賓州電力 (PPL) 2012 Q3 法說會逐字稿

Good morning, my name is Carrie, and I will be your conference operator today.

At this time, I would like to welcome everyone to the PPL Corporation third quarter conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question-and-answer session.

(Operator Instructions)

I would now like to turn the call over to your Vice President and Director of Investor Relations, Mr. Joe Bergstein.

Thank you.

Good morning, everybody, and thank you for joining the PPL conference call on third quarter results and our general business outlook.

We are providing slides of this presentation on our website at www.pplweb.com.

Any statements made in the presentation about future operating results, or other future events, are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from such forward-looking statements.

A discussion of factors that could cause actual results or events to vary is contained in the appendix of this presentation and the company's SEC filings.

At this time, I would like to turn the call over to Bill Spence, PPL Chairman, President, and CEO.

Thanks, Joe, and good morning, everyone.

Thanks for dialing in.

Joining me on the call today are Paul Farr, PPL's Executive VP and Chief Financial Officer, as well as the Presidents of our four business segments who will participate in the Q&A session today.

To get started, I will provide an overview of our third quarter results and a few operational highlights.

Then Paul will provide more details on our segment performance for the quarter.

We will try to keep this call brief and focus primarily on the events of the quarter as I know your day is full of earnings calls and we will see many of you next week at EEI.

Before turning to earnings, I will update you on the impact of Hurricane Sandy.

The hurricane caused considerable damage in parts of eastern Pennsylvania served by our PPL Electric Utilities affiliate.

This was the largest storm to hit PPL Electric Utilities' service territory, causing outages to over 500,000 customers.

PPL Electric Utilities assembled the largest workforce in its history, more than 5,000 people, to undue Sandy's damage.

By Sunday night, power had been restored to 99% of the affected customers.

The remaining work wrapped up on Tuesday.

Some of our neighboring utilities closer to the coast fared significantly worst.

We have sent contractor crews that have completed work for PPL Electric Utilities to New Jersey and New York utilities to assist in the rebuilding of their devastated communities.

I know this was a very trying time for our customers, and I would really like to thank them for their understanding and patience as we work diligently to restore their power.

The PA governor's office and PUC showed strong leadership in working with the utility industry to ensure we had solid communications and very well coordinated assistance.

Especially through Pima and community emergency management organizations.

I would also like to recognize the hard work of PPL employees from Pennsylvania to Kentucky, as well as workers from out of state utilities who assisted us in our restoration efforts.

Now, let's move on to earnings.

Today, we announced third quarter reported earnings of $0.61 per share compared with $0.76 in the same quarter of 2011.

Earnings from ongoing operations for the quarter were $0.72 per share, versus $0.76 per share in the same period a year ago.

For the first three months of the year our reported earnings were $2 per share, up from $1.91 per share in the first nine months of 2011.

Ongoing earnings were $1.93 per share for the first three quarters of the year versus $2.02 per share in the same period last year.

Our results in the third quarter, and through the first nine months of the year, are strong evidence that we are delivering on the promises of our transformational acquisitions in 2010 and 2011.

As expected, our rate regulated businesses are providing financial stability as we continue to effectively manage through challenging wholesale market power prices.

I'm pleased with both our financial and operational performance given what the markets and mother nature have challenged us with.

Now, turning to slide 5. Strong earnings from the UK utilities and the ability of our supply group to manage outage challenges at our Susquehanna nuclear plant have put us in a position to raise the midpoint of our 2012 earnings forecast.

In fact, we are updating our 2012 forecast range to $2.30 to $2.40 per share in earnings from ongoing operations making the midpoint of our guidance $2.35 per share.

Before we move to Paul's comes let me take a few minutes for an operational overview.

Starting in Kentucky, now that we've signed contracts with various vendors, we've updated our estimate of capital spending necessary to complete our previously discussed environmental compliance projects.

We now estimate these projects will come in closer to $2.5 billion, a reduction of $500 million from our original forecast.

We are able to deliver these savings to customers in Kentucky because we proactively addressed EPA regulations and were able to secure bids before others.

These savings will contribute significantly to our objective of reducing equity needs over the next few years.

Paul will provide more details on this effort in a few moments including other CapEx reductions, higher dividend flows from the UK, and O&M savings.

Despite the capital spending reductions, we expect our rate base in Kentucky to grow at a compound annual rate of over 8% through 2016.

In addition, it's likely we will need to deploy capital in the 2016 and 2017 time frame to replace the Bluegrass facility and potentially other coal fire generation capacity.

But, we will clearly have the internal cash flow to support such investments at that time.

As for the rate case proceedings in Kentucky, we are moving along as planned.

A settlement conference has been scheduled for November 13 and 14, with public hearings scheduled to take place later this month.

We continue to anticipate an order from the commission in late December or early January with new rates effective shortly thereafter.

I've mentioned on previous calls that our management team in the UK has dramatically improved the customer service performance of our Midlands utilities.

This improved performance continues to translate into benefits for WPD customers as well as PPL share owners.

I'm pleased to report that WPD is forecasting for the regulatory year ended March 31, 2012, to have earned over $80 million in performance bonuses for the four UK utilities, most of which comes from the Midlands businesses.

This was due to our ability to deliver reliability to customers at frontier level performance.

These bonuses will be reflected in our revenues in the 12 month period starting April 1, 2013.

We can say with pride that our four network utilities are now among the best customer service providers in great Britain.

Turning to the domestic operations in Pennsylvania, in early October PPL Electric Utilities received final approval from the National Park Service to route the Susquehanna-Roseland transmission line through the park.

This was the final permit required for this major grid upgrade that will improve electric service for millions of people in the northeast.

Saving consumers more than an estimated $200 million per year and creating about 2,000 jobs during its construction.

The rate case in Pennsylvania is proceeding, headed towards a final commission decision in December.

We are, of course, disappointed by the ALJs recommended decision that would produce an elaborate turn on equity of 9.74%.

The ALJ recommendation would result in $64 million increase in distribution revenue as compared to the $104 million increase we had proposed when we filed our case.

Today, we are filing detailed exceptions to this ALJ recommendation.

We remain hopeful that the PUCs final decision will reflect a higher return on equity than this recommendation.

Especially in light of our need to continue to replace aging infrastructure and our strong customer service record.

At our supply segment, we resumed generating electricity from Unit 1 of the Susquehanna nuclear plant yesterday.

We shut down the unit October 20 to inspect the Unit 1 turbine.

The inspection confirmed data obtained from diagnostic equipment we installed earlier this year to monitor for conditions that could lead to turbine blade cracks.

This is good news because it confirms the root cause analysis and enables us to move forward with a long term solution.

During the just completed outage on Unit 1, we replaced small number of cracked blades.

Based on similar data from the diagnostic equipment on the Unit 2 turbine, we plan to shut that unit down for inspection and replace any cracked blades we discover.

We are finalizing our plans with the vendor on a long term solution that we believe will resolve the cracking issue and can be implemented starting in the first half of 2013.

We are revising the estimated after tax financial impact of these inspections to $25 million to $30 million as we have been able to complete them more rapidly than initially expected.

On slide 7, we provide updated detail on the competitive slide -- supply segment hedges.

We have adjusted our expected output levels for 2012 to reflect actual results through September 30 and our forecast for the remainder of this year.

The decline in our expected eastern base load generation is primarily driven by the Susquehanna outage.

For 2013, we've reduced our coal hedges in the east as we continue to manage our coal levels by working with coal suppliers to defer, renegotiate, or buy out existing coal contracts.

We've also provided our 2014 hedge details for the first time as we've layered on additional power hedges and have hedged now, approximately, 50% of our 2014 base load output.

By the end of 2012, we would expect to be 60% to 90% hedged for 2014.

In conclusion, we are very pleased with our results through the first nine months and confident this business mix is producing the share owner benefits we expected.

The Midlands acquisition continues to prove to be highly successful.

The supply segment continues to perform well and manage through the current market and operational challenges.

And, our domestic regulated segments are progressing through the rate proceedings and executing on the rate based growth opportunities.

I look forward to your questions following Paul's comments.

Paul?

Thanks, Bill, and good morning, everyone.

Let's move to slide 8 to review our third quarter financial results.

PPL's third quarter earnings from ongoing operations were lower than last year.

Primarily driven by lower earnings at the supply segment as a result of lower energy margins, higher O&M, and higher depreciation, which were partially offset by higher earnings in the UK primarily driven by higher delivery revenue.

We've outlined on slide 9 the Kentucky regulated segment earnings drivers.

Our Kentucky regulated segment earned $0.12 per share in the third quarter, a $0.01 decrease compared to last year.

This decrease was primarily driven by lower retail margins as a result of lower residential consumption, partially offset by higher industrial load compared to a year ago.

Moving now to slide 10.

Our UK regulated segment earned $0.28 per share in the third quarter, a $0.06 increase over last year.

This increase was due to higher earnings at WPD Midlands and higher delivery revenue at WPD South West and South Wales, primarily driven by higher prices.

These positive earnings drivers were partially offset by higher pension expense at the two legacy companies and less favorable currency exchange rates.

Turning to our Pennsylvania regulated segment on slide 11, this segment earned $0.06 per share in the quarter, a $0.01 per share increase compared to last year.

This increase was primarily due to higher transmission and distribution margins and lower financing costs, partially offset by higher O&M.

Moving to slide 12, our supply segment earned $0.26 per share in the third quarter, a decrease of $0.10 compared to last year.

This decrease was driven by lower Eastern energy margins primarily due to lower hedged energy prices, lower Western energy margins primarily due to lower volumes, higher O&M, higher depreciation, and higher financing costs.

Turning to slide 13, we have updated our CapEx plan to reflect the changes for the lower projected ECR capital spending in Kentucky.

As Bill discussed, this represents a $500 million reduction for 2012 to 2016 from our original plan.

We are still finalizing our business planning process, but have identified an additional $200 million to $300 million of supply CapEx that can be eliminated over the next several years that is not currently reflected in this chart.

These capital reductions will provide additional financial flexibility while we continue to manage through a low commodity price environment.

Turning to slide 14, we have updated our rate base growth projections with the only change being the reduced ECR spending in Kentucky.

We now project more than $7.5 billion in increase in rate base from 2012 to 2016, resulting in a 7.5% compound annual growth rate.

We realize the reduced capital spending in Kentucky has an impact on future EPS, but this is significantly offset by the elimination of the equity needed to fund those investments.

Obviously, the almost $700 million to $800 million in reduced CapEx in supply in Kentucky is a major driver to eliminating equity needs beyond our drip issuance.

We also expect to repatriate an additional $30 million to $50 million per year above our previous expectations from the UK, driven by our forecast of strong annual revenue bonuses and performance ahead of plan on cost synergies.

We continue to evaluate our level of O&M spending and have made progress on that front.

But, Fukushima related costs and the need for additional outages at Susquehanna over the next few years to implement the permanent fix for the blade cracking issue are expected to absorb that benefit in the near term.

Beyond this time frame, we see opportunity to reduce supply O&M.

Given the significant attention dividends have received during this earnings season, let me end with our commitment to the dividends, which we view as an extremely important piece of our total shareholder return.

The current dividend level represents a 61% payout ratio based on the midpoint of our revised 2012 earnings forecast.

And, is much more than covered by our rate regulated earnings.

As we have been indicating, we expect modest increases to the dividend through the low parts of the commodity cycle and as we deploy significant capital in our rate regulated utility businesses.

This intention is reflected in the dividend increase that we announced earlier this year.

Our dividend is secure, and we clearly see added flexibility for future growth as we execute on our rate regulated growth strategy.

With that, by way of review, I would like to turn the call back over to Bill for the Q&A period.

Thank you, Paul.

Operator, we are now ready for questions.

(Operator Instructions)

Paul Patterson.

Good morning.

Can you hear me?

Yes, we can.

Good morning, Paul.

On the nuclear cost side there, you mentioned some -- could you just give us a little bit more of a flavor?

You said $25 million to $30 million for the inspection.

But, what kind of costs are we talking about when they start the actual repair of the blade cracks?

And, any of the Fukushima -- or any other basic costs that you are seeing?

The other question related to that is that Exxon mentioned on their call that they were looking at an annual refueling cycle, potentially to, at least at some of their plants, to help out with fuel expense.

I was wondering what your thoughts are about that with respect to Susquehanna?

Sure, I don't think we would change our refueling outages at this point or the timing of them.

Related to costs for Fukushima, we are still in the process of determining that, but as we've mentioned on previous calls, we think the capital costs will be very manageable.

And, the real question -- or open question at the moment, is whether the industry will be required to install filtered vents on the units, and that will be a little bit more costly.

But, again, I don't think, in the overall context of PPL, that those costs of capital would be unmanageable.

As for your first part of your question on the costs to replace the blades and the ultimate fix.

On the replacement side, the cost for the O&M associated with the outage, as well as the replacement cost, those have been already factored into the numbers that we provided today, that $25 million to $35 million after tax.

In terms of the fix, we are still determining exactly what those costs would be.

Again, I don't think that they are going to be unmanageable for us.

Okay, and then, with respect to the filtered venting issue, what -- you mentioned it's manageable for you guys.

Any sense, just roughly speaking, what the impact could be there?

I will ask Dave DeCampli to comment on that.

Yes, first of all, we believe the commission, the NRC, will be wrestling with this issue shortly, probably by the end of the month as to whether the filtered vent will be included in the package of improvements or changes we will have to make at the unit.

Filtered vent, Paul, we do not have a solid enough estimate on it at this point in time.

We do have an estimate for the balance of the other changes we believe will be necessary, and that is somewhere between $60 million and $85 million of capital.

Yes.

I think --.

That doesn't include the vents, is that right?

That's correct.

That's right.

I think that --.

Go ahead.

My understanding was that the staff was going to be issuing a recommendation for those filtered vents.

And, I'm just trying to get a sense as to what the impact of those would be.

Sure.

I think we will know more by the end ever the month once we find out exactly what they are looking for and the time frame they are looking for it.

Okay, and these are capital expenses.

Is O&M considerably more or less, or a big factor at all in this?

It really wouldn't factor in in any meaningful way.

It would be capital.

Okay.

And then, just on industrial sales in Kentucky, it looked like they were -- they've been very strong.

What's going on there?

Sure, I'll ask Vic Staffieri to comment.

Our capital -- our sales on industrials are up 9% quarter-over-quarter and about 6% for the year.

That's just because we've had some good robust industrial sales in the automotive sector and in the North American stainless, and the return to service of a facility that was out of service last year.

So, we've had good steady industrial sales growth in Kentucky this year.

6% over last year.

And, just in terms of trading, just to revisit on that, how is the outlook for trading in your forecast now looking?

Your current experience and just what you are seeing out there?

We were right on plan.

I don't think there is any change.

And then, just finally, the Kentucky case, it looks like you guys are going to be having a settlement discussions pretty soon.

Any sense as to how those are shaping up or the outlook for those?

The settlement hearings are scheduled to begin next week.

It will be too early for me to speculate.

We haven't had a chance to sit down with the interveners yet.

The big issues, as you might imagine, are return on equity and some depreciation, a little bit of skirmishing around O&M expenses, but it's really the return on equity.

Thanks, a lot.

Kit Konolige.

Good morning, guys, thanks.

So, a couple of questions.

Paul, I think in the past you've talked about your belief that the -- that earnings from the supply business would not drop below zero at the bottom of the cycle.

Is that still the case as you start to hedge out into '14 now?

Yes, as I think about the hedges that we've layered in and I think about the balance of the business plan, which again is getting close to final, we continue to believe that we can keep the supply earnings at neutral to positive for the tougher years of the cycle that you are referencing.

Okay, excellent.

And, on the -- on WPD then, you said that over $80 million in performance bonuses.

This is relative to the -- I think in the past you've talked about $60 million or better that you expected here.

That's the data point that we are following here?

Yes, that's correct.

Correct.

All right, very good.

Okay, those are my questions.

Thank you.

Justin McCann.

Good morning, question for Paul.

What is your current projection of average outstanding shares for '13 and '14?

And, also your expected effective tax rate both for the UK and on a consolidated basis for those years?

Yes, on a consolidated basis on the ETR for '12 and '13, we are around 28% to 30% for '12 and '13 in that zip code blending across all of the -- actually a little lower than that, closer to 25% for '12, 28% to 30% for 2013.

And, let me pull the share amounts for 2012, weighted average around 586 million.

We will get back to you on the '13 number.

Okay, all right.

Thank you.

Sure.

Julien Dumoulin.

Congratulations on the UK here.

It just seems like it never stops.

I would be curious to what extent are the year-to-date benefits are above plan that you recognize in your new guidance?

Are those go forward or is this really driven by a one time tax benefit this year?

If you parse that apart, I would appreciate it.

Sure, I would say it's really a combination of great operational performance, good customer service, and reliability that is going to drive some of the performance on a go-forward basis.

And then, there are some tax benefits.

But, I think basically it's small and it's really driven by the fundamentals of the business, not any one time items.

Great.

And then, secondly on supply, going back to the first question there on the nuclear costs.

If you could, just in aggregate, what kind of cost increases are we talking about?

And then, secondly, just flagging, I suppose, to the extent to which on a go-forward basis, '12, '13, '14, what kind of costs are we talking about?

At what point will we recognize this O&M benefit?

Sure, well, on the cost for Fukushima related, as we mentioned, the first part of it is pretty well known and that's making changes to everything but the filtered vents.

The items that the NRC and the industry are on the same page with which will allow us to respond better in the unlikely event of a challenge to off site power in particular.

As well as maintaining proper levels and understanding where the water levels are in the spent fuel pools as well as the temperatures.

Those instrumentation changes are relatively small and low capital cost items.

So, all of that, as Dave mentioned, I think in the $50 million to $60 million range.

The bigger unknown is around the filtered vents, which, as I commented earlier, we don't have a good estimate yet because we're not exactly sure what the NRC may be looking for.

When it comes to the turbine blades, the majority of our expense to do the permanent fix will probably come next year.

Now, it will come with some unscheduled outages, so we are going to have -- on the unit that's not in a refueling.

We'll have a special outage to put in the permanent fix.

Then the scheduled outage may -- hopefully wouldn't take much longer but it could be a little bit longer.

O&M for 2013 will be a bit higher.

Now, as I mentioned on the last call we have a number of initiatives underway to trim our O&M and capital expenses, particularly in the supply segment.

And, there, we would expect some of the O&M savings for 2013 would be offset by the increased outage that we have to take next year.

That's a run down of where we see the supply business from an O&M and capital perspective.

Excellent, and perhaps a last quick one here.

More strategic, on the supply business overall, how are you thinking about it from an ownership perspective?

Particularly given some of the comments from some of your peers of late.

Sure.

We still like the business mix that we have.

We have no plans to make a strategic change with the supply business.

And, we're happy with its performance through the good part of the cycle and we will manage it well through the down cycle.

Got you.

Thank you.

You're welcome.

Jonathan Arnold.

Good morning.

Good morning.

Just on the additional CapEx cuts, I think, Paul, you mentioned in your speech $200 million to $300 million of additional CapEx you might take out over the next several years.

Are you saying that you are planning to go through with these?

Or that is something that you have up your sleeve to manage through a prolonged down cycle?

Or is that something -- work we are going to actually see you do now?

I would say as we look at the responding to the lower commodity environment that those are actions that make economic sense to take.

And, we would plan to take those in the final business plan that our Board will approve later this year.

I don't think (multiple speakers) that's the margin.

So, that's something that is going to be in the plan but just wasn't on the slide?

Correct.

We typically only update the chart in full of CapEx on an annual basis.

And then, provide you throughout the year, as we make changes, we provide you the deltas.

We will reassess whether or not we actually go ahead and update that going forward, just so you have it all in one spot.

Okay.

And then, you talked about, I think it was $500 million of lower spending on environmental CapEx.

And then -- because you had moved early on getting the stuff moving.

To what extent was it a function of the final rules being less severe than maybe the initial proposal?

Was that a piece of it or not?

No, that was a very small piece.

It was $30 million to $40 million in the total spending to optimize around Jasper.

It was heavily driven by the mercury rule, so not driven by that at all.

So, you've just been more conservative about what you assumed it would cost?

I'm not sure -- I'm sorry, this is Vic Staffieri.

I would say it's not a question of conservatism.

We had a plan that we laid out with the regulatory commission in Kentucky.

We applied, pursuant to our environmental cost recovery mechanisms.

We had projections of what we thought the compliance costs were.

And, we were just very fortunate that with the commission's support we were able to get out early, get our estimates in, get it all bid.

Everything was bid here, including all the commodities, and all of these bids have come back very favorable.

And, that's really the genesis of the $500 million in savings.

Great.

Congratulations on that and thank you.

Look forward to seeing you guys in Phoenix.

Thanks, Jonathan.

Anthony Crowdell.

Good morning.

Just a quick question on -- you had said, I guess, there's additional dividends being repatriated from the UK properties.

Is that additional -- does that get absorbed by the higher expenses of the other business units?

No, I would say that that's a straight increment in terms of additional cash flow that we got in the US that we were then able to deploy to the regulated utilities, primarily here, that have the equity needs as they're growing rate base so strongly.

We don't have a forecast out for '13.

I don't want to talk about things on a net basis per se.

But, that's not being absorbed and is incremental to the cash we have to invest in the domestic rate regulated.

Lastly, it looks like you have potential to wrap up the cases late December, early next year, both in Kentucky and in Pennsylvania.

Does the company think they could earn their allowed return in these two jurisdictions once these rate proceedings are finished or there still be lag where you'll still under earn?

Since we are still in a pretty heavily capital intensive building program, infrastructure replacements, there is going to be immediately some type of lag.

We can manage some of that hopefully, through O&M and other levers that we have, to try to keep it close to or near the ROE.

I think, as we've said in the past, with the type of spending we need to do on a traditional general rate case basis, that we would be probably looking at needing to file every few years.

I would probably just remind you that a lot of the spending that we are planning to do has realtime or near realtime recovery, particularly in Kentucky with the environmental spend.

And, of course, in the UK it's all return of and on immediately as we spend it.

Then in Pennsylvania, we have a new law that was passed early this year that will allow us to file for some of the capital.

About one-third or more of the capital, that we had planned to spend under a new rate making mechanism which will allow more timely recovery.

I think, overall, we feel good about our ability to keep the returns close to the authorized level because the rate making constructive arrangements that we have in both Pennsylvania and Kentucky.

Great.

Thank you.

Another thing, I'll chime in with is, the other thing that's a driver that's a bit going against us is Pennsylvania, we are dealing with, still, with Act 129.

And, that's clipping the kilowatt hour sales growth that would more organically be there.

We talked about the strength of industrial in Kentucky, but we've seen some soft residential.

A lot of our ability to stay out for longer periods will be dictated by how strongly the economy recovers and getting back to normal load growth profiles as well.

Great.

Thanks for your time, guys.

Paul Ridzon.

Good morning.

Do you have any recourse to the vendor on the turbine blades?

Are they going to share some of this cost or is that all going to be expensed by you?

At this point we have not made that determination.

I think we are both focused on ensuring that we know the root cause and putting in a permanent fix.

In terms of the commercial sharing of the cost, that will come at a later date.

I think we are very focused on just making sure that we get the permanent fix into the unit as quickly as possible.

Thank you, very much.

Michael Lapides.

I just wanted to make sure one thing, I'm not following.

Are you expecting multiple years of higher nuclear O&M and capital costs at suppliers?

Or is this more of a one time thing related to Fukushima, meaning a one year where you will see a higher expense and things normalize beyond that?

We would be looking at this as a one time expense.

We are hopeful that, for the Susquehanna turbine outage blade cracking issue, we can accomplish much of what we need to do in 2013.

We will know better by the end of the year.

We would look at these as one time events.

Okay.

And, just want to make sure that I follow, the potential CapEx reductions at supply are not on the slide deck that you put out -- that's not on the slide deck you put out today.

But, maybe something you put out when you give guidance for '13 as well as any potential O&M reductions you do at supply.

Exactly right.

Yes.

Okay.

Thank you.

Steve Fleishman.

Good morning, Steve.

Hey, Bill.

Just a couple of questions.

First, on the hedging strategy, you guys ramped up a lot of hedging for '14 the last two quarters.

Are you planning to more ratably hedge from here on?

Because you had left it open for awhile, ramped it up.

Is it back to more rateable hedging from here?

I think -- it probably, because we are getting closer to the period in which we would want to have 2014 more highly hedged, it will probably tend to be more rateable, Steve.

But, just as we have done in this last rally, we are going to look to pick our spots as to when we hedge.

So, I would say we are leaning in that direction to be more rateable.

But, we are going to certainly take advantage of any market opportunities as we see them.

I would also say that we just completed our own internal fundamental analysis.

And, I would say the team is more bullish on '14 and '15 than they have been for awhile now.

That would tend to have us leave it open a little bit more than we otherwise would.

Again, as we drive closer and closer to '14 we will want to have a pretty heavily hedged book by then.

Okay.

One other question on Susquehanna.

Is the outage cost expected to be similar to this year?

Or is it just uncertain?

Go ahead, Dave.

Why don't you answer that.

Yes, the cost this year included -- will include three additional outages, really.

We had a refueling outage.

But, in addition to that we had an inspection outage for the other unit in the spring plus the outage we just accomplished plus a short upcoming outage to the other unit soon to start.

So, this year we experienced three, what we will call maintenance or inspection outages, to deal with the turbine blade issue.

We expect just one of those next year in addition to the refueling outage.

So, next year's O&M costs would be about one-third of what they would have been this year.

Okay, great.

Thank you.

Sure.

Brian Chin.

Good morning, Brian.

Actually, my questions have been -- hi, good morning.

My questions have been asked and answered.

Thank you.

Great, thank you.

(Operator Instructions)

Raymond Leung.

Hey, guys.

Just, Paul, can you just give us an update on the latest thoughts on the equity proceeds from the equity units?

I think you talked about downstreaming to get it down to supply, in terms of reducing debt there.

Any updates on thoughts, given that you have been able to maybe potentially reduce some costs and CapEx?

Does that change your view there?

It really doesn't change the view there per se.

It lightens up in '13 and '14, the equity needs, a little bit in Kentucky.

But, we have around a $700 million -- north of a $700 million refinancing that was otherwise due at supply next year.

So, we will downstream cash for that.

We will equitize appropriately, Kentucky and PPL Electric Utilities, to help finance those rate base growth plans.

So, I wouldn't say, really, anything has changed with respect to that.

To the -- sorry to hijack the question, but the individual that asked about the 2013, the weighted average share count is 614 million shares for that year.

But, Ray, I wouldn't expect that we would be changing the plan materially.

And, again, those cuts are coming across a four to five year window.

In any given year they are not all that significant.

Okay.

And, just as a side bar question.

Can you talk about PPL Montana and what's going on down there?

I think one of the agencies changed the outlook the other day.

Is it all margin pressure and lack of contracts?

Yes.

If you read the S&P report, it's reduced levels of contracting as we go out over the next couple of years.

So, very heavily hedged this year, next year, less hedged in '14 and '15.

And, those are the years, like we see with respect to the entire supply business, where we do see some pressure on it.

And, given the project finance nature of that sale lease back, they put a negative outlook on the BBB minus.

Great, thanks.

See you guys next week.

Okay, thanks.

(Operator Instructions)

Ashar Khan.

Good morning and congrats.

I just wanted to -- I guess, Bill, you mentioned in the beginning of your comments that there might be some more additional CapEx at Kentucky in '16 and '17.

Could you just tell us the amount and when will that be firmed up?

I guess it's not in your projections right now?

It is not in the projections right now, Ashar.

We don't have a preliminary number yet.

Maybe Vic can talk to what we are thinking about it in terms of projects.

We are in the process now of an RFP, we just got the offers in last week to meet on them.

We have some capacity requirements in '17 and '18.

We had the Bluegrass turbines, originally we were going to use to meet that, we haven't done that.

There's capital savings we reflected in 2012.

And, until we evaluate the bids that we just received, and we will take into account any self-build options for '17 and '18, it's still a little early for us to make an estimate of what those capital requirements might be.

When will you get to know?

Is it a year down the road?

Or when should we expect you having a clearer idea of those?

That should be handled by the first quarter of next year when we are done with the evaluation of the RFPs.

Okay.

Thank you, so much.

Thanks, Ashar.

Operator, if there are no more questions in the queue?

Apparently not, okay.

Thanks, everyone, for joining us today and we will see many of you at EEI and safe travels.

This concludes today's conference call.

You may now disconnect.