OGE Energy Corp (OGE) 2010 Q1 法說會逐字稿

Good morning. My name is Beth and I will be your conference Operator today. At this time, I would like to welcome everyone to the OGE first quarter earnings conference call. All lines have been placed on mute to prevent 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 first quarter 2010 earnings call. I'm Todd Tidwell, Director of Investor Relations. And with me today I have Pete Delaney, our Chairman, President, and CEO of OGE Energy Corp., and 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 followed by an explanation of first 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 www.oge.com.

In addition, the conference call, and the 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. In addition, there is a Regulation G reconciliation for ongoing earnings in the appendix.

I will now turn the call over to Pete Delaney for his opening comments. Pete?

Thank you, Todd, and good morning, everyone. Welcome to our first quarter earnings call. This morning I'll discuss our recent accomplishments and forward initiatives, and the outlook for our businesses. And Sean will review our financial results in more detail.

Our first quarter results were good. Income from ongoing operations came it at $0.36 per share, up $0.18 in the first quarter over last year. We did take $0.11 non-cash charge related to the elimination of the tax deduction of the Medicare Part D subsidy, and Sean will discuss that in more detail in a minute.

The Utility delivered a strong quarter, driven largely by cool weather in our service area, and the rate recovery on the significant capital investments that we have made in Utility to maintain our reliability and to bring renewable energy resources to our customers.

At Enogex, earnings were up significantly, as we continued to experience volume growth, in the gathering and processing businesses, coupled with the rebound in natural gas liquids prices. Enogex had record NGL and concentrate production in the first quarter of this year, as our investments in the prolific natural gas basins in our area are producing positive results.

These rich natural gas liquid streams not only benefit Enogex returns, but also provide good economics for our customer, the producer. Our new Clinton processing facility that came into service last year, located in the heart of these basins, has improved the efficiency of our NGL recoveries, which translates into higher liquids volumes and better financial results.

We continue to anticipate that gathering and processing volume growth will be 7% and 12% respectively this year. As our stock price breached our prior record close of $41.01, reflected on the differences in our financial profile since February of 2007 when we hit our previous all-time high. We have invested over 2.5 billion in our businesses, while strengthening our credit profile. And at the mid-point of our guidance, utility earnings this year were up $0.45 per share, or about 26%.

And those earnings represent a much higher portion of consolidated earnings, which themselves are up 15% to 20% from 2007, assuming the midpoint to the high end of our 2010 guidance. And the dividend is 7% higher. So, feel good about where we are positioned today to continue to grow our earnings and dividends to provide a solid shareholder return.

Moving onto the Oklahoma economy, it continued to remain steady, and has not experienced severe economic impacts that have plagued much of the country. The latest unemployment data for the metropolitan area's over 1 million, shows Oklahoma City with the second lowest unemployment rate in the nation at 6.7%.

This is well below the national average of near 10%. However, our state and local governments, like many others, are facing serious budget constraints. We do see we're continuing to add utility customers near our historical growth rate of about 1% per year.

Our industrial load is recovering. And while not back to 2008 levels, it has shown growth for three consecutive quarters. We expect to add an additional 20 megawatts of industrial load this year. That said, we remain vigilant and are mindful of the challenges faced by many in our area.

Turning specifically to some of our key initiatives to position us to meet our goal of no new fossil fuel generation until 2020, the Windspeed transmission line, which was energized at the end of March, and will provide much needed transport capacity for renewable generation in the western part of our state.

This was the first major transmission project this Company's undertaken in many, many years. And I would like to recognize our members involved in the project for completing this line on time and on budget. Transmission is an area we remain focused on and excited about as we have already committed to invest about 700 million over the next several years.

In addition, when the Southwest Power Pool Board met on April 27th and approved additional transmission priority projects, of which OG&E would build about 300 million. We expect a notice to construct these lines sometime this summer, at which time we will update our projected capital expenditures and our financing plans.

Two important applications before the Oklahoma Commission include our system-wide Smart Grid rollout and the Crossroads wind farm. Hearings on the Smart Grid application will take place towards the end of June, and we expect a decision from the Commission in the third quarter.

As you know, approval of the Smart Grid program is an integral part of achieving our 2020 goal. The Crosswinds wind farm procedural schedule has not been issued by the Oklahoma Commission, but we anticipate that, if the Commission approves this project, it would be operational in late 2011.

The favorable terms of the Crossroads project will save our customers millions of dollars in fuel costs over the next several years, and many years after that. Along with the 280 megawatts of approved wind PPAs, this almost-200 megawatt wind project will bring our wind portfolio to near 750 megawatts, or over 10% of our generation capacity.

Turning to Arkansas, we anticipate filing in May for recovery of both the OU Spirit wind farm, and the 280 megawatts of wind PPAs. We will be seeking a rider for the OU Spirit, and to recover the wind PPAs through the Fuel Adjustment Clause.

So, you can see, we still have a great deal of activity taking place in the regulatory front, and we continue to work with our state commissions in an open and transparent manner to advance projects, or improving our service to customers.

Looking at Enogex for a moment, we are evaluating many growth projects. And as you know, it is our practice to only include known and committed capital expenditures in our forecast. Though we only show 45 million of capital expenditures in the outer years of the forecast, I would expect that number to increase.

As mentioned earlier, the natural gas from our core areas have a rich blend of natural gas liquids that considerably produce returns over dry gas streams. And we have identified numerous opportunities for Enogex's growth in the mid-continent. And once we have completed due diligence regarding these projects and confirm their economics, we expect that they will be included in our capital plan.

The types of projects we're evaluating include additional build-out of our gathering system, the addition of processing capacity, and investments in the new basins. We continue to focus on fee-type business and converting more of our keep hole processing into fixed fee arrangements. I'm excited about the future of Enogex and the many opportunities available for expansion.

I want to thank all of our members for their continued focus on executing on our business plans. They're keeping a focus on their day-to-day tasks critical to our success. And at the same time, deliver two key projects, the OU Spirit and Windspeed transmission project, on time and on budget.

These accomplishments reinforce our credibility with regulators and other key stakeholders. Enogex continues to execute on developing new business opportunities to serve our midstream customers, and more importantly, our members have improved their safety performance at the same time.

We have affirmed our 2010 earnings guidance and expect ongoing EPS to come in towards the high end of the range, driven largely by better-than-previously-projected performance at Enogex. There's a lot left of the year, but we currently expect Enogex to be at the top end of its earnings guidance.

And now, Sean is here to discuss the details. Sean?

Thank you, Pete. For the first quarter, ongoing net income was $35.6 million, or $0.36 per average diluted share, as compared to ongoing net income of $16.8 million, or $0.18 per average diluted share in 2009. Ongoing net income for the first quarter excludes the charge for the Medicare Part D subsidy.

This non-cash charge, resulting from the elimination of the tax subsidy, associated with the retiree prescription drug benefit, lowered GAAP earnings by $0.11 per share in the first quarter. The contribution by business unit, on a comparative basis, for both ongoing and GAAP earnings per share is listed on the slide.

At OG&E, ongoing net income for the quarter was $8.2 million, or $0.08 per share, as compared to ongoing net income of $1.3 million or $0.01 per share in 2009. Some of the primary factors are as follows. Gross margin increased 27.5 million, or 17%, and I'll touch on gross margin on the next slide.

Operation and maintenance expense increased by 8.6 million, primarily due to higher employee costs, plant maintenance, and post-retirement benefit expenses. Included in the increased O&M is approximately 3 million of expenses that also have revenue offsets in the form of riders.

Depreciation and amortization expense increased 4.2 million, primarily due to additional assets being placed into service, including the OU Spirit wind farm. Net other income and expense was lower by 1.7 million, in part due to lower margins associated with the guaranteed Flat Bill Program, which is based on normal weather.

Basically, the way this works is margins increase with milder weather, and decrease when weather has a greater impact than normal. The impact of the elimination of the Medicare Part D tax subsidy created a one-time non-cash impact of $7 million, or $0.07 per share at OG&E.

Now, turning to gross margin, you can see the drivers on this slide for the 27.5 million increase in gross margin at the Utility for the first quarter, compared to 2009. Cooler weather in the first quarter, compared to last year, increased margins by $11.6 million. Heating degree days were 28% higher, compared to last year, and up 9% compared to normal. In the quarter, cold weather increased margins 5.5 million compared to normal.

Various riders, including the OU Spirit wind farm, increased gross margin by 9.5 million. You can also see on this slide the other drivers for the quarter, including the Oklahoma and Arkansas rate increases. Megawatt hour sales were up 5.9% for the quarter.

Industrial sales were up 5%. And although industrial sales are still below 2008 levels, we continue to see a gradual improvement. Our overall customer growth rate was just under our historical average of 1%, with the majority of customer growth occurring in the residential sector. On a weather-normalized basis, residential and commercial sales grew approximately 2%.

Now, turning to Enogex, ongoing net income for the quarter was $29.4 million, or $0.30 per share as compared to net income of $15.4 million or $0.16 per share in 2009. Some of the primary factors are as follows. The largest variance was the gross margin, which increased by 28.3 million, and I'll discuss that in a moment.

Operation and maintenance expenses were basically flat, in part due to inclement weather that impacted the timing of certain projects in the first quarter. Depreciation and amortization expense increased 3 million, primarily due to higher levels of depreciable plant placed into service.

Interest expense was 2.3 million higher compared to 2009, primarily due to higher levels of capitalized interest in 2009. And the impact of the elimination of the Medicare Part D tax subsidy created a one-time non-cash impact of $2 million or $0.02 per share at Enogex.

Now, turning to gross margin, the vast majority of increase in gross margin came from the gathering and processing businesses. Volumes increased 3% and 16% respectively, and realized commodity spreads increased from $2.85 per MMBtu in 2009 to $5.79 per MMBtu in 2010.

Natural gas liquids prices also saw a significant increase, from $0.63 per gallon in 2009 to $1.05 per gallon in 2010. Condensate volumes were up 34%, due primarily to a richer natural gas stream, cooler weather, and increased operating efficiencies at our processing plants.

Condensate contributed 9.3 million of gross margin, compared to 3.1 million in the first quarter of 2009. For a more detailed explanation of these financial results, I would refer you to the Company's first quarter 10-Q filed with the SEC this morning.

Before moving onto your questions, I would like to mention a couple of key items. As Pete mentioned, we have reiterated our 2010 guidance of the [$22.70] (sic -- see press release) and $2.95 per share. We now expect to be at the upper end of the range, excluding the one-time Medicare Part D charge of $0.11. This was driven by higher margin expectations at Enogex coming in at the top end of the range.

Second, OGE Energy Corp. will be filing a universal shelf at the SEC. This is consistent with our previous message of our plan to issue 250 million of long-term debt at the Utility this year.

This concludes our prepared remarks, and we will now take your questions.

(Operator Instructions). We'll pause for a moment to compile the Q&A roster. Your first question comes from the line of Jay Dobson, Wunderlich Securities. Your line is open.

Pete, was hoping that you or Sean could maybe take us back through sales. Those at OG&E seem as if they're modestly better than you had previously expected, and sort of how, as you stand here now, you look out through the balance of 2010 and how that might impact your previous expectations for OG&E.

Sure, Jay, this is Sean. The sales, obviously, we had a very good quarter from a weather perspective that impacted margins by 11.6 million. We did see customer growth from a margins' perspective of 1.6 million. That was the gross margin impact. If I look at customer count, it was right on line with kind of our historical average, just slightly below 1%.

So, we feel pretty good about where we are, and really right on plan. Don't foresee any changes. We're cautiously optimistic that we'll continue to see an improvement in the Industrial sector. As I mentioned, it's still below our 2008 levels, but we are seeing a slow, steady improvement there.

Got you. So, just to be clear, and I'm sort of avoiding the weather and talking more about industrial sales, this would fall within your range of guidance (multiple speakers) --

Yes, absolutely.

-- or expectation, as you look out through 2010, if in fact this continues, this wouldn't drive us to higher ranges?

No. I think it's well within our plan. And if you recall, back to 2009, Jay, we did begin to see some of this gradual improvement in the third and fourth quarters. So, this is a continuation of that and that's what we'd expect.

Okay, perfect. And then, I think in your previous guidance, when you talked about the mid-part of the range, you were pretty clear that you were assuming ethane rejection throughout the year, and that you'd have a benefit of about, if I recall, about $5 million. In pushing the guidance range to the higher end, are we to assume you've changed that assumption? Or help me understand where you are.

Yes. We have. And when we put that guidance out originally, back early part of November, it was forecasted being rejection. When we updated that, when we talked on the call in February, we were obviously in a recovery mode. I think your numbers are correct there. But they're -- you know, we're very pleased. The volumes are up there at Enogex, as well. So, there's a lot of contributing factors there, and ethane would be one of them.

Got you. And then, last question, Pete, on the MLP and your sort of latest thoughts given the strength in Enogex and the potential for greater capital spending, thinking of the MLP as a capital or financing decision rather than a strategic one, maybe give me your latest thoughts.

Well, I think, Jay, you're right. All in terms of we view it as a -- it is a financing option, not a strategy option; our strategy is not based on that. And I think we're very fortunate to have the investment opportunities, Crossroads, we're very excited about. The priority projects, building into the Guymon area, we're very excited about. But, as you know that when we start looking at all that, it's getting to a point where we would need to issue equity to support our balance sheet, as we're committed to maintaining our strong ratings.

And so, we do realize that, in fact, that there may be alternatives. But, looking at the cost of capital, it may be more advantageous than issuing OGE Energy and comm. stock. And all's I can say is that we're evaluating those alternatives. We're not really prepared, at this time, to say anything or make any statements of what steps we may take or when we may take them. But, just let you know that we are evaluating those and we're aware that there may be something that's better for our shareholders in that regard.

Got you. But, to just clarify, you characterize it as a financing decision, which I agree with. So, we'd really have to see the CapEx beginning to rise at both Enogex and OG&E to be the catalyst for that, which suggests maybe it's less of a 2010 decision and more a later decision?

Well, I think we talked a little -- we're guardedly optimistic. I mean, we, on our strategy around -- on our Utility's not driven, really, by economic growth. If you look at what -- we see our growth continuing at -- our customer growth 1% a year, but we're -- a lot of -- most of our infrastructure's associated with renewables. Transmission's really renewable wind farms. We don't see the need for that infrastructure changing, given the direction of where energy policy's heading. And so, we don't think that's dependent on the economy.

Enogex is a little different, obviously, because you have the strength in natural gas prices. Now, we, again, are very well-positioned in that our natural gas plays have heavy liquids components. And so, the crude natural gas ratio and the high crude prices -- I say high -- on a historical basis, really support those returns. So, we continue to be bullish. We're also aware that when we're talking about not just financing with OGE Energy stock but taking other actions, it takes time.

So, I'm not sure if it's -- I wouldn't want to say we wouldn't make a decision until '11, because you need to do things in advance and get in position to be able to finance your growth in the best possible way. So, we're looking at it and we'll continue to look at it. But, we have a great opportunity. We will love to capitalize on that.

Brilliant. Thanks very much. I really appreciate it.

Sure.

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

Just wanted to check, I was looking at your CapEx slide and it looks like your CapEx forecast came up modestly. And I guess that's pretty much all the electric utility. And does that include the proposed -- is it the Crosswinds, the 280 megawatt wind project?

Yes.

And David, this is Sean. Yes, there was a slight increase there. We had some compression projects in Enogex that add about 20 million. But, that CapEx payable is essentially the same as you've seen before. It does not include the Crossroads wind project. As you know, we filed that. And we'd hope to receive approval on that in August timeframe some time. It does not include the priority projects.

We have not received notice to construct those, and we'd expect to receive that later this summer, too. I think the only other change in the CapEx payable there is probably on the transmission front. There's a slight increase in the Sunnyside to Hugo transmission line.

Okay. And the Crossroads is about $400 million?

Yes.

And you said that final approval, would you then -- so that would be for a rider or how would you recover that?

Yes. We requested a rider. And so, we would -- a procedural schedule has not been established yet but we'd anticipate approval in August.

Okay. And then, you mentioned something about some other projects approvals this summer. What were you referring to?

Yes. On the 27th of April, the SPP approved a number of what they called priority projects. And two of those would be OGE projects. This was similar to the list of projects they announced last fall. And so, they approved those, but they have not issued any notices to construct yet. Kind of in concert with that, the SPP has also filed a tariff with the FERC for approval of the highway or byway cost allocation methodology. And there's a 60-day process at the FERC.

I'm assuming it doesn't go to hearing. So, the SPP is not going to issue notices to construct until the tariff is approved and the cost allocation is finalized. So, that's probably late June, early July timeframe at the earliest. At that point in time, we'll have the notice to construct in our hand. We'll also know what the total cost estimate is. And we'll also know the timing under which the projects are expected to be brought on line. So, that'll give us a lot of clarity around what sort of funding and financing needs we may or may not need.

So, but just so I'm clear, the priority projects -- the SPP priority projects, are or are not in your forecast at the present time?

They are not. They are not.

And what kind of range could we be looking at, do you think? (multiple speakers) [Have you] --?

Probably around 300 million is a good number, just (multiple speakers) --.

Okay.

-- give or take.

So, you're talking about potentially 300 million of additional CapEx on the SPP priority projects, 400 million of potential CapEx related to the Crossroads. And then, you were talking about some growth opportunities at Enogex. I guess this gets back to Jay's question about meeting the funding needs. And you're talking about some potential alternatives to OGE common stock, issuing OGE common stock, and he was alluding to the MLP, or asked you directly about the MLP.

Obviously, the Plains All American deal just went off the IPO and was red hot. They upsized it and priced it above the range, and its stocks been doing quite well, even in this market. So, do you think an IPO is really the route? Or might you actually look at just monetizing, actually just selling the state for cash?

Dave, this is Pete. I don't really want to - we're -- as you know, there's alternative ways to go about this. And we're going to look at alternatives. And as you know, and we've said, and I've said, we've focused on our long-term value and try to make the best decisions that, over time, we don't focus with increasing our stock price at one point in time. We want to try to maximize that value to last over a period of time, so that our highs keep getting higher and our lows of our stock keep getting higher as well.

And so, we're going to look at what works best for us. And I think Jay said it right. For us, it's not part of our strategy at Enogex. We compete in the field. It doesn't impact us there. You know we're organically growth-driven. We're not acquisition-driven. And we still have some work to do of reducing our field to fill it out, without killing our [people] exposure. We want to still contain a good commodity. Out of that business we still think that that will help our valuation and that we've done to-date on doing that has helped our valuation. So, we're going to continue to work on that.

And so, we've got, as you said, several alternatives, and we just have to look at the pros and cons of each and, given our long-term plans, our financing needs and where we're headed and make that right decision. And we're looking at those and we do the best job we can and do it as quickly as we can and execute as best as we can. And that's all I can really say at this time.

Just, David, one follow on Pete's there. You're correct. Crossroads is about $400 million. The priority projects will be about $300 million. But, the big assumption there is the timing of those expenditures, and they're not all occurring at the same time. And as we've said all along, we're very committed to our balance sheet.

We're going to protect that balance sheet. And if we were fortunate enough to receive approval on all those projects, we're not concerned about, or afraid of issuing equity, because those will be accretive projects. And we feel like those will be good investments for our Company.

(Operator Instructions). Your next question comes from the line of Brian Russo, Ladenburg Thalmann. Your line is now open.

Just in terms of the Crossroads wind project, I mean, is there any risk that the Commission does not approve that? I mean, I don't think there's an RPS standard in Oklahoma. And I'm just curious what your thoughts are there.

This is Pete. I'll give you my views on this, and Howard Motley's our Vice President, Regulatory Affairs, is here, as well. One, this Crossroads project is a very good project economically. Our guys, I think, did a great job in going out and aggressively taking advantage of a weak turbine market. And when you -- although -- and so, we are glad there's no RPFs. We're not as big in favor of mandates that ramp up costs to our customers.

But, we find without a mandate that, especially with the Crossroads, that the economics of these projects, because of just offsetting fuel costs, are very good for our customers. And then, on top of that, in terms of positioning ourselves for potential CO2 legislation, it helps us in that regard. And also, I think we all believe that we will have a national RPF at some point in time. And it helps us for that.

So, we're not mandate-driven, never have been. We're really driven what's best for our customers. And we're looking at the numbers and our testimony, which I think is very solid. It's a strong argument this is best thing for our customers. And so, there's always a risk of not getting approved. But, we feel very good about it.

Okay. And in terms of the external financing needs, can you finance the $400 million Crossroads project with your drip and operating cash flow? Or would you need to tap the debt or equity markets for that specific project?

Obviously, that'd be incremental to our existing plan today. But, I'll tell you, I'm going to hold in reserve comment on that until we receive approval on that. And we have very definitive schedules of when those expenditures occur and where we are coming in at August. But, I think, obviously there would be a requirement for some incremental financing to split between what, if any amount of equity, would be required. We'll certainly lay that out for you when we receive approval in August.

Okay. And where you stand today, what's the most attractive cost of capital for you in terms of financing? Equity or monetizing Enogex?

Well, I think, clearly, and it's no secret if we look at kind of a cost [effecting] worse than the multiples are. There are some very attractive multiples today for Enogex. But, I think, as Pete mentioned, that's just one element we're considering. But, we're looking at that all across the business, and we're really trying to make sure we maximize the long-term value. So, there is, today, an opportunity but we want to make sure it's there for the long-term.

Okay, and then just lastly on the 2010 outlook, the $2.70, the $2.95, you alluded to the high end of the range. Can you just provide us with the subsidiary earnings range, as well?

Sure. So, OG&E has not changed. We're still leaving that guidance set at $2.10 to $2.20. And as we said before, we've moved Enogex up to about, on the higher end, when the higher of their range was $0.86.

Okay. So, and what about corporate? Is there any sort of drag there?

No, same thing as we've said before. The roughly $0.08, and then (multiple speakers) --

$0.08 drag?

Yes. And that hasn't changed.

Okay. Thank you very much.

Okay.

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

Oh, hi, guys. Just one follow-up, as far as timing goes on a decision, since you're going to be getting better clarity from SPP and the Commission on the wind project this summer, could we expect some decision in terms of funding, or some kind of announcement -- potential announcement related to funding this summer, as well?

Well, in my comments I just referred to the fact that once we get -- again, once we get the approval, or the no-stick [unintelligible], and then Crossroads approval. And again, we don't have the procedural schedule for that. But, again, we would expect that decision, Howard, in fall, or --?

No. So, I think that (technical difficulty) the procedure schedules, I think, are for signing next week. And we'd have a hearing for the Smart Grid in June and Crossroads in July.

Okay.

And we're actually in the position to try to issue an order for both cases by the end of July or early August. So, that's kind of the timeframe we'll know whether they will approve the projects or not.

And so, at that point in time, we'll update our CapEx and we'll look at our -- and then, we'll update our financing plans. And then, we'll have much more clarity about the timing of when -- and in our plans of when we would look to issue equity to support our balance sheet.

Right. But, I'm saying, will you have an announcement as far as either going corporate common or potentially doing an alternative financing that could involve Enogex?

Again, I really can't -- I'm not in a position to really put a timeline on that. That's going to be by the fall or the summer or by year-end.

Okay. All right, well, thanks, guys.

All right, okay.

(Operator Instructions). Your next question comes from the line of Jay Dobson. Your line is open, sir.

Thanks. Sean, just wanted to follow up on David's question. If we think about the Crossroads and then the SPP projects, thinking first about Crossroads, I think Pete said that would have COD sort of late '11. So, if you get approval, I mean, it would seem as if most of those dollars are spent in '11. Obviously you have to actually purchase turbines and things like that. So, there'd be some of that that's occurring in '10, but then most of it probably in '11.

And then, SPP would seem as though you'd have a longer tail with maybe like a three-year spend. And maybe if you could just sort of confirm that. And then, just sort of help us think about understanding, you don't have approvals, but just how some of those dollars would spread over that horizon.

Yes, I think your assessment there on Crossroads is correct. The majority of dollars would be spent in '11. As far as the priority projects, we're not anticipating those dollars to be flowing out the door immediately. If you look at our CapEx schedule on the existing projects, we have one of those lines coming in each year. So, it's kind of a stair step there. I'm not anticipating. I haven't heard any indications that those priority projects are going to be requested to be in service by 2012 or anything like that.

So, I don't think those are necessarily near-term capital expenditures of significant amounts. And so, if you think in terms of, those are typically 12- to 18-month projects, if there was a 2014, 2015, even a 2013 timeframe, you really wouldn't begin those real expenditures until '11 or '12. Does that help, Jay?

There are no further questions at this time. Presenters, I turn the call back over to you.

Thank you, Operator. In closing, I'd just like to say I'm pleased with where we are today as an organization and our performance against our plan. And while we feel positive regarding our position, we are aware that uncertainties remain regarding the strength of the apparent economic and market recovery. However, our financial profile's strong and we look forward to continuing to execute our strategy in the weeks and months ahead. I thank you for your continued interest in OG&E. Have a good day.

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