桑普拉能源 (SRE) 2011 Q2 法說會逐字稿

Good day, and welcome to the Sempra Energy second quarter 2011 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Steve Davis. Please go ahead, sir.

Good morning, and thank you for joining us. I'm Steve Davis, Vice President of Investor Relations. This morning we'll be discussing Sempra Energy's second quarter 2011 financial results. A live webcast of the teleconference and Slide presentation is available on our website under the Investor section. With us today in San Diego are several members of our management team, including Don Felsinger, Executive Chairman, Debbie Reed, Chief Executive Officer, Neal Schmale, President and Chief Operating Officer, Mark Snell, Executive Vice President and Chief Financial Officer, and Joe Householder, Senior Vice President and Controller.

You'll note that Slide 2 contains our Safe Harbor statement. Please remember that this call contains forward-looking statements that are not historical fact, and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance. As you know they involve risks, uncertainties and assumptions, so future results may differ materially from those expressed on our call. These risks, uncertainties, and assumptions are described at the bottom of today's press release, and are further discussed in the Company's reports filed with the Securities and Exchange Commission. It's important to note that all of the earnings per share amounts in our presentation are shown on a diluted basis. With that, I'll turn it over to Don.

Thanks, Steve, and thank you all for joining us. I'd like to begin today's call by commenting on our recent CEO succession process. We'll then review our second quarter financial results, and then provide an operational update on our businesses. In light of Schmale's retirement later this year, and my retirement next year, our Board engaged in a thoughtful, year long process to insure a smooth leadership succession. That process culminated in the election of Debbie Reed as CEO, and as a Sempra Board member.

As many of you know, Debbie has a broad understanding of the energy industry, and has excelled in her 30 year career with the Sempra Companies. She has demonstrated outstanding leadership at every level of responsibility. She is also well respected by key stakeholders that we interface with, including customers, regulators, elected officials, community leaders, and our employees. Given this, we decided that she was the right person to lead the Company going forward.

Once a decision was reached that Debbie would succeed me as CEO, we decided to make that transition effective immediately. This timing provides Debbie with the opportunity to focus on Sempra's annual strategic review of our business. Additionally, this timing allows Neal and me, to provide support and guidance to Debbie, and the rest of the organization during this transition until our retirements. We have an excellent management team in place to take the Company forward. The Board and I are confident that Debbie, Mark, the business unit presidents, and the rest of the management team will continue our excellent track record of creating shareholder value, and delivering great service to our customers. Now, I'd like to hand the call over to Debbie.

Thanks, Don. I'm pleased to join you all in my new role today. Before I review our second quarter results with you, I would like to address a question some of you have asked concerning my strategic vision for Sempra. I want to start by reiterating that our strategy has been and will continue to be, focused on regulated utilities and contracted energy infrastructure. It is a space within our sector where we have demonstrated success, and one in which we have deep competency.

As Don mentioned, we have just begun our annual strategic review at Sempra, in which we update our five year business plan. This year, I have three objectives that we will complete as part of this process. First, we will conduct a thorough market assessment of the short and long-term business environment in which we operate. We will be analyzing market trends to identify opportunities and risks. As an example, environmental regulations are prompting retirements of coal plants, at the same time that nuclear plant development has been substantially slowed. This trend is likely to create opportunities for natural gas-fired generation, and the development of new gas infrastructure including storage.

Secondly, we will be reviewing the current and expected performance of our asset portfolio considering market cycles, and focusing on getting the greatest value from these assets. We will develop specific strategies for assets not meeting our return expectations in this market environment. Lastly, we will put in place the organization and leadership to execute and deliver on our plans.

I feel fortunate to have Don, Neal, Mark and the rest of the management team available to draw upon, and support me in this process as I transition into my new role. As always, we will update you on any developments on our quarterly earnings calls, and at our Analyst conference next spring.

Now let's move on to the review of our second quarter and year-to-date financial results. Earlier this morning, we reported second quarter earnings of $511 million or $2.12 per share, compared with $222 million or $0.89 per share in the same period last year. This year's second quarter earnings included a gain of $277 million or $1.15 per share, reflecting write-up in the value of the Company's original investments in Chile and Peru. This was a result of acquisition of a controlling interest in those utilities during the quarter. Excluding the impact of this gain, our quarterly earnings per share increased by 9%.

Earnings through the first six months of 2011 were $769 million or $3.19 per share, compared with $328 million or $1.31 per share in 2010. First quarter 2010 earnings included an after-tax charge of $96 million or $0.38 per share related to a litigation settlement. Our financial performance for the first half of the year is in line with our expectations for this point in the year, and on a full-year basis. We remain on track to generate earnings of $4 to $4.30 per share. This, of course, excludes the impact of the write-up that we recognized this quarter.

While our earnings in the second half of the year will be impacted by the expiration of Sempra Generations' 10 year contract with the California Department of Water Resources at the end of the third quarter, we expect higher second half earnings at our California utilities, consistent with our past performance. Additionally, we are expecting the contribution from some regulatory matters that we anticipate to be resolved later this year.

SDG&E will be requesting the CPUC's approval to recover a total of about $90 million of increased wildfire insurance costs from July 2010 through December of this year. About $60 million of that has already been requested, and we expect to file a request in the third quarter of this year for an additional $30 million. You may recall that late last year, the Commission allowed SDG&E to recover $29 million of insurance costs for the July 2009 to June 2010 policy period. It also provided guidance for future recovery requests, until our next general rate case. And our two requests will be consistent with that guidance.

The other regulatory matters that we anticipate to be resolved by the end of the year, are applications for $17 million of energy efficiency awards for SDG&E and SoCalGas, and a $6 million gas cost incentive mechanism award at SoCalGas. I'd note all of the items I've just described are on a pre-tax basis.

Now I'd like to hand it over to Mark, so he can take you through some of the details of the financial results, beginning with Slide four.

Thanks, Debbie. At San Diego Gas & Electric, earnings for the second quarter of 2011 were $71 million, compared with earnings of $75 million in the year ago quarter. The small variance was due to higher AFUDC earnings, which were more than offset by higher litigation expense and insurance premiums. For the six months of 2011, SDG&E's earnings were $160 million, which is in line with the $158 million of earnings last year.

At Southern California Gas Company, second quarter 2011 earnings were $59 million, compared with $69 million in the second quarter of 2010. The second quarter of this year was impacted by $5 million from lower storage revenues and higher expenses, net of higher CPUC authorized margin, and a $4 million adjustment to prior year employee benefit costs. For the six months of 2011, SoCalGas' earnings were $127 million, compared with $134 million of earnings last year.

Now let's go to Slide 5. Sempra Pipelines & Storage recorded earnings of $337 million in the second quarter of 2011, compared with earnings of $39 million in the same quarter of 2010. Excluding the impact of the $277 million gain, earnings were $60 million for the quarter, and the quarter benefited from $14 million of higher earnings from our increased ownership stake in the utilities in Chile and Peru, and also five -- from $5 million of higher earnings from the pipeline assets in Mexico, which were acquired in the second quarter of 2010.

For the first half of 2011, Sempra Pipelines and Storage had earnings of $391 million. Excluding the impact of the $277 million gain this year, earnings of $114 million for the first half of 2011, compared with $77 million last year. The increase was mainly due to $20 million higher earnings from Chile and Peru, and $13 million higher earnings from Mexican pipeline assets.

Now let's go to Slide 6. Sempra LNG had earnings of $18 million in the second quarter of 2011, compared with earnings of $13 million in the prior year's period. For the first six months of 2011, Sempra LNG's earnings were $51 million, up from $45 million last year. Both the second quarter and year-to-date 2011 results, included $11 million higher earnings from customer payments related to the non-delivery of contracted cargoes.

Now please move to Slide 7. Our Generation business recorded earnings of $50 million in the second quarter of 2011, compared with earnings of $52 million in the same quarter of 2010. For the first six months of 2011, Sempra Generations earnings were $94 million, up from $1 million of earnings last year. Last year's results included an $84 million charge, related to a litigation settlement in the first quarter. The improvement in earnings was also due to $15 million of lower operating and maintenance costs, as a result of scheduled plant maintenance, and earthquake damage to our Mexicali power plant in 2010. This was offset by $4 million higher depreciation expense this year. And with that, I'll turn it back over to Debbie, who will begin with Slide 8.

Thanks, Mark. Now, let me update you on activities at our California utility. Last month, SDG&E and SoCalGas filed updates to their General Rate Case Application, which reflect the impact of bonus depreciation. The updates were consistent with what we had included in the guidance provided you in March. The CPUC's schedule for the rate cases calls for intervener testimony in September, hearings late in the year, and a final CPUC decision around March of 2012. The CPUC has already approved, making the new rates established by these rate cases, retroactive to January 1, 2012.

Another important regulatory proceeding is the CPUC's examination of what changes should be made to natural gas pipelines, following the tragedy in San Bruno. As we talked about on our last call, the CPUC requested records supporting maximum allowable operating pressures for 1,600 miles, out of 4,000 miles of Department of Transportation defined transmission pipeline that SoCalGas and SDG&E operates. We conducted an extensive review, which renewed our confidence that the maximum pressures on our systems have been appropriately set, in accordance with current regulations, and that we operate our systems safely.

The CPUC has also directed the natural gas utilities in California to file implementation plans to comply with new requirements to test or replace all transmission pipelines that have not been pressure tested. We will submit our plan to the CPUC by August 26. We believe that complying with these new requirements has the potential of increasing capital spending at our utilities, particularly at SoCalGas by several hundred million dollars per year over a 10 year period, but it will ultimately be the Commission's decision to set the appropriate level of spending going forward. Both SoCalGas and SDG&E expect full recovery for all incremental costs related to complying with the new requirement.

Please go to Slide 9. Now let's move on to some of the major utility projects. For the $1.9 billion Sunrise Power Link project, construction is progressing as planned. The project is on budget, and is now about 30% complete. We continue to expect to complete the line in the second half of next year.

Turning to SDG&E's smart meter program, this project is now essentially complete. The mass deployment phase has concluded. As of the end of the second quarter over 1.3 million electric and 850,000 gas meters have been installed. I'd also mention that SoCalGas' advanced metering project is on track, and the upgrade of 6 million natural gas meters is expected to begin next year.

As for the push towards meeting the 33% renewables target, SDG&E has made significant progress this year. Since the beginning of the year, contracts for more than 1,200 megawatts of renewable energy have been added to it's portfolio. One renewable project that I'd like to highlight is Rim Rock, which is a 189 megawatt wind project, that demonstrates a unique approach to helping meet the renewable goals at SDG&E. Last month, the CPUC unanimously voted to allow SDG&E to make a tax equity investment, for up to $250 million in the Rim Rock project.

The investment will be included in rate base, and represents the first regulated tax equity structure in the nation. We will also make an additional shareholder investment in the project, which is expected to be about $40 million, and should earn a utility-like return. This innovative structure benefits customers by lowering costs for clean energy, and serves as a model for future projects.

Now let's move to the next Slide. Last week, we announced the expansion of our Copper Mountain solar complex in Nevada. The project, creatively called Copper Mountain 2, is supported by a 25 year power sales contract with PG&E that is now pending approval by the CPUC. We expect 92 megawatts to be complete by January of 2013, and 58 megawatts by 2015. And at the end of the second quarter, the 250 megawatt Cedar Creek 2 Wind Project in Colorado was also placed in service. This project is a 50/50 joint venture with BP Wind. There is a 25 year agreement in place, with a utility subsidiary of Xcel Energy for the sale of the project power.

At our last Analyst conference in March, we discussed plans to develop a 1,000 megawatts of renewable capacity at Sempra Generation over the next five years. Already, half of this goal has been met with projects that have been completed, and under construction, or have been contracted. Also out of these 500 megawatts, about 300 megawatts have already received the necessary regulatory approval. We are developing and building a robust pipeline of renewable projects, and including in our Slide presentation is an appendix summarizing these projects that we've launched today. In addition to the 1,000 megawatts in our five year plan, we have the potential for roughly 1,700 megawatts of additional renewable projects based upon our existing land position.

I'd also like to update you on our efforts to maximize the value of Sempra Generation's natural gas plant. We recently signed a 25 year agreement to supply 240 megawatts of electricity to an association of electric utilities in Arizona and southern Nevada. The contract, which starts in 2015, provides us with an attractive long term strategic hedge for a significant portion of our existing generation and capacity at Palo Verde, and serves as a platform for further optimization of the two remaining gas-fired plants we will have following the transfer of El Dorado to SDG&E on October 1 of this year.

By the way, I'd also like to share with you that I recently visited Peru, and had the opportunity to meet with Peru's new President, as well as the Prime Minister and Energy Minister. We had a very constructive meeting, and it gave me confidence that the positive regulatory framework, our electric utility has operated under for over a decade will continue. There is great interest in ensuring that Peru has a robust electric and increased generation capacity to keep up with this economic growth.

Now, please turn to the final Slides. We're pleased that we're on track to meet our guidance for the year, and I have confidence that our utilities will deliver strong results in the second half of this year, consistent with our long track record of solid performance. The major projects at our California utilities are moving forward according to plan, and our infrastructure businesses are performing well.

Before I open up the call to take questions, I'd like to take a moment to acknowledge the fact that this is Neal Schmale's final earnings call, before his retirement later this year. In his prior role as Chief Financial Officer, and his current role as President and Chief Operating Officer, Neal has made countless, significant contributions to Sempra Energy in his 13 years with the Company. I want to thank him for his leadership and dedication to our Company, and wish him the very best in his retirement. And with that, I'll stop and open up the call to take any of your questions.

(Operator Instructions).

We'll take our first question from Faisal Khan of Citi.

Good afternoon. On the -- I believe the power generation contract that I believe you guys signed at Sempra Generation, the 25 year contract for 240 megawatts beginning in 2015, can you guys talk about that a little bit more, in terms of what the pricing outlook is for that? I know we have the contract falling off at the end of the year. What is that -- what is that contract exactly -- how is the contract structured?

Good morning, Faisal. How are you?

Good.

I would just say we're not going to disclose the commercial terms, but we feel this is a really good starting point for hedging our fleet. And we feel very positive about the contract, we think it's good for the customer and very good for our business as well.

Okay. Fair enough. And then if you could give us a little update on how you guys are thinking about some of your gas infrastructure assets within the US, particularly, your equity investment in Rex, and your storage assets, and your LNG assets, are you guys still thinking about, or do you ever look at the MLP structure and how that could enhance the value of Sempra stock, or how that might help you guys grow that business a little bit further?

Well, Faisal, I'll start, and ask Mark to add anything to that. As was mentioned, we're engaged right now in our strategy work that we do every year around this time, and those are the kinds of questions that we're looking at as part of the strategy work. We're looking at every asset we have, and what's the best structure for that asset. Is that an asset that we can add assets to, and increase the value? And what is the best way to maximize the value of our existing investments? And certainly, we will look at structures like MLP as part of that. Mark, do you want to add anything?

Yes, I would just say we've looked at it in the past, and I think we're focused on it now. And I would expect that we would -- I don't know that we'll go exactly the MLP route, but I do think we'll do something to maximize the value of our assets. But that's certainly an option that's open, and we're exploring it in the current market.

Okay. And have you guys also looked at the liquefaction option at your Cameron facility? Is that still a possibility, or how are you guys thinking about that?

I would say that, that is a possibility if we can get long term contracts from a credit worthy counter-party for that. Don has stated before, and I would reaffirm that my views are, we're not going to do that unless we can have long=term contracts in place. But certainly that's something we're looking at with other parties.

Okay. I'll get back in the queue. Thanks guys.

We'll go to Paul Patterson of Glenrock Associates.

Good morning.

Good morning, Paul.

The tax rate for the second quarter seemed a lit low. And I was wondering if you could describe what's going on there, and if there's been any change in the tax rate outlook for this year and others?

I'm going to ask Joe Householder to answer that.

Hi, Paul. This is Joe. Our tax rate is right in line with what Mark presented at the Analyst conference, roughly about 30% for 2011. The low rate you're seeing in the statement of operations is simply due to the non-cash book gain we had on the step-up of our basis of a pre-existing Chile/Peru equity investment. So that's why it's 17 and 25 or so, but we're really at the 30% rate if you take that gain out.

Okay, great. And then you guys thought about a buyback at the -- and with the fall off in the share price and what have you, I was wondering if you guys might want to sort of talk about what your current thinking on that might be, or how you're looking at that, in relation to some of the activity we've seen in the market in your stock.

I'm going to ask Mark to address that. We've had a number of discussions. Well certainly we think our stock is an excellent investment right now, but I do think we are still looking at where we come out at SoCalGas, with the increased capital spending that we fully expect to have to pay, or have invest for the next couple years. And as we've said, it's probably to the tune of several hundred millions of dollars a year, for a multi-year period. And once we know what those numbers are, then we can think about whether there's room to do any kind of buyback or anything like that.

So we're probably talking, in terms of timing still a ways off, is that how we should think about it?

Yes, I would think we wouldn't make any decisions until the fourth quarter.

Okay. And then the pipeline analysis, it sounds like you've done a thorough analysis, and you're okay with the pressure. Another Company in California has had quite a few things come out, I guess, as part of their review, in terms of past practices, and other issues perhaps not directly related to pressure. Can you guys tell us if there's anything potentially like that, that you guys are seeing, or any revelations that you guys have had about your with your safety review, that might be noteworthy?

I would just say, that we've had people doing thorough reviews, because we have had the same reporting requirements to the CPUC, as other companies in California have had. And we have not found anything that concerns us, in terms of our past practices, or how we operate our pipelines. We operate our system very safely. We have -- we have looked at lessons learned from the San Bruno incident, and are making modifications going forward, that we think would improve our responsiveness if something like that occurred. But we have not found -- a concern, any deep concerns at all, in terms of the way we operated our system. And we just had a recent audit by the CPUC, and they didn't find any concerns either, that's significant.

Okay, great. Thanks so much.

We'll take our next question from Mark Barnett of Morningstar.

Good morning, Mark.

Good morning. A couple just real quick questions. With the tax equity investment, alongside just the normal equity investment in -- was it Rock Rim, sorry? Are you considering doing that maybe, outside of just wind? Or, I mean, is there like a sort of a targeted technology, I mean maybe might even be considering geothermal investments as well, or perhaps solar?

What we've looked at thus far, is most of the projects we focused on have been on the wind side, but it wouldn't preclude doing other technologies. I would stress that this investment is being done within SDG&E within the regulated Company. And so the big issue there is ensuring that the entire structure is a benefit for customers as well. So if there was a competitive solar deal that could be structured in the same way, and provide benefits to customers, we would certainly consider that.

Okay. And -- would you be considering kind of the same set up, where the tax equity investment alongside the equity?

Yes, on the geothermal, I don't think that that would, we would be looking at that. But in this case, this was a regulatory structure that was negotiated as part of a settlement, and that the CPUC basically had the structure approved, where we would have the rate-based investment, and then we would have a shareholder investment alongside of that. So my sense is that, that would be the type of structure that they would want us to have going forward.

Yes, Mark. This is Mark Snell. The one thing on that would be, is the taxed equity helped us get a lower cost to customers, because it lowered the financing cost for the developer. And any of those, that would be, that same structure could work very well with the solar development, as well as wind. Anything that has a high tax component to it, we think it could be effective. And it literally, it is one of the few times where it is sort of a win-win for everybody. We get lower pricing for customers, the developer gets -- has lower costs, and we get a tax benefit at the utility that's shared with the shareholders. So all that kind of works out well.

Thanks for that detail. And then just one more quick question. On the Pemex assets, has there been any further discussion around those remaining kind of assets in the JV, or is it just going to sit pat for now?

As far as the Pemex assets, right now we're working with Pemex on some potential growth projects. There has been no additional movement, in terms of them exiting the partnership. But as long as we remain in the partnership, we believe there will be a number of growth projects that we could do jointly, so that's where that stands at this time.

Okay. Thanks a lot guys.

We'll take the next question from Ashar Khan of Visium.

Good morning.

Hi, good morning, congrats. Just wanted to check in. Where do we stand on distributions from the sale of the commodity business? Could you just help us wherever you are in that? Have you gotten everything or how much more is there to go?

Well we've gotten about, we expect to get between $1.8 billion and $1.9 billion. We've gotten a little over $1.4 billion, and we would expect to get the remaining $400 million to $450 million by the first quarter of next year.

Okay.

And we did get about $320 million in April of this year as a distribution.

Yes, and we're kind of on a quarterly distribution schedule. We should get another $100 million here in a week or so.

And Debbie, as you guys go through the strategic review, I guess one thing is we've gone through the sale of the commodity business to make it more simple and all that. It's still, I don't know, we are still not getting the multiple, and I don't know, is there some way you're thinking how to simplify it to the investor base, so I guess, the different components of the businesses get their multiples reflected into the price? I'm trying to see which way you're thinking about strategically, as you think over the fall.

Yes, I would say that that is one thing that we will be looking at. We'll be looking at all of our businesses, and the long term value of those businesses in our portfolio. We will also be looking at, how do we focus on increasing some of our domestic earnings growth. And so those will be things that will be part of this strategy work, and since I've just been in this job a month, I can't tell you much more than that, but we will be doing that work over the next few months.

Okay. Thank you.

Our next question will come from Michael Lapides of Goldman Sachs.

Good morning, Michael.

Good morning, Debbie. Your Latin American businesses, can you talk to us? I think one of the times we were out there meeting with you guys, you -- George had discussed, and I think in the follow on you all had about, significant potential growth opportunities around your Peruvian and your business in Chile. Can you just talk about whether those growth opportunities are adding bolt-on distribution businesses, or are they branching out in other things like hydro or electric transmission?

Yes, I'd be happy to talk about that. As I mentioned, I was down meeting with the new President, the Energy Minister and the Prime Minister. And they are very interested seeing that more electric generation gets built. And in Peru, we are working right now on our first hydro project, that will be about a 100 megawatt project to be completed over the next couple of years. That project will then give us an opportunity to do more. But I want to stress just in our basic distribution area, kind of our basic growth in our Chilean and Peruvian businesses, so you get a good sense of that.

If you look at the customer growth that we're seeing in those businesses, it's about 2.5% a year. If you look at the sales growth in those businesses, it's about 5.5% to 7% per year. And we are interested, and if there are some potential distribution companies that could be consolidated, and we feel that they would be wise investments for us, we would certainly consider those investments as well. It does have a very high growth environment, and has a very stable regulatory environment which we believe will continue.

Got it. And one follow-up. Can you talk about the capitalization of the business, and if growth opportunities don't emerge, whether there's a potential to recapitalize that business, and eventually either bring back the some incremental capital back to the US, or use it for like investment in Mexico or elsewhere?

There is some opportunities, and I'll have Mark go through the details of that.

Hi, Michael. Of course, all of the expansion projects and even the acquisitions that we might -- could possibly do in South America, would all be funded at the local level down there. We have additional borrowing capacity at that level, and we also have offshore cash that we could use to invest there. So we wouldn't anticipate funding from the US to grow those businesses. We would anticipate doing that there locally. And then obviously, we like a lot of other companies in the US, are lobbying and talking about some kind of change in the tax system, that would allow US companies to bring cash home and invest in opportunities here. And we certainly are poised and ready to take advantage of that, if that should happen. But we have in our models also anticipated, that even if it didn't happen at some point in development, we will have enough cash, we will have to bring some of it home. And we -- and, of course we have to pay the taxes on that. But we think the right answer right now, is since we have good investment opportunities is to continue to invest that money offshore.

How sizeable is that? Meaning like, if you were to make the decision to bring back some of the capital today, what are we talking about?

Well, in our five year plan, we build up about a $1 billion dollars of offshore cash over the five year planning period.

Got it. Okay, thank you.

(Operator Instructions).

And we'll take a follow-up from Faisal Khan.

Hi, sorry guys. Just a couple more questions. I think there's talk of this Brass LNG project maybe moving forward, and I think you guys might have a small stake in that project. Are you still interested participating in that project, or is that something that you have to review?

I would say that we're looking at all opportunities in terms of that, and I'm going to ask Neal to put some color around it.

Yes, this is Neal Schmale. And we did have an interest in acquiring a small stake in that project, emphasize the word small, and the project like all of these, takes a long time to get going. But I think the general idea is that to acquire molecules of LNG internationally, will allow us to improve that business.

Okay, understood. And then on the SoCalGas, you guys talked about kind of lower storage revenues. Can you highlight that a little bit more, or go into that a little bit more? What causes the storage revenue to be more? I thought that was a mostly regulated business, but I guess there's bit of industrial and power generation load that affects that number?

Yes, it is a regulated business and on the storage piece though, we have an incentive design that allows us to make some additional money by selling storage at a premium to some of the market pricing, and packaging storage in creative ways. And we've earned incentives historically, earned some incentives this year for that, but the incentives were less this year than we've had in a prior year. That's all that's happening there. And that was a $2 million on a pre-tax basis, and so nothing real significant.

Okay, and just is your Sunrise, if I look at the CapEx for the first six months, and is it possible to break out what Sunrise and the smart meter program was? Because those are very distinct projects that have come to a close, or will come to a close in the near future, so that probably represents kind of a ramp down I guess in CapEx, although I think some of your other--

Yes, for Sunrise, the number was $347 million for the first six months of the year.

Okay.

And then for the smart meter CapEx, we were looking at a total this year for about $120 million of the entire year. And I don't have the number in front of me for the first six months, but it's -- (Multiple speakers) -- pretty much in that range.

Okay, great thanks. And by the way, Neal, congratulations, and best of luck.

Thank you.

At this time there are no further questions, so I'll turn it back over to Ms. Reed for closing remarks.

Well, thank you for all joining us today. We really appreciate you being with us this morning. And if you have any questions, please don't hesitate to call Steve Davis, Victor or Scott with any follow-up. Thank you again. Bye-bye.

Once again, ladies and gentlemen, that concludes our conference. Thank you all for your participation.