公共服務電力與天然氣 (PEG) 2007 Q4 法說會逐字稿

Welcome to the Public Service Enterprise Group fourth quarter and year-end 2007 earnings conference call and webcast. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session for members of the financial community. (OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded Friday, February 1, 2008, and will be available for telephone replay beginning at 1:00 PM eastern today until 1:00 PM eastern on February 8, 2008. It will also available as an audio webcast on PSEG's corporate website at www.pseg.com.

I'd now like to turn the conference over to Kathleen Lally, Vice President of Investor Relations. Please go ahead.

Thank you very much. Good morning, everyone. Thank you for participating in our earnings conference call this morning. I just want to go over some of the regulatory requirements. We released our fourth quarter 2007 and full year 2007 earnings statements this morning. In case you have not seen them or received a copy, the release and the associated accounting attachments are posted on our website, www.pseg.com, under the investor section. We have also posted a series of slides that detail the operating results for the quarter. We expect to file our full year 2007 10K at the end of February.

So let me just briefly review our disclaimer statement with regard to our earnings guidance before turning the call over to Ralph Izzo and Thomas O'Flynn. You should be aware that the statements contained in this communication about our and our subsidiaries future performance including and without limitation to future revenues, earnings strategies, prospects, and all other statements that are not purely historical are forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on information currently available, and on reasonable assumptions, we can give no assurance they will be achieved. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made herein.

The discussion of some of these risks and uncertainties is contained in our annual report on Form 10K and subsequent reports on Form 10Q and Form 8K filed with the Securities and Exchange Commission and available on our website. These documents address in further detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this communication. In addition any forward-looking statements included herein represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so even if our estimates change unless otherwise required.

In the body of our earnings release, you will see that we provided a table that reconciled net income to operating earnings. We believe this format improves the readability of the release and provides the required reconciliation between the GAAP terms, net income and income from continuing operations to the nonGAAP term operating earnings. The attachments for the press release provide the reconciliation to each of our major businesses, operating earnings exclude the net impact of certain asset sales during the periods presented. Operating earnings is our standard for comparing results for all of our businesses. We exclude such costs so that we can better compare our current period results with prior or future periods. Thank you. And with that, I would now like to turn the call over to Ralph Izzo and Tom O'Flynn. At the conclusion of their remarks, there will be time for your questions. We ask that you limit yourself to one question and one follow-up.

Thank you, Kathleen. Good morning. I join Kathleen and add my thanks to you for participating in our earnings call this morning. We have excellent news to report. The very strong results for the fourth quarter of 2007 closed out an exceptional year for PSEG.

Operating earnings for the fourth quarter of '07 increased to $1.09 per share from $0.54 per share reported for the fourth quarter one year ago. This brought operating earnings for the full year 2007 to $5.41 per share from $3.45 per share. If the $3.45 number isn't familiar it's because we've taken results for '06 and restated them to reflect discontinued operations. Our operating earnings for 2007 were at the upper end of our guidance, despite excluding those operating earnings -- despite excluding from earnings businesses such as SAESA that are being accounted for as discontinued operations given our plans to sell. The results for the quarter and the year were driven by PSEG Power and PSE&G. In addition to our strong earnings performance, 2007 was a year of many, many accomplishments. We resumed independent operation of our nuclear facilities. We reduced international risk with the sale of the majority of our Latin America assets. We improved the balance sheet with a substantial reduction in debt of the parent and subsidiary companies.

We kept our focus on operations and reliability as evidenced by PSE&G winning the Mid-Atlantic Reliability One award for the sixth year in a row. We initiated several programs to improve the operating efficiency of our equipment with an eye toward reducing our carbon emissions. We've expended our efforts to craft solutions to the state of New Jersey's energy requirements. We committed to expanding our transmission system and we are looking to invest in new generating capacity. These efforts have required tremendous focus on the part of PSEG employees as we also underwent a successful restaffing of our organization. In short, we solidified our operations, delivered on our financial promises and greatly reduced market and financial risk, thereby positioning ourselves for a bright future.

Our results for 2007 were strongly influenced by favorable energy markets and the benefits of rate relief granted to PSE&G in the fourth quarter 2006. We expect financial performance in 2008 to benefit from continued favorable energy markets. We are maintaining our 2008 operating earnings guidance of $5.60 to $6.10 per share. This forecast represents at the midpoint an 8% improvement over record earnings in 2007. On a post split basis, our guidance would obviously be $2.80 to $3.05 per share. Our confidence in 2008 was demonstrated by two recent actions by our Board of Directors, its decision to raise our common stock dividend by 10% in the first quarter and the declaration of a two for one stock split for shareholders. The stock split will be effective February 5th. The increase on the quarterly common dividend to $0.3225 per share on a post split basis will be paid to holders on March 10th at the end of the month. The increase in the quarterly dividend brings the full year common dividend rate to $1.29 per share on a post split basis.

Now we enter 2008 with a continued focus on operational excellence. This focus will encompass our approach to a steam generator replacement program for Salem unit two this spring as well as the work associated with the Hope Creek uprate to be accomplished by mid-year. PSEG's focus on operating efficiency at a minimum helps provide reassure customers of our desire to provide them with the most cost-effective service. This corporate-wide effort on maintaining operational focus will be complemented by an assessment of opportunities for investment, given a greatly improved balance sheet. PSEG will be working with the New Jersey Board of Public Utilities to define the role it will play in meeting the state's climate change driven energy goals. And PSEG Power is proceeding with efforts to expand its peaking generating fleet as it also explores opportunities to expand its presence in its target markets either with new or existing assets. Our asset based market conditions and the focus of our employees will influence our results. We closed out 2007 on a strong note and we're looking forward to the challenges that 2008 will bring. I'll turn the call over now to Tom O'Flynn.

Thank you, Ralph. And thanks to all joining us this morning. As Ralph said, we're very pleased to report that PSEG recorded fourth quarter operating earnings of $1.09 per share versus $0.54 per share for the fourth quarter of 2007. As you see in slide nine, all businesses posted meaningful improvements in the fourth quarter. The improvement was led by PSEG Power which reported operating earnings of $0.80 per share compared to $0.40 per share, followed by a 20% increase in PSE&G's operating earnings to $0.30 per share from $0.25 per share.

Energy Holdings reported operating earnings of $0.06 per share compared with a operating loss of $0.05 a share a year ago. For the full year, Power's earnings were up 83% to $3.73 a share from $2.04 per share. PSE&G's earnings grew by 42% to $1.48 per share from $1.04 per share, and Holding's earnings declined to $0.45 per share to $0.63 per share of a year ago. We provided you with the waterfall charts on slides 11 and 12, taking you through the net changes on year-over-year operating earnings by major business for both the quarter and full year respectively. I'll now go through each company in detail.

As I mentioned, Power reported operating earnings for the fourth quarter of $0.80 per share compared with $0.40 per share of a year ago. This improvement in earnings was driven by recontracting into a stronger market. The quarter benefited from an increase in pricing on the February 2007 contract that was effective on June 1st of 2007. Increased pricing on other contracting of our generation output as well as the introduction of PGM's reliability pricing model, or RPM. We've also seen an expansion into the market's heat rate which benefited from the performance of our combined cycle gas generating units. These items all totaled to $0.32 a share. Higher pricing more than offset the declining volume for the nuclear fleet for the quarter. A 33 day refueling outage that powers 100% owned Hope Creek facility reduced the nuclear fleet's capacity for the quarter to 83.6% versus 95.9% a year ago resulting in full-year capacity factor of 91.4%, only slightly below other forecast capacity factor for the year which was 92%.

Higher prices for generation and a control on expenses led to a 34% improvement in Power's operating margins to $51 per megawatt hour and $38 per megawatt hour. For the full year numbers are similar. Power's margins expanded 32% to $50 per megawatt hour from $38 per megawatt hour. A positive side of tighter markets has been an expansion in the market heat rate. This has led to improved utilization of our combined cycle fleet.

The slide on page 17 provides a breakdown of production by fuel for the quarter and the year. Utilization of our peaking and combined cycle fleet has responded to the market's pricing signals. We expect to see results from the January 2008 auction capacity under PGN's pricing model later today. The introduction of pricing on capacity has had a positive influence on the market, forced outage rates of decline, requirements of all facilities have been delayed and more PSM, or demand-side management, is being bid into the market. We've also learned later today if a bid we submitted for new capacity at an existing site to start commercial operation in June 2010 are cleared in this January auction. We plan to participate in the upcoming may auction for the 2011, 2012 delivery year as we're in the midst of finalizing the analysis associated with adding up to 300 to 400 megawatts of new peaking capacity into our system for total cost of approximately $250 million to $350 million. The fourth quarter also benefited from higher BGSS margins, an improvement in commodity pricing supported BGSS sales and margins. For the quarter, earnings from the BGSS contract added $0.06 per share for earnings.

Now moving on to PSE&G. PSE&G reported operating earnings for the fourth quarter of $0.30 per share compared with $0.25 per share from a year ago. The improvement in results was driven by a number of factors. Higher gas and electric margins associated with the rate settlement implemented in November 2006 added $0.04 per share for the overall improvement. PSE&G's results also benefited from a return to more normal weather versus warmer than normal conditions experienced during 2006's fourth quarter. This added $0.06 per share to earnings. Activity on a number of constructive regulatory fronts picked up in the fourth quarter. We continue to invest in systems to improve operating efficiency and explore the most cost-effective means of reducing carbon. In December, we unveiled new carbon abatement programs designed to help our customers save energy, reduce their bills and in the process reduce greenhouse gas emissions.

Also in December, we announced plans to deploy and test advanced metering infrastructure technologies, easier said AMI. We'll hopeful of hearing shortly from the New Jersey Board of Public Utilities on the $100 million solar initiative filed in April 2007. The results of these initiatives will help to form the direction of future programs and investments. PSE&G also filed a request with the FERC to include rate base construction work in progress on its planned $600 million to $650 million investment in the 500kv Susquehanna to Roseland transmission line. As part of this request, PSE&G is seeking incentives in it's authorize return to equity for the project. Spending on this line would begin in earnest during 2009 with a projected in-service date of 2012.

Now turning to PSEG Energy Holdings. Holdings reported operating earnings of $15 million, $0.06 per share versus an operating loss of $14 million or $0.05 per share during the fourth quarter of 2006. Results for the fourth quarter were largely influenced by a decline in spark spreads in recognition of mark to market gain of the $8 million associated with the long term contract held by Global's Texas generating assets versus the $15 million mark to market loss booked in the 2006 fourth quarter. This reversal improved reported earnings by $0.06 per share. While those results also benefited from a decline in O&M expense in Texas of $0.01 a share. The operating income from resources declined $0.01 per share in the fourth quarter is primarily a reflection in increased tax expense and some other items which offset lower financing costs. Holdings had a busy quarter from a transactional standpoint. Holdings sold its interest in Electroandes in October for $284 million, $220 million after tax.

Also closed on the sale of its interest in Chilquinta and Luz Del Sur in December for $685 million or $490 million after tax. And we also hired Credit Suisse to advice us on the sale of SAESA. As a result SAESA's operations have been classified as discontinued operations. The proceeds from these asset sales allowed Holdings to announce an early redemption of $400 million of 10% notes scheduled to mature in 2009, and to make a $100 million deposit with the IRS against certain contested tax liabilities to mitigate the accrual of deficiency interest. Holdings was also able to provide enterprise with a dividend of $210 million.

Holdings has substantially restructured its balance sheet. Following the January 2008 redemptions of $400 million of 10% debt maturing in 2009 and payment of the February 2008 maturity of $207 million of [8 5/8%] senior notes, the only issue of debt securities that Holdings will have outstanding is $530 million of 8.5% senior notes due in 2011. With reduction in the number of holders of energy holding securities following all these redemptions, we have filed notice on the Securities and Exchange Act of 1934 of our intention to terminate Holding's registration and financial reporting requirements. We do, however, plan to post regular financial reports for Energy Holdings including annual audited financial statements to our website and to maintain credit ratings with no plans for change in Energy Holding's credit profile. Also, all the information related to Holdings is material to PSEG will be disclosed as part of PSEG's quarterly annual reports on Form 10Q and 10K.

Couple comments on enterprise. The subsidiary companies provide enterprise with dividends of $560 million in the fourth quarter. This distribution coupled with cash on hand supported a reduction in debt at the enterprise level of $709 million during the fourth quarter, bringing the total reduction for the year to approximately $1.1 billion. We are, as Ralph indicated, maintaining our 2008 operating earnings guidance to $5.60 to $6.10 per share. On a post split basis, this would be $2.80 to $3.05 per share.

Our guidance for '08 represents an 8% increase in 2007's operating earnings using the mid-point of the range. PSEG Power will be the primary driver in expected improvement in earnings. The full-year higher prices from the February 2007 BGS auction, repricing of the 2005 contract in the upcoming BGS auction, and the full-year capacity pricing represent the support behind these improvements. Our results will also benefit from the decline in financing costs at the enterprise level. The strength in these areas will more than offset the potential for a nominal decline in the operating earnings of PSEG, and the loss of operating earnings at Holdings from the sale of assets at Global as well as the normal decline in the earnings profile of resources.

The operating earnings picture of Holdings reflects the absence of Holdings from SAESA as it's being reported as discontinued operations without the benefit of return on cash proceeds from the potential sale of SAESA for most of the year. The improvement our balance sheet, the strength of our cash flow and our outlook for 2008 all provide support for the Board's recent decision to raise the common dividend by 10% to an indicated annual rate of $2.58 per share or $1.29 on post split basis. The new dividend rate represents a 44% payout ratio for forecasted 2008 operating earnings. It's in the middle of a range of 40% to 50% for our dividend payout, which provides flexibility for growth and investment. Lastly, we hope you'll all be able to join us in New York on March 20th and like last year, we'll make a full half-day presentation to the financial community, addressing operations, our outlook and a number of other issues. At this point, Ralph and I are now ready for any questions.

Operator, can you queue up the questions?

Thank you. Ladies and gentlemen, we will now begin the question and answer session for members of the financial community. (OPERATOR INSTRUCTIONS) One moment, please, for the first question. The first question is from Ashar Khan of SAC Capital. Please proceed with your question.

Good morning. Congratulations. Tom, I just wanted to -- if I go to the income statement which is attachment five, the operating income of [tech power] is [$168.0 million] and if I add the depreciation, of $140 million, I get to [$182.0 million] EBITDA. I wanted to make sure if I'm doing apples to apples that $2.6 billion EBITDA which was the high open EBITDA that you mentioned at the EEI presentation,that a comparable number with the [$182.0 million] EBITDA that was reported for the year 2007?

Yes, Ashar. Good morning and that's all correct. The EEI in the fall we had open EBITDA. I think it was $2.4 billion to $2.6 billion, so you're using the high end of that range at $2.6 billion, but it's $2.4 billion to $2.6 billion, apples to apples. And at the time, I believe we didn't -- I believe we said that we thought our '07 number would be about $1.8 million, so your math at $1.82 million is exactly correct.

Then if I could just end up as a follow-up question. You mentioned that the BGS margins would probably decline to a normal level. What is the normal level?

No, I'm sorry. BGSS.

Yes, BGSS, sorry.

It's probably a few cents lower than that.

Okay. Thank you --

Something between '06 and '07.

Something between '06 and '07. And Tom, just clarification, open EBITDA resumes the higher output once the scrubbers are put in into the facilities or no?

Somewhat. We really don't get those -- that full impact until [10 or 11].

So this is --

-- there's a modest amendment for that. I think we do assume a normal coal capacity factor. If you saw last year, our coal capacity factor was a little bit down to '06. We would assume a return to full coal capacity factor, which we can get some way back in '08, but we can't get fully back and beyond until that works out.

I appreciate. Thank you very much, sir.

The next question comes from the line of Dan Eggers of Credit Suisse. Please proceed with your question.

Good morning. The RGGI conversation, obviously getting a little more air time lately. Can you just give us some thoughts on how that's going to flow through margins particularly on the generation that's already been contracted to the BGS over the next couple of years?

Dan, good morning. It's Ralph Izzo. Well, I guess we're all expecting January 1, 2009 for the initiation of RGGI, and we're not expecting any openers in existing BGS contracts. I would I think the forward markets are pricing in some expectations for carbon in the area.

So the future contracts, I guess this auction, is going to embed some level of carbon would be the assumption but the past settlements, that would be a cost for all carbon emissions on prior sales in the BGS, that right?

It's going to cost, but presumably people -- RGGI's not -- hasn't been a secret or surprise to folks.

I think, Dan, if you see -- if you look out on the PGM curves now through sale 12 with previous visibility, we have seen off-peak prices come up and we have seen a tightening of differentials between peak and off peak, the two I think the primary driver then may be some coal prices, but there may be some incremental amount for carbon phasing it.

Got it. Then following up on Ashar's question BGSS normal environment probably would support the mid-point of your range would be kind of splitting the baby on the $0.23 increase in BGSS contribution in '07, so marking down about $0.12 or something, is that fair?

Yes. Something between the '06 and '07 number. Yes.

Okay. All right. And then, I guess just last question, with you guys looking at adding capacity into PJM through the RPM process, how do we think before when you're going to make capital allocation decisions by way of proceeds from asset sales whether it goes to new investment or share repurchase? Is that going to come probably after the May auction? Is that reasonable?

That's certainly a part of it. As we said, we did make a proposal into this current RPM auction. But we'll continue to look and would expect to have some expanded views of potential new capacity build in May. We'll see. But I think, in general, we feel very good about what we've done in '07, in terms of the cash generation debt paydown setting our eyes on credit targets. We've for the most part gotten to our objective in terms of credit profile and key credit stats. And I think with that being said, there's still some issues out there. We've still got to complete the sale of SAESA, we've got some broader incremental investment opportunities in front of us. So we feel like we're in an enviable position from a capital deployment standpoint and we are thinking through the alternatives. I think when we sit with you in March, we expect to give you more clarity around some of the levers and our timing for those.

Got it. Thank you.

Our next question is from Leslie Rich of Columbia Management Advisors. Please proceed with your question.

Hi, there. I wondered if you could walk through a little more detail on slide 17 in terms of your generation output in the mix. Specific -- you commented that your combined cycle plants were running more and your nukes had an outage, and I'm just wondering when's going on with coal because your capacity factors or total output there has also declined. And I'm not sure if that's a reflection of being offline for scrubber installation, or if it's the fact that some of those were marginal units that were priced out of the market or sort of how to think about that.

Yes, Leslie I'd say, I mean, nuclear recovered, it was -- we expected 92%, we're at 91.4%. So that was pretty close. The 91% this year, the biggest driver there is (inaudible). I'd say the drop on the coal side from 14% to 8% to 13% would be a larger drop than we would expect going forward. We had a couple of maintenance and construction issues during 2007 that brought that coal number down. The two notable ones were a [bag house] at Bridgeport in Connecticut that caused a longer outage to connect that, and then Hudson is part of our extended consent decree remember we did about a year ago. In the interim here as we're building the back end, we're converting to a [dara] coal, the Indonesia coal, that we also burn up in Connecticut.

So that reduced our capacity factor for some period of time. And we do also need to be mindful of submissions issue here as we do on our back ends. So expectation I'd say over the next couple years before [mercen] Hudson get the back ends hooked up would be something in the probably low 14,000 range. So if you look at the two green boxes on 17, we expect to probably get back about half, two-thirds of that coal number over the '08, '09 period. And in the gas piece numbers reasonably from flat from an profitability standpoint, the hours made more money for us. That was really just a result of the heat rate that I touched on.

Great. Thank you.

The next question is from Paul Patterson of Glenrock Associates. Please proceed with your question.

Good morning. Can you hear me?

Yes, Paul.

I wanted to ask you a question on attachment seven, the operating cash flow. It looks like a kind of flattish compared to net income. And I'm just wondering is that a working capital thing? Just what are some of the larger drivers in that?

Yes, Paul, you hit it spot on obviously with improved earnings and cash from ops flat, the difference there that is hidden. You'll see it in our K. It'll jump out at you. But there is about almost $450 million of capital -- of working capital difference between '06 and '07. In other words, in '06 we benefited from working capital about $160 million, $170 million, and that was in '06. And in '07 we were hurt by working capital about $280 million. So net-net, if you look at cash generated absent working capital changes, on that attachment looks flat, it is actually up about $450 million.

So when we think about '08 what should we be thinking about in terms of operating cash flow?

I think just in general from year to year, you ought to expect operating cash flow to improve consistent with earnings. That's generally where it is. I'd say the working capital changes it's -- are hard to forecast on a year to year basis. PSE&G is driven very much by receivable so the extent that you got higher gas prices or higher delivery in the fourth quarter, that just causes receivable balance changes and then of course power is driven largely by margining. Longer-term prices go up, which is generally a good sign for power. That causes margining to be posted so working capital near term to go down.

Okay.

So in general, power is the views of the business guides with the treasury guides can be opposite direction.

Okay. I hear you. And then with respect to the planned additions. There have been a few announcements the 550 megawatts going to Knight -- potentially going to Knight sell. I guess there was a local story about you guys building a 138 megawatts for 2010. And of course you made the 300 megawatt to 400 megawatt announcement earlier. Just how should we think about the capacity additions, subtractions, retirements in your area going forward? Is 138 megawatts part of the 300 megawatt to 400 megawatt? How does it all sort of work? How should we think about capacity additions and subtractions and all of those?

I probably take your pieces in reverse order.

Okay.

The 300 megawatt to 400 megawatt that we discussed in October, I believe, it was.

Right.

Was meant to be a general level of new capacity that we expect to bid in the RPM auctions in January and May. The 120 megawatt to 130 megawatt , it was picked up in the local press here and I'd touched on a little more briefly in the comments. That was part of that. So we do have an existing -- I'm sorry, we have a number of sites. But we did build new peaking Brownfield capacity from existing northern New Jersey zone into the RPM bid.

That RPM bid I think is supposed to hit -- PGM's supposed to announce the results of that shortly. So we'll see if we cleared or not. Our plan would be if we cleared we'd certainly bid it. If we don't, we wouldn't expect to but we would seriously look at the same opportunity again in May. I just say on that one piece, the cost -- as we look at development of that project, one thing that we've been trying to get our arms around is whether there would be any incremental transmission cost. The greatest fairly constrained around here in this tough, quick development process necessary for the RMP to get a definitive answer on that. So we did -- our bid into this RPM auction did include some risk, if you will, for incremental transmissions costs that probably wouldn't be defined for some period of time from

Okay. I guess from a reserve margin basis, I guess, with some of these moving pieces, what is the outlook assuming you get the 550 megawatt transfer, what is the outlook for reserve margins that you guys are looking at in EMAAC, I guess, with all the stuff -- with what's happening in transmission and all this stuff? How should we think about that trend? Or just roughly speaking, what's your anticipation?

Yes. Paul (inaudible) The other project that did become public over the last few weeks, looking to take our Bergen station through the line with a partner and potentially supplying that to [Nico] through [a feed] they've got going. That is incremental. That is in a competitive process that [Nico's] got. There are certainly other participants in that. We made it quite clear within PJM and to the New Jersey folks that that would only be done if we're very comfortable that reliability could be maintained. Some simple reserve margins around that -- those are helpful, but the reliability is more -- that would surround that would be more local areas, especially the PS North, so.

Okay. Thanks, guys.

The next question is from Andrew Levi of Brencourt Advisors. Please proceed with your question.

I'm all set, guys. Thank you very much.

Next question, Andy.

The next question is from John Kiani of Deutsche Banc. Please proceed with your question.

Good morning, Ralph, Tom.

Good morning, John.

Can you talk about the status of classifying some of the new 69 kV construction at PSE&G as FERC transmission?

Yes, (inaudible) FERC on that. John, there's a seven factor test we believe we've passed. Time frame for decision on that, I don't have at the tip of my fingers. There's a couple of interveners who are really more involved in the point of view of making sure they get the facts and figures back. Last time we had heard anything from the Board of Public Utilities, they had filed intervention but were removing that intervention, so we see a pretty clear field ahead of us on that.

Okay, great. And then, as far as capital redeployment and return of capital to shareholders is concerned, can you talk a little about how you're weighing options for returning capital to shareholders versus potential growth acquisitions, and how you're looking at that dynamic now that we've got a strong balance sheet and good cash flow?

Yes. Sure. Tom touched on some of that. There's some big pieces of the puzzle that will be filled in coming a few days. We'll hear some results from RPM this Monday. We'll have a BGS auction in a couple a few weeks. We've just started the SAESA. It's a big process. We're excited, but we don't have a lot of information yet on the role we will be playing in the energy master plan. There are lease and economic head winds that didn't exist a year ago. So we're putting all that in the mix and talking about it on a fairly regular basis and we'll give you a lot more color at the March conference.

Okay, thanks.

The next question is from Ashar Khan of SAC Capital. Please proceed with your question.

Thanks. Tom, I just wanted to understand, the last I had from the EEI slides was that excess cash was $2 billion to $2.5 billion to 2011. And if I read this slide if I'm right doing apples to apples, it's saying $1.5 billion to $2 billion so there's been a reduction of $500 million. Am I missing something?

I'm sorry. Which slide are you looking at?

It's part in this presentation, isn't it? Number 30.

Why'd you ask that question, Ashar? That would be news to us, so --

Could be the time frame.

Yes, I think we generally look it over a five-year time frame. As we look over five-year time frame, it would be $2 billion, $2.5 billion. The objective here, Ashar, was not to change that number. We still feel as good about excess cash as we did. Perhaps --

Okay. Okay. So could be a typo here?

We think about planning on a five-year basis. So whatever you're reading is four years. So on a five-year basis we think $2 billion to $2.5 billion.

Okay. Thank you.

Mr. Izzo, Mr. O'Flynn, there are no further questions at this time. Please continue with your presentation or closing remarks.

Thank you for your -- joining us. We'll see you in March.

Great. Thank you very much.

Ladies and gentlemen, that does conclude the conference call for today. You may disconnect and thank you for your participating.