll take our next question from Jonathan Reeder from Wells Fargo.

Hello, good afternoon, gentlemen. Brian, is it safe to interpret that the 7% to 10% total shareholder return expectation that you identified is affirmation of the 4% to 6% EPS growth target?

Yes, I think that what I would say on that point, Jonathan, is it's on a pre-hydro basis. Certainly, our expectation is we're going to be able to deliver that 4% to 6% quite easily. On a post-hydro basis, again, we talked about this at our analyst day. It will be hard to invest that much capital on a going-forward basis to continue that growth rate.

But our expectation is we should be able to achieve probably the lower end of that range from the earnings perspective. But, again, in any case, we expect to be able to provide the 7% to 10% that I talked about in terms of total return. Obviously, from a starting point today, if the hydro transaction were to close because just of the sheer size of that transaction, our expectation is we would be able to do quite better than that in the short term.

Okay, got you. And then, can you elaborate on just the reaction to the hydro transaction amongst your important constituents within Montana? I know it's been a few months now. There's been some hearings and everything. How's the reaction been?

The reaction from customers has been just really overwhelming in a way that you don't see very often over a utility matter. Just by coincidence, in January and February every year, we go out and hold community meetings in conjunction with the University of Montana, and obviously, talking a lot about the hydro transactions, customers are very, very positive. There was a tremendous sense of anger, truly, when the facilities were sold in Montana, and there is, I think, a feeling that those are being restored and will be re-dedicated to serving our Montana customers at prices based on cost.

I think the reaction has been particularly strong in some of the communities that are near the facilities. We've had a couple of community meetings in Great Falls, Montana, now, and those have been particularly positive. So, in terms of, I would say, we talked actually on the last call, I believe, about some of the reaction from legislators. So, in terms of kind of the public reaction to it, it could not be really any, any more exciting.

I have to say, too, that our employee response has been really tremendous because these were assets that our employees cared very, very deeply about, as well. So, that's been a neat part of it.

And, again, though, at this point, I have to emphasize just how important the regulatory process is -- how hard our employees involved in that effort are working. We all consider this to be maybe the most important (inaudible) any of us will ever work on, and that's the spirit that we're all taking.

And in light of the regulator response, I know there was a hearing not too long ago where some of the commissioners expressed some opinions. Do you care to, I guess, elaborate on what you were able to glean from that?

My answer really went to the public response. The process at the Commission is -- it's serious, it's complicated. I mentioned the size of our initial filing -- number of data requests that we have responded to in one way or another. Couple of key milestones in the regulatory process: We did make a supplemental filing, including some additional modeling runs, and that filing, in our view, certainly affirmed that we made the correct resource choice with the Hydro acquisition.

Last week, there was an oral argument on our motion to really put some sideboards and some discipline on what is already maybe an unprecedented, or nearly unprecedented, scope of discovery. The Commission deliberated in an open work session on that yesterday, and we were, again, recognizing these are important subjects. We were pleased that where we stand right now, the proceeding will, I think, have a little bit more focus and discipline than would have been the case otherwise. But the record will be certainly very complete.

I mentioned that this is the -- for those of us working on it at the Company -- this is one of the most important activities we'll ever participate in, and we think, for our customers, one of the very best things we can do over the long term for -- I have to believe that the commissioners and staff are taking a similar view. This really, really matters for our customers, and matters a great deal and, I think, for the state of Montana, as well.

So, it's tough. It's complicated, as we expected going in the front door, but we certainly are pleased that the Commission is focusing on this, and we think is managing the process forward.

And then from a timeline perspective, do you believe September 16 is still a good date for a final decision? Or just based on the complexity and the fact that you did need to make that supplemental filing to the record, do you believe the procedural schedule could get pushed out a bit?

We have -- and ultimately, it will be the Commission's decision. We have gone through everything possible on our side to ensure that the procedural schedule is met, and we've reached out to other parties and the Commission staff to ensure that, as well.

I certainly -- from the, I think, very solid approach that the Chairman is taking to managing this docket, it certainly appears that he is also committed to running a thorough, but very professional process. We are hopeful that the schedule will hold, and that a decision will be timely.

All right. Thanks for the additional info.

(Operator Instructions)

And, sir, there are no further questions in queue.

Okay. Well, thank you all very much for joining us today. Obviously, there's a lot going on, and we're very excited about it and committed to the work that needs to get done. Look forward to talking to many of you next quarter, and some of you before then. Take care.

This concludes today's conference. Thank you for your participation.