OGE Energy Corp (OGE) 2009 Q3 法說會逐字稿

Good morning. I will be your conference operator today. At this time I would like to welcome everyone to the OGE Energy Corp. earnings conference call. All lines have been placed on mute to bear out any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you, Mr. Todd Tidwell, you may begin your conference.

Thank you. Good morning, everyone, and welcome to OGE Energy Corp's third quarter 2009 earnings call. I'm Todd Tidwell, Director of Investor Relations and with me today I have Pete Delaney, Chairman, President and CEO of OGE Energy Corp, Sean Trauschke, Vice President and CFO of OGE Energy Corp. and several other members of the management team to address any questions that you may have.

In terms of the call today, we will first hear from Pete Delaney, followed by an explanation of the third quarter results from Sean, and finally as always we will answer your questions. I would like to remind you that this conference is being webcast and you may follow along on our website at OGE.com. In addition the conference call and accompanying slides will be archived following the call on that same website. Before we begin the presentation, I would like to direct your attention to the Safe Harbor statement regarding forward-looking statements. This is an SEC requirement for financial statements and simply states that we cannot guarantee forward-looking financial results but this is our best estimate to date. I will now turn the call over to Pete Delaney for his opening remarks. Pete.

Thank you, Todd, and good morning, everyone. Welcome to our third quarter earnings call. I will discuss our recent accomplishments, important initiatives and our outlook for our businesses. I will then turn it over to Sean who will review our financial results in more detail.

The third quarter was a good quarter on several fronts. First, we were able to report solid earnings this quarter due largely to rate increases in Arkansas and Oklahoma despite unfavorable weather. Our utility earnings benefiting from these regulatory actions were up some $17 million despite a negative weather variance of $7 million. And on a consolidated basis net income for the quarter was down less than $3 million due to the growth in utility earnings as earnings at Enogex were driven lower by a 46% drop in both commodity spreads realized and liquids prices. This commodity decline tends to match the fact that Enogex gathering processing and natural gas transportation business continued to grow and I'll let Sean talk about that in more detail in a minute.

On the regulatory front we successfully settled two rate proceedings. Around the last earnings call we had received regulatory approval for our $48 million rate case settlement, which has been implemented. A key component was the increase in the monthly customer charge from $6.50 to $13, a month accounting for $44 million of that increase. A good step directionally given our escalating demand side management efforts.

Secondly, we just recently settled with the attorney generals office, the corporation commission staff and the Oklahoma industrial group in regard to the rate recovery of our $270 million investment in the 101-megawatt OU Spirit Wind Farm. Administrative law judge has recommended approval of the settlement which is a key step toward approval by the Oklahoma Corporation Commission which we hope will occur in November as the farm should begin service by year-end providing additional earnings in 2010. This will have been the tenth rate matter settled within the last two years, good work in our opinion.

Throughout the year I have been reporting our economy in Oklahoma has not been affected as much as other areas of the country and that storyline continues today. Unemployment in the metro Oklahoma City area is about 6.8%, not where we want it, but still 3% below the nation. Our customer growth continues to be just under 1% year to date in line with historical levels. Industrial sales which have been down considerably seem to have stabilized this quarter based in part by the incremental 45 megawatts of new load that has already come online this year. With another 9 megawatts expected by year-end. Industrial sales were down some 15% for the third quarter. However, this is an improvement of last quarter's negative variance of 16%. As discussed on the last call, we expect this upward trend to continue as many of these new projects have come online the second half of the year. Another positive note, Mitsubishi Power Systems announced a new wind turbine manufacturing plant in our Fort Smith Arkansas service area which should add to our load in 2007.

All in all our economy continues to sustain itself in the face of lower natural gas prices and overall decline in the national economy. I think representative of that -- of the outlook of the leadership in the region is that the City Council of Oklahoma City has scheduled a vote in December to extend a $0.01 tax to invest approximately $800 million over the next seven years in the metro region including the first phase of a rail system which would be powered like quickly.;u/

The earnings impact from the rate case successes only tell one side of the story. In addition to positioning us for continued earnings growth utility in 2010, they have laid the groundwork for our 2020 plan. As you may recall, our 2020 plan which we announced several years ago provides for us to defer the need for additional fossil fuel generation until after 2020. The four major components of that plan are the Red Bud plant acquisition completed in late 2008 which provides generating capacity to cover load growth for several years, second, the expansion of the transmission system to integrate wind resources, third, addition of considerable amount of wind generation to provide some capacity but more importantly reduce our exposure to renewal standards, gas and CO2 pricing. And lastly, deploy smart grid as a platform for among other things, demand side management. We continue to make great progress on this plan.

The wind speed transmission line approved by the Oklahoma Corporation Commission in 2008 is expected to be completed at the end of the first quarter next year. This is one of the first major projects to complete as part of the region's transmission build-out to reduce congestion and provide capacity for the huge wind supply potential of Oklahoma, Kansas and Texas. OGE remains well positioned to participate in the transmission build-out with additional $600 million of transmission investment planned over the next four years. The debate over whether to use 765 or 345KV lines continues but in any event we are hopeful that our Woodward to Guyman line in Oklahoma will be approved by the Southwest Power Pool in the near future. If constructed using either voltage it would represent an additional $250 million investment for OGE.

Our wind build-out continues as planned in addition to the 101 megawatt OU Spirit Wind Farm we have purchased power agreements for our additional 280 megawatts bringing our total wind nameplate capacity to 550 megawatts. We're very pleased with the all in costs for this ramp of almost 400 megawatts of wind acquisition, which should prove to be an economic hedge against higher natural gas and CO2 emission costs either of which we hope not to experience in the near future.

In our positive energy smart grid program recently received a major boost. First as part of the rate case the Oklahoma Corporation Commission approved the pilot in Norman, Oklahoma providing for deployment of 45,000 and 2000 of smart meters in home area networks respectively. This week the DOE rewarded a $130 million grant to OGE to fund systemwide deployment, the tenth largest award. We will begin the process of negotiating terms of the grant with the Department of Energy and expected to progress with the systemwide deployment over next three years.

Our 2020 plans part of our effort to position for potential CO2 legislation, I'm actively engaged at DEI and with our legislators in Washington concerned over the proposed -- that proposed legislation will overly burden our customers and regulatory process with costs. Some important changes sought are in line with EEI position namely deferring the start date of any legislation to 2015, getting a 40% allocation of additional ounces to the industry in line with the industry's emission levels and a reasonable price cap.

Turning to Enogex, we had made good progress toward our long term objective to move that business towards fixed fee based revenues. We are beginning to see the benefit of moving a large processing contract from keep hold to fixed fee. We expect our keep hold with treating fees to be down to 20% of our processing portfolio, a considerable move from 47% in 2003. And our future earnings from the processing business will also benefit from the completion of 120,000 MMBTU per day Clinton processing plant this month.

On the transportation side this was the first full quarter of firm transportation revenues from the mid Continent express interstate pipeline and from firm 311 services in eastern Oklahoma which together contributed almost $5 million in revenue over the same quarter last year. We continue to see renewed levels of activity in our key unconventional production plays, namely the Woodford, Granite, County Wash and Cana years. We continue to expect a 10% increase in volumes this year and a 5 to 7% increase in gathering volumes next year. The continued growth in gathering of processing volumes mitigated the impact of a 46% drop in realized commodity spreads sustaining at a respectable 15% return on equity for the business. Both businesses are continuing to advance their positions as a result of their success on key initiatives.

I will now turn the call over to Sean to discuss the quarter in more detail, but before opening up the question -- the call to questions, I will discuss increasing our long-term earnings growth rate outlook to to 7%. Sean.

Thank you, Pete. For the third quarter we reported net income of $136.8 million or $1.40 per average diluted share as compared to net income of $139.5 million or $1.50 per average diluted share in 2008. The contribution by business unit on a comparative basis is listed on the slide. Before I discuss our two businesses, I would like to discuss the $0.09 variance at the holding Company and energy marketing business. Because commodity prices and spreads were low this quarter, we did not see the opportunity to cover our costs in the demand fees associated with various marketing contracts. This was a very different story in 2008 when prices were much higher. Year to date the holding company and energy marketing group has posted a loss of $0.07 per share and that is about what we would expect for the full year 2009.

Now, moving onto the utility, at OG&E net income for the third quarter was $123.2 million or $1.26 per share as compared to net income of $107.1 million or $1.15 per share in 2008. Gross margin on revenues increased $40.6 million or 13.5%.

I'll provide more details of gross margin on the following slide. Operation and maintenance expense increased $5.8 million primarily due to higher employee costs and increased spending on vegetation management which is offset by an increase in revenue through the system hardening rider. Depreciation and amortization expense increased $9.6 million, primarily due to the Red Bud facility being placed into service and the amortization of regulatory assets. Other income and expense created a positive variance of $10.3 million, in part due to higher allowance for equity funds used during construction in 2009 and higher participation in the guaranteed flat build program. Interest expense increased $4.1 million due to the higher levels of long-term debt that were issued in 2008 partially offset by lower short-term interest borrowings are and higher levels of capitalized interest. Now turning to the drivers for gross margin.

New revenues primarily from the Red Bud facility, storm cost recovery and system hardening riders increased the gross margin by $29.3 million. The Oklahoma and Arkansas rate case settlements increased the gross margin by approximately $26.4 million and the 2500 new customers added this quarter increased gross margin by $2.8 million. The residential and commercial sales are growing year to date on a weather normalized basis compared to 2008. While we have seen a 15% decline in industrial sales year to date versus last year, it does appear to have stabilized and we continue to see the new industrial load Pete mentioned earlier come online in 2009.

Offsets to the higher gross margin include milder weather which reduced gross margin by approximately $11.2 million compared to the third quarter of 2008, which was basically a normal weather quarter. Year to date weather has decreased gross margin by $9.9 million compared to normal and $13.8 million compared to 2008. In addition, lower demand and related revenues from nonresidential customers decreased the gross margin by approximately $6.7 million.

Now, turning to Enogex, net income decreased $10.2 million or $0.12 per share in 2009 compared to 2008. The largest variance was the gross margin which decreased by $15.3 million and I'll discuss that on the following slide. Operation and maintenance expenses were $5.1 million lower in 2009, primarily due to lower labor costs compared to the same period in 2008. Depreciation and amortization expense increased $2.6 million primarily due to the system investments we have made over the past several years. Interest expense was $3.9 million higher compared to 2008 primarily due to interest expense associated with the issuance of the long-term debt in June of this year.

Now looking at the drivers for gross margin, as you know, processing spreads were off 46% quarter over quarter as a result the processing business had lower gross margin contribution. However, the base business continues to grow as we have added transportation revenues through demand fees from MEP and Gulf Crossings. These investments along with the storage demand fees and higher 311 firm service rates increased gross margin $5.5 million for the quarter. We also continue to see volume growth in the gathering and processing business. Gathering volumes increased 6% quarter over quarter and 11% year to date. Gathering volumes and fees increased gross margin by $2.8 million for quarter. Processing volumes have also grown over 10% for the quarter and 6% year to date. For more detailed variance explanation, I would encourage you to review our 10-K filed this morning with the SEC.

We have had a solid three quarters and despite the challenging economic environment and mild third quarter weather, we continue to expect to be towards the middle of our guidance for 2009 of $2.30 to $2.60 per share, assuming, of course, normal weather for the remainder of the year. Looking at 2010 guidance, we expect earnings to be between $2.70 and $2.95 per share based on assumptions set forth in our third quarter 10-Q filed with the SEC this morning. Over the next couple of slides, I will discuss the 2010 earnings drivers for both OG&E and Enogex.

Looking specifically at the utility, we project earnings of $2.10 to $2.20 per diluted share. The 2010 gross margin assumes a 0.9% sales growth, it also assumes OU spirit is approved and in service by January 1, and the wind speed transmission line is in service by April 1, 2010. Operating expenses will increase partly due to higher costs associated with the smart grid program, system hardening and OU spirit but again these are offset by increased revenues from their riders. In addition, base O&M will increase higher pension and retiree medical costs. Higher depreciation will also occur as a result of additional plant and service. We have assumed issuance of long-term debt in the amount of $250 million at the utility midyear, which is the primary driver for higher interest expense. Another major variance from 2009 is the reduction in equity AFUDC as we place assets such as OU Spirit and wind speed into service and begin recovering under these riders. Our effective tax rate at the utility is also expected to decrease due to the production tax credits associated with OU Spirit. Those credits are given back to customers by lower revenue requirement for the wind farm.

Now turning to Enogex, we project earnings of $0.64 to $0.86 per diluted share. We anticipate gross margin to be driven primarily from increased commodity and higher hedge prices in the processing business, gross and gathering volumes of 5 to 7%, a full year of MEP and Gulf Crossings and a full year of the new Clinton processing plant as processing volumes are projected to increase 12% over 2009.

Moving on, this slide clearly indicates our focus on utility and fee based business. The key take away from this slide is that approximately 4% of forecasted gross margin are subject to commodity spreads and natural gas liquids prices. As we think about 2010, a simple sensitivity view is a 10% change in commodity spreads from the $5.15 per MMBTU value we gave you for the entire year is $4.5 million of net income. Or another way to look at it, it's 1.5% of the consolidated earnings per share of the Company. So you can see in 2010 we have very little exposure to commodity spreads at Enogex. Stable earnings growth along with conservative financial practices continue to be our focus. I will point out for those interested, we posted supplemental processing information on our website this morning with hedging information through 2011 and a breakdown of projected processing margins for 2010.

I wanted to take a minute to discuss our capital spending plans. You'll notice the heavy focus on utility and transmission capital expenditures over the next four years we have plans to invest over $600 million on transmission projects. This is where our focus will be for the next several years. We are committed to our ratings and any additional capital projects that might require equity issuance would be accretive to earnings per share and support our long term growth plans.

In closing I wanted to briefly touch upon our liquidity. As Pete mentioned in his early remarks, OGE has a strong financial profile and you can see in our projected consolidated cash profile we have ample liquidity to fund our growth projects with over $800 million of available liquidity in 2010. At the same time, our credit metrics are improving as well. So despite this tough economic environment, we are growing earnings and dividends as well as strengthening the financial position of the Company. With that, I'll turn the call back over to Pete.

Thank you, Sean. We have made great progress in positioning our businesses to execute our plans. I am very pleased with the success of our financial regulatory and operational initiatives over the last few years and very appreciative of the hard work of our members and of course one could always ask for more constructive overall economic framework. That said, as a result of our current outlook for our businesses, we are increasing our long-term earnings outlook from 4 to 5% as we have publicly stated for several years to 5 to 7% on a consolidated basis. This increase is driven by a more favorable growth outlook for the utility largely due to plant transmission investment. The growth rate for Enogex remains as we have -- as we have expressed in past years. We continue to focus on growing the dividends subject to Board approval at a rate in line with the past several years with the continued uncertainty in the overall financial and economic system, we plan on adhering to a conservative payout strategy to ensure sufficient liquidity to fund our investment program that will continue to drive shareholder value. Now I will turn the call back over to the operator to hear your questions.

(Operator Instructions) We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Reza Hatefi. Your line is now open.

Thank you very much. Congratulations on another great guidance. The gross target, the 5 to 7%, I guess in your 10-Q it says 5 to 7% from 2009 through 2012, which sort of implies 2012 is, $2.90 or $3. Is it fair to look at it that way or am I just reading too much into that?

No. I think the way to look at that is we were trying to articulate that's a compound annual growth rate and so earnings are going to grow through 2012 off of the midpoint of 2009 5 to 7%, so if our guidance is $2.70 to $2.95 this year we would expect continued growth thereafter. I mean, for 2010 our guidance would be $2.70 to $2.95 and we are expecting growth beyond that as well.

Oh, so should we assume 5 to 7% off of the '09 midpoint or the '10 midpoint?

I think you can use the '09 midpoint.

Okay. Great. Thank you very much.

Your next question comes from the line of Jay Dobson. Your line is now open.

Good morning.

Good morning.

Question for you, Sean or Pete. The guidance now for '09 still at the midpoint leaves me just a little confused when I look to the fourth quarter. You've done about $2.30 year to date and if I, you know, pick exactly the midpoint, that would suggest a $0.15 fourth quarter versus $0.29 a year ago, and I think you said holdco could be about flat in the fourth quarter, keeping that $0.07 loss where we are so I'm just wondering what the rate increase and Enogex continuing to do okay, why $0.15 versus $0.29 would work mathematically.

Yes, and I believe we earned $0.23 in the fourth quarter last year, was the number, Jay, not $0.29.

Okay.

Yes. And so, and we have kind of targeted this to midpoint. Obviously, the weather -- we have assumed normal weather and, as you noticed in the third quarter and continuing in the fourth quarter, it's still been mild, and, it's a different economic environment this year. We didn't see the full effects the fourth quarter of last year. So we are still targeting the midpoint there and we still have two months left to execute, and so I wouldn't anticipate that you're going to see -- there's nothing concerning or deteriorating there, but I think we are being very cautious and prudent. Pete, do you have anything to--?

No. I agree. There's nothing -- we expect that, Enogex is going to continue to perform. Last year -- year over year we will see a better comparison because of course processing spreads really came down in September of last year. But that being said, it's still overall a fragile recovery we have seen. We -- and I talked a little bit about our -- industrial sales were turning around. We tend not to get a lot of margin from that and so we are just keeping with our cautious outlook for the remainder of the year.

Got you. So it's fair to say that might be conservative, because I think the $0.23 you're referring to, Sean, actually included the $0.06 charge for the termination of the potential JV, on $0.29 might be a clean number but I could have my numbers wrong. Second thing, can you just talk about the longer-term prospects for Enogex really on two accounts, first, is there greater ability to move the revenue stream towards fixed fee? You've done a great job with that clearly getting keep hold down to 20%, but is there more ability to do that? And then second, just on the back of the JV that you didn't do last year, is there other opportunities for that as we look forward?

Well, I know first, Jay, on the fixed fee question, we -- there's two parts of that as we talked about. One is the processing portfolio that we have made some major movement in that direction. Optimally our really mix is we think from an economic standpoint is a fixed fee and keep hold and to a lesser extent POL gets our economic models. We do believe we have opportunities -- a lot of opportunities when we go from moving, I believe, our focus will be moving POL more into the fixed fee from an economic standpoint now that we have our keep holds. Keep in mind the keep hold does have the treating fee which has a lot of value in it. So we do think as contracts are coming up over the next couple of years, we do have opportunities to move the POLs over to the fixed fee which we think will give us a higher risk -- risk adjusted return on that portfolio. So, yes, there are opportunities there.

On the transportation side, we have had -- again, with MEP and Gulf Crossing, some major investments and the firm 311, of course we will always continue to try to get some firm intrastate service on our system, but that's hard to -- hard to predict with any certainty. We do have, on the other hand, a contract to supply AECI, which is a long-term contract for serving their -- a new power plant, I think it's combined cycle natural gas plant, that would be at 2011. We do have some other -- one other power plant contract too that will be opportunity to renegotiate as well, which we would anticipate would be able to increase that margin, so we do have some opportunities and we do expect to be able to within just our overall growth move more towards fixed fee which we think, is obviously a good thing from a risk adjusted return. We continue to focus on -- we like Enogex, we like where it's positioned, we like where we are positioned in the unconventional plays in the Mid-Continent area, we continue to focus on our shareholder -- building shareholder value over the long term and making sure that we get full value that we think for Enogex and our stock price and we will continue to focus on that. I'm not going to exclude anything but we really are not, at this point in time working on anything that, of that nature.

Great. Thanks very much, Pete, Sean, I really appreciate it.

Thanks, Jay.

Your next question comes from the line of Brian Russo. Your line is now open.

Good morning.

Good morning.

Good quarter and good outlook. Just a couple of questions on the utility, the 0.9% load growth expected in '09, given your comments earlier in the call about some of the regional growth initiatives and some, new manufacturing plants that -- coming online down there, can we expect an acceleration off that 0.9% growth post 2010, all else equal, of course?

No. I think we are -- for planning perspective, we are not looking for an acceleration in our overall kilowatt hour sales growth outlook. Particularly, we are -- with our 2020 plan, keep in mind we are going to be investing with our deployment on smart grid, we do have demand side management programs where we are looking to, basically move load offpeak but also for energy efficiency. So of course we anticipate earning return on those investments, our demand side investments so right now we are not forecasting any increase from our kilowatt hour sales. The 0.9, I think you're referring to our customer growth rate?

Oh, okay. I'm sorry. I must have misunderstood. I thought that was load growth.

Is it sales? Okay. And so but we are staying with that number.

Okay. And then just on the Enogex side, as you guys decrease your commodity exposure, I'm just curious why such a large range in the guidance. Is it a function of volumes or whether ethane is rejected or not?

Primarily volumes.

Okay. So 5% gets you to the low end assuming a $5 plus for ex spread and 7% gets you to the high end?

I think on -- we look at a multitude of variables when we are looking at our guidance, and, you do have commodity spreads, you do have volumes, you would have costs, O&M, interest, interest costs and we put that in and look at our probability distribution and, those are the major drivers and that's the types of range that we are getting within, of course, reasonable probability, and so it's -- it's really those combination of factors.

Okay. And on the realized commodity spread of a little over $5, could you break that down as to what dollar value you hedged at versus what market spread you're assuming?

And you're talking about 2010?

Yes.

Yes. Okay. So our 2010, our hedges are at $5.05 and we have -- the current forward curve on last week was at $5.96.

Okay. And can you break down what percent is hedged versus unhedged? Is that possible?

Oh, yes, sure. It's right at 75% of the keep hold volumes.

Okay. Great and it seems like you're paying down--?

Brian, just to be clear that excludes ethane.

Are you guys being conservative on ethane? Because I think when we started 2009, you assumed ethane rejection, but as we moved through the year, you began to take ethane of the can you just give us kind of your outlook on that?

Keith Mitchell, the Chief Operating Officer Enogex, Keith, you want to cover that?

Yes, we are just trying to look at forward curves both looking at the gas and ethane to see what we expect. Ethane is very difficult to predict. It's kind of a wild card as recovery and so we have been fortunate enough to have some recovery months this year. Right now we are projecting to be in rejection most of 2010.

Okay. And just also, could you give us a sense of what the sustainable debt level is at Enogex given your current CapEx profile?

Brian, we have plans to refinance the $289 million maturity in January, so we are going to be looking at that here at the end of this year and early next year, and we have sufficient capacity in our revolver and -- but we don't have any plans to issue any additional long-term debt at Enogex.

So it's self-funding is what you're saying?

Yes. I think that's -- that's an easy way to look at it. We have sufficient capital, Enogex is producing sufficient capital to fund the investments and continue to grow the business.

Great. Thanks a lot, guys.

Your next question comes from the line of David Frank. Your line is now open.

Yes, hi. Good morning, guys.

Good morning, David.

I had a couple questions for you of the one was the 5 to 7% growth. Is that contingent upon you winning new transmission and/or other utility CapEx projects or is it executing on stuff already in your forecast and contingent on things like the economy and such?

Yes, I think it's contingent on the forecasts that we have laid out, the $600 million of new transmission opportunities that's been approved and committed. It certainly proves -- assumes normal weather and, some help on the economy, but it does not anticipate or incorporate any new transmission or any new investments in other businesses.

Okay. Great. And then I think SPP staff made some recommendations for transmission projects recently. I think there was some comment in there regarding a proposal you and Xcel had. Can you give us some update on that. I don't believe that was in your CapEx plan.

Everything in our CapEx plan is known and committed and there were priority projects under review and my comments are, and I think this is what you're referring to, I referred to our Woodward to Guyman and I'm sure you know where Guyman is, David.

I go there all the time.

Guyman is in the panhandle of Oklahoma pretty far away from here, but where excellent wind potential is, and we have, as you know, a joint venture with Mid-America and AEP. That's our tall grass line. And that's for 765 build-out of that line. Now -- and I'm not exactly sure on the timing, but when the original priority projects came out that was not on the list, I think that their Oklahoma regulators among others have talked to the SPP and questioned given the wind potential out there why that line is not a priority project. My understanding is that the southwest power pool is doing a wind -- updating their wind integration study and that that line will be reviewed and they may very well end up be back with us, we are not sure of the but we know it's being looked at. But either way, if it's 765, we would be building that in tall grass with AEP and Mid-America. If it's 345, it's not in the partnership and we will be building that ourselves. We -- we believe that given the wind potential there, it's a timing issue. That line will be needed at some point in time. Again, it's just a timing issue, so -- but that's not in the $600 million that I referred to. Anything beyond the portfolio 3E which is what is in there, which is approved, would be incremental.

Okay. Last question, just on the -- you have still a wind -- a bit of your wind requirement is still outstanding, I think around 150 to 200 megawatts for the most recent RFPs. I think you're looking to fill about 450 and you took in 300 and still waiting on a piece. I was wondering when we could hear something on that?

Well, we -- again, we will be filing very shortly for the two purchase power agreements totaling 280 megawatts that we selected. There was a third project, which I think maybe you're perhaps referring to is the build to own transfer that we had for an incremental 150 megawatts, I believe it was size wind farm, and in our -- in our due diligence and negotiations, that didn't really pass. We weren't ultimately comfortable recommending that we move forward on that project. We have planned for some time to have two rounds at this point of wind development or acquisition. This is the -- one of the first ones, though. We expect to be back, again, for another 300 or so megawatts as we continue to build out that portfolio. We will see if we get any more clarity on our PS standards, our mandates out of Washington over the next couple of months, but at a minimum we are going to be moving ahead with another -- another PP -- another RFP. The timing of that would probably be sometime in 2010, but that hasn't been decided. As you know, part of the settlement on the OU wind farm is that we have to file our integrated resource plan, I think, in January and that we probably would not move to do anything on acquisition until that RFP plan is filed.

Okay. So just to clarify, we shouldn't expect any announcements regarding any build transfer own or however you put it.

Correct.

Related to your utility anytime in the near future?

I would anticipate that's correct.

Okay. Thanks a lot, guys.

Your next question comes from the line of Jeff Coviello your line is now open.

Good morning. A quick question on the -- that ethane rejection point. If -- I guess how much money roughly, have you made from, not rejecting the ethane this year versus what you had baked into the original assumptions at Enogex, I guess how much if you don't reject the ethane, about how much upside could there be?

Pete.

Yes. Ethane is clearly the less -- the least profitable component and I don't have the number here exactly how much we have made. I mean, obviously, we look to optimize and as we do have a chance to recover, it's kind of an option that we have. We have a chance to recover and make some incremental revenue, we do, but that's why it's always kind of on the bubble of recovery and rejection because it is the least profitable of those components.

Okay. Okay. So it's a -- I guess -- it's a decent impact but it's not a huge impact to earnings at Enogex if you shut it off or run the ethane through? Is that the right way to think about it.

That's correct. It's just really incremental optimization revenue. It's probably on avenue less than $5 million for the year.

Got it. Okay. That's helpful. I really appreciate it. Thank you.

Your next question comes from the line of Brian Russo your line is now open.

Hi, yes, just one quick follow-up. Are you expecting or assuming any corporate drag in the 2010 earnings guidance?

Sean, Brian referring to overheads in the company?

Yes.

Yes, we would expect that the hold company and ER would continue to have between $0.07 and $0.09 like they did on this year.

Okay. Thank you.

There are no further questions at this time.

Well, we certainly appreciate your participation on the call and your continued interest in OGE Energy. Have a great day and thank you.

This concludes today's conference call. You may now disconnect.