桑普拉能源 (SRE) 2013 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Sempra Energy second-quarter earnings results conference call. Today's conference is being recorded.

At this time, for opening remarks I would like to turn the conference over to Mr. Rick Vaccari. Please go ahead, sir.

Good morning, and thank you for joining us.

This morning, we will be discussing Sempra Energy's second-quarter 2013 financial results. A live webcast of this 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. Debbie Reed, Chairman and Chief Executive Officer; Mark Snell, President; Joe Householder, Executive Vice President and Chief Financial Officer; and Trevor Mihalik, Controller and Chief Accounting Officer.

Before starting, I would like to remind everyone that we will be discussing forward-looking statements on this call within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those discussed today. The factors that could cause our actual results to differ materially are discussed in the Company's 10-K and most recent 10-Q which will be filed with the SEC later today. It is important to note that all of the earnings per share amounts in our presentation are shown on a diluted basis and that we will be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call, and to Table A in our second-quarter 2013 earnings press release for a reconciliation to GAAP measures. I would also like to note that the forward-looking statements contained in this presentation speak only as of today, August 6, 2013, and the Company does not assume any obligation to update or revise any of these forward-looking statements in the future.

With that, please turn to slide 3 and let me hand it over to Debbie.

Thanks, Rick, and thanks to all of you for joining us today.

The second quarter was an important one for Sempra, as we received the final decision in our General Rate Case for SDG&E and SoCalGas. This decision provides us with a sufficient level of revenues to maintain a safe and reliable system for our customers and provides regulatory clarity for the Company through our current rate case cycle, which runs through 2015. Additionally, we continue to move forward on many infrastructure projects during the quarter, and I will give updates on some of these projects a little later in the call.

Now let's move to slide 4. Our consolidated financial performance this quarter was strong. And that performance, coupled with our efforts to control costs within the revenue structure we were granted in our GRC, allows us to remain on track to meet our full-year EPS guidance. This guidance of $4.30 to $4.60 per share is updated to exclude a $119 million loss on the San Onofre nuclear generating station or SONGS. This guidance also includes the 2012 retroactive benefit from the GRC of $77 million.

We remain committed to achieving the 6% to 8% long term compound annual growth projections we laid out at our analyst conference in May. This growth rate is based off of our 2013 adjusted EPS guidance of $4 to $4.30 per share, which excludes both the 2012 retroactive GRC benefit and the $119 million loss at SONGS. Annual earnings from SONGS were between $15 million and $20 million. But that has now ceased as of the date Edison decided to retire the facility. Our guidance for the year reflects our view that we will overcome the loss of these earnings through better performance across our business.

Now let me hand things to Joe to discuss the financial results in more detail, starting with slide 5. Joe?

Thanks, Debbie.

Earlier this morning, we reported second quarter earnings of $245 million, or $0.98 per share. This compares to earnings of $62 million, or $0.25 per share, in the same quarter last year, which included a $179 million impairment charge on our investment in the Rockies Express Pipeline. This quarter, we recorded a loss of $119 million related to SoCal Edison's decision to permanently retire SONGS. We estimated this loss using California utility regulatory precedent to determine the expected recovery of SONGS' rate based assets, replacement power cost, and O&M during the time of the outage. The loss is slightly higher than the top of our previously disclosed range, as additional analysis and the most current information was taken into account since the date we filed our 8-K on the topic. After excluding the SONGS loss, second-quarter 2013 earnings for guidance comparison purposes were $364 million, or $1.46 per share.

As Debbie indicated, our year-to-date performance was strong, and allows us to remain on track to meet our guidance of $4.30 to $4.60. Additionally, this quarter's results include $106 million for the retroactive benefits from our final general rate case decision. $77 million of this benefit is associated with 2012, and $29 million is associated with the first quarter of 2013. Without those benefits, and the loss of SONGS, adjusted earnings for the period were $258 million, or $1.04 per share. Keep in mind that our results for the first half of 2013 include the $63 million planned annual repatriation tax expense, which we recorded in its entirety in the first quarter. Additionally, first-half results include the dilutive effect of our highly successful IEnova IPO.

Now let's go through the results for each of our segments in detail, beginning with San Diego Gas and Electric on slide 6. At San Diego Gas and Electric, earnings for the second quarter of 2013 were $65 million, down from earnings of $95 million in the second quarter of 2012. Excluding the impact of the loss at SONGS, and the GRC retroactive benefits for 2012 and Q1 '13 of $69 million, SDG&E's adjusting earnings grew to $115 million. The increase was due to $15 million of higher CPUC and FERC margin and to an $11 million reduction in 2013 income taxes. This reduction resulted primarily from the change we made last year in the tax treatment of certain transmission and distribution repair expenditures, and increased spending on self-developed software. These increases were partially offset by $4 million of lower revenue from our cost of capital decision, and $2 million of lower earnings due to the loss of SONGS rate-based margin as a result of the closure.

Now please turn to slide 7. Second quarter 2013 earnings at Southern California Gas were $118 million, compared to earnings of $53 million last year. Excluding the GRC retroactive benefits for 2012, and Q1 '13, of $37 million, adjusted earnings at SoCalGas in Q2 '13 grew to $81 million. The improvement in earnings was driven by $15 million of increased income tax benefits in 2013, primarily as a result of a change in repair expenditures for natural gas pipelines, similar to the one I just described for SDG&E, and by $9 million of higher CPUC-based margins due to the final GRC decision. This quarter's results also benefited from $4 million positive variance due to the full recovery of transmission integrity management program costs in 2013, which were not balanced in the 2012 revenues.

Now let's move to Sempra International on slide 8. At our South American utilities, earnings were $34 million in the second quarter of 2013, compared to earnings of $38 million in the same period of 2012. The decrease was due to a loss related to the sale of our investment in two Argentine natural gas utility holding companies. In June, we completed our exit from Argentina through the sale of our investments in that country for $13 million. As we discussed last quarter, the completion of this sale will produce a tax refund of approximately $80 million, which we expect to receive in the first half of 2014.

This tax benefit was previously recognized in earnings in prior years. Second-quarter 2013 earnings for the Sempra Mexico segment were $26 million, versus earnings of $47 million in the second quarter of last year. The decrease is due to $10 million of lower tax benefits in 2013, versus 2012. These are largely related to currency and inflation adjustments. Also $8 million from non-controlling interest at IEnova related to our reduced ownership and $4 million lower earnings from operations, primarily related to the planned major maintenance that occurred at our gas-fired generation plant in Mexicali.

Now please turn to slide 9. Moving to Sempra US Gas and Power, the natural gas segment earned $9 million in the second quarter of 2013, compared to a loss of $193 million in the year-ago period, which includes last year's $179 million impairment charge on REX. The increase came primarily from improved earnings from LNG and gas storage operations, mainly due to changes in natural gas prices this year. The renewable segment generated earnings of $15 million in the second quarter of 2013, down from earnings of $24 million in the second quarter of 2012. The decrease is largely driven by deferred tax benefits in 2012, from solar assets placed in service last year. This decrease was partially offset by higher levels of production tax credits from our wind assets, many of which were placed into service in late 2012.

Now let me hand the call back to Debbie.

Thanks, Joe.

As you know, in June, Southern California Edison, the majority owner and operator of SONGS, made the decision to shut down the plant. As a result of this decision, SDG&E established a new regulatory asset in the amount of $322 million, which reflects Management's assessment of the amount probable, but not certain, of recovery and rate for SDG&E's investment in SONGS. Additionally, SDG&E recorded a loss of $119 million after tax, due to the plant closure.

Due to the outage of SONGS, from January 1, 2012, through June 6, 2013, which is the date Edison announced the plant was to close, SDG&E has spent approximately $166 million on replacement power. The CPUC has opened a multi-phase OII to determine the ultimate recovery of the investment in SONGS and the costs incurred since the start of the outage, including the cost of purchasing replacement power. I can assure you that as a minority owner of SONGS, SDG&E will do all it can to protect the interest of customers and shareholders as these proceedings move forward.

Now please to slide 11. Last quarter, FERC issued an order on SDG&E's transmission rate case filing, which conditionally accepted our filing, including the methodology we used to calculate our requested ROE of 11.3%, and approved the 50 basis points adder for SDG&E's membership in the California ISO. Last week, FERC issued an order making the 11.3% ROE effective September 1, 2013, subject to refunds, pending an approved settlement or final decision. Settlement discussions with the key parties have already begun. Since many of you have you asked me what happens in a rising interest rate environment, I wanted to remind you that both our utilities have a trigger mechanism which allows our CPUC-authorized ROEs to be reset at the annual average Moody's A utility bond index rate, moved 100 basis points above or below the benchmark level, which is currently 4.24%. While interest rates have been rising in recent months, the move has not been significant enough to raise the average rate to a level where a trigger would occur this year.

However, if rates continue on a similar trajectory to what we've seen recently, the potential does exist for an upward trigger to occur effective January 1, 2015. If an upward trigger did occur, it would increase our equity return by 0.50 of the difference between the new monthly average rate and the benchmark rate. Additionally, the authorized cost of debt would be adjusted to reflect the actual cost of debt at that time. We continue to await a final decision on our pipeline safety enhancement planner, PSAP, and expect that decision to come out later this year. As you know, we have received authorization to track in a memo account, and are currently spending capital and O&M in anticipation of a final decision.

Let's now go on to slide 12. Moving to our Cameron liquefaction project, I am pleased with the progress we are making and we remain on track to begin operations in the second half of 2017. We currently expect EPC bids back from the two consortiums bidding on the project this quarter, and we would anticipate selecting a final EPC contractor by the end of the year. Our efforts to secure financing for the project continue to move ahead, and interest in project financing Cameron remains very strong. We expect firm commitments from lenders by the end of the year, and anticipate putting 60% to 70% leverage on the project at attractive terms.

We remain confident that the DOE will approve our non-FTA permit in 2013. This is based both on the positive recent comments made by Secretary Moniz concerning LNG export approval and on strong bipartisan support for our project. Given the FERC schedule issued in April of this year, we expect to receive our FERC permit in February of next year, which will put us on schedule to begin construction in the first half of 2014.

Turning to South America, as you recall, last year, a joint venture we formed with SAESA, another Chilean electric utility, was awarded two transmission line projects, which are now under construction. In June, this JV was awarded two additional 220 kilovolt transmission lines that will extend roughly 70 miles. The total project cost for these two new lines is expected to be about $80 million, 50% of which will be Sempra's share. And we expect construction to be completed in 2018.

Let's now move on to slide 13. At IEnova, we recently signed the contract with PEMEX for the first phase of the Los Ramones pipeline project, and expect to begin construction in the fourth quarter of this year. This 48-inch pipeline, which is 70 miles in length and starts at the US/Mexico board in south Texas, will be part of our JV with PEMEX. And the total project costs are expected to be between $450 million and $550 million. This pipeline is expected to commence operations in the second half of next year.

The second phase of Los Ramones is a 450-mile pipeline project which is estimated to cost roughly $2 billion. The pipeline will begin at the terminus of our Phase I project and extend into central Mexico, bringing gas supplies to this region of Mexico for the first time. Bids for the second phase of Los Ramones are due this quarter, and IEnova will most likely submit a bid, potentially with a partner. We continue to make good progress on our $1 billion Sonora pipeline project, and we have now both signed the construction and pipeline supply agreement. We remain on schedule to begin construction on the pipeline this quarter, and expect the first phase to be operational in the second half of next year. I'm really pleased that our team at Sempra International has been able to execute on these opportunities. We continue to see a number of very strong incremental opportunities in this business unit that will help us grow at or above the 6% to 8% range we laid out at our analyst conference.

So let's now go on to slide 14. While it is unfortunate we had to take a loss at SONGS, I am really pleased that we had such a strong quarter otherwise. We continue to execute on our strategy, and deliver solid performance for our shareholders. We remain on track to meet our earnings guidance for the year, and we continue to have very compelling long-term growth prospects.

And with that, let me stop and take any questions that you might have.

(Operator Instructions)

Faisel Khan, Citigroup.

Just a couple of questions. In recent news about the potential to change the foreign tax rate for repatriation of overseas earnings, I was just wondering if you could just remind us, if we were to move to more of a quasi--territorial system, as -- what might be outlined in some of these tax-paid publications, what would be the earnings impact or benefit to you guys? And then I have a follow-up.

Let me first remind of you what we committed to do under the current tax situation. And then I will have Joe talk about what is happening in Washington right now. And what the impacts might be with that. What we committed to do under our -- under the current tax situation is that we were repatriating about $200 million this year, and then about $300 million over the next five years, back. And we're doing that by using the net operating losses that we have as a result of some of the bonus depreciation we had at the utilities. And so that is the plan that we're working currently.

As you know, under the tax laws, they've looked at changes that may change the overall corporate tax rate, and with doing that, then we would get a benefit. And I think the number was something around $30 million. But Joe, let me ask you to go into more detail.

Sure. It depends on where they land here. As Debbie mentioned, if they were to drop the rate to 28%, something that the President suggested the other day, Debbie is right. Instead of about $60 million a year of expense, we would have roughly $30 million. But if they were to go to a more territorial system, which we've been advocating, perhaps they might do something that would have no tax, although they might actually impose some kind of a one-time tax to bring back some of this money that is sitting offshore in many companies. So they might impose a 5% tax or something like they have done previously, and in that case, certainly it would lower the earnings impact that we have in our plan today. So it would be very beneficial to us.

Okay, understood. And you guys ended the quarter with about $1 billion in cash on the books, and it looks like you had a number of asset sales including the IPO of IENova. What is the plan with the $1 billion in cash? Is it to pay down debt? Or is it -- how are you going to reinvest that cash or give it back to shareholders?

Faisel, this is Joe. Let me talk about that. Most of that cash that is sitting on the balance sheet right now is either in Mexico or in Chile. As we have talked about before, we are not repatriating any of the funds from Chile because we would have an incremental Chilean tax, and we are looking for investment opportunities for that sum, which is around $300 million. The other $500 million about is sitting in Mexico and that is money that was raised in the IPO and is going to fund the Sonora pipeline project.

Okay, understood.

[Nas Kumwala], Wolf Research.

Just had a couple of quick questions for you guys. First of all, if you exclude Argentina from South America, can you discuss how Chile and Peru are doing year-over-year?

Yes, if you take Argentina out, Chile and Peru are right on track to what we would be anticipating, and what we laid out for you at May at the Analyst Meeting. We're having good performance from both of those companies, the growth rates are very positive, and the ranges that we've talked about before, we're seeing customer growth of 2% to 3.5%. And loan growth of 5% to 6% in both of those utilities.

Okay, great. And then for SONGS, what is the ongoing impact to earnings from pulling SONGS out of rate base?

The ongoing impact -- what I can say is what historically we've had is about $15 million to $20 million a year of net income from SONGS. And as I mentioned in my comments, certainly for this year, through looking at cost efficiencies, and some of the improvements in our operations due to advancements of technology that we're deploying and all, we feel that we can offset that for this year. And so we were able to include that in our updated earnings guidance that we would still be in the $4.30 to $4.60 range, including covering off that loss of SONGS income for this year.

Right. No, I appreciate that. But thinking about next year, and forever (laughter), are the cost efficiencies stuff that you guys can keep or --

We will look at -- we will update our guidance, as we always do, in February. What we will certainly look at continuing to look for ways that we can improve the operations of our business, as we always do, and look at some opportunities to offset that. One of the things that hasn't been factored in, and we will be factoring in when we do our guidance, is what is needed to replace SONGS. And what that would mean in terms of additional investment. And so all of those things we will be looking at before we give updated 2014 guidance in February.

Okay. Great. I appreciate that.

Mark Barnett, Morningstar Equity Research.

A couple of quick questions on some of the international projects. The number, I think, on the Los Ramones looks roughly the same. I was just wondering, with the Chilean project that you won and the announcements that you highlighted, are these projects all already fully included in your planned CapEx as of the Analyst Day?

Yes, the -- on the Analyst Day, we had the Los Ramones Phase I that we talked about, and then we had the Chilean -- first two transmission lines in Chile. The second two that I just mentioned today that we had just bid were not in the capital plan, but as Joe mentioned, we have plenty of cash in Chile to fund those projects.

Okay. And you had mentioned for one of the projects, I believe, Mexico, the second phase, you had mentioned a potential partner. Would that be a domestic partner you would be looking at or maybe another multi-national?

We're still looking at that right now. The bid hasn't even come out. We're looking at a September time frame is what they said for the bidding on that. And so we're, of course, pursuing all possible options and looking at how we would want to handle it. We haven't made any decisions.

Okay. Last one. As you said, it is a little too early with the bid not out yet, but is there kind of a -- would you say a greater interest in bidding on these projects? Maybe a little bit more competition circling the market, or is it a little bit too early to comment?

Mark, why don't you talk about that?

Yes, I would say that there is certainly interest in Mexico. I think there is -- the people recognize that there is good growth there and that these are good projects. But I do think that the companies that have historically been successful in Mexico, of which obviously we're one of the leaders in, are the ones that are -- continue to be successful. And I think it is just the knowledge of the market and knowing how to get things done there. But it is attracting more international investment. But I think the companies that have been doing business in Mexico for a long time still have some advantage.

Okay. Great.

Rajeev Lalwani, Morgan Stanley.

Just a question on Cameron. In the event that the DOE doesn't issue the non-FTA approval until, say, next year, how does that impact the overall timeline and construction of the project?

First of all, we expect that to come this year. And that's -- every indication that we've received, and most recently, a key person that works with Moniz, his energy counselor, Melanie Kenderdine, commented that he had completed his reviews of the data. He had completed his review of the analysis to ensure that the public interest analysis was done appropriately. And he had affirmed that no further modeling was required, and so we would anticipate, having him now completed that, we will start seeing these projects roll forward.

It is not on the critical path for us yet, because the FERC permit comes after our expectations on the non-FTA. And so, as long as we have both of our permits in the first quarter of next year, then we're pretty much on path.

Okay. Great. And in terms of the incremental investment opportunities above the 6% to 8% growth that you laid out at the Analyst Day, can you talk about -- and you talked about Latin America and some of the opportunities there. But where do you stands with the opportunities in California and those that were under the shale gas revolution?

We gave you the slide at the Analyst meeting, and we broke it down into the utilities and midstream and renewables. And just to give you a highlight of some of the things we're working on, as I mentioned, any utilities for San Onofre and what needs to be put in place with San Onofre retiring. There will most likely be some incremental transmission investments that will be necessary, but also the gas system. Because to replace San Onofre, it is most likely a combination of renewables and natural gas will be necessary, and that we will be looking at what type of investments will be necessary in the gas system. And so that is underway.

In Latin America, we talked about Los Ramones Phase II. We're looking at clearly moving forward with the extent that we can on the Santa Teresa Hydro II project. And then we talked about the additional transmission in Chile. And then we will continue to look at other things there. And then in the US midstream area that we have made a filing to do some laterals on REX, that is a public filing, and that we're also looking at the assets adjacent to Cameron. The LA storage, and then the Cameron pipeline, and would expect to be developing those assets in the same kind of time frame as Cameron.

And then on the renewables space, we're certainly looking at any additional opportunities there. Including, if there is some -- to get some potential to get some wind projects done before the clock ticks away. And that we no longer have the opportunity for the production tax credits. So those are all underway right now in those areas.

Perfect.

Brandon Blossman, Tudor Pickering Holt and Company.

Actually following on a little bit on the REX comment on the laterals, and I understand there some sensitivity around it is likely, but can you comment just generally REX's future as a bidirectional pipe? And then also how that fits into a drop down MLP strategy on a go forward basis?

Yes, let me just say that this is something that we told you before we were looking at, because we saw the flows out of the Marcellus and Utica, and needing to get to market. And so this has been something that we have been quite interested in for a while now. And now we're pursuing it with a new partner. So let me have Mark talk a little bit about that.

I think the future of REX is it will, over time, start to look like a giant header system for the Mid-Con. And it will take flows from both directions and probably feed into Chicago and other Mid-Con markets. I think that will take some time. There is some tariff issues. And you have probably seen the news on some of the issues with the existing shippers. All of that has to get worked out. But I think over time, that is where this asset will go.

We probably, as far as the MLP-able, it's obviously it is an MLP-able asset, but until a lot of these issues are resolved, it would be one that we wouldn't drop into an MLP right away until we had some long term predictable cash flows out of it. But we have -- the good news is, we have plenty of other MLP-able assets that are very strong, and obviously with the Cameron facility, we will have very good assets that we can look at developing that kind of infrastructure down the road.

And just to follow on, again, midterm. Are there incremental ideas that may be percolating around REX today?

There are, and we're pursuing them right now. And I think there is likely to be some near-term things coming out of REX to showing additional revenue possibilities.

Okay. Great. Look forward to seeing those.

Faisel Khan, Citigroup.

I figured I would follow up with a few more questions. On the LNG project, the -- I think -- if you could just clarify the [confusion], expecting to get the construction permit in February of '14?

What we're expecting in February of '14 is the FERC permit.

The FERC permit. Okay.

Which basically allows us -- without the FERC permit we cannot begin construction. And so that is what we're expecting in the February time frame.

After that, you guys can start construction, so starting February, assuming you get the permit in February '14, you would start construction right away. There is no other permit that is required after that.

There is a few months between when you get the permit and when you can actually begin construction. But assuming that we get the permit in February as we expect, then we would be on our construction schedule that we have laid out to have the first trains come on at the end of 2017.

Okay. Got it. And just on this project queue that everyone keeps looking at -- for all these -- all the liquefaction projects, it seems like the DOE is going in the project queue order. Are there criteria that the DOE has to look at in order for a project to get the approval? Or is it simply having the application in place? How do you guys -- what is your opinion on how you see the DOE looking at each application? Is it -- you guys have talked about having to have the FERC application, the process and all of these other things. Can you just remind us what the key criteria are to get that FTA?

Sure. The FTA criteria is really that in order not to approve the permit, they have to show that the project is not in the public interest. So there is a presumption that these projects should get approved. And you know, that's an important factor. And there has been nothing that has come out in any of the public studies that have been done, the EIA studies or any of the studies that have been done, that have demonstrated that exporting is not in the public interest. And so what we think has happened is, after the Freeport project was approved, Moniz stepped into this job. He had made a commitment to go through the data, and to go through the determination of public interest that had been published earlier in the NERA report.

And as we understand, he has completed that work now. And has affirmed that, that work is accurate and no further studies are necessary. So what really should happen is that these projects should move forward, then, in the queue. Because that report shows that the projects are in the public interest and to export LNG. And the projects actually -- the report actually showed that the more LNG you export, the more in the public interest it is. So we would anticipate seeing some projects start going through the queue now that he has completed his affirmation of the data. Mark, do you want to add to that?

(multiple speakers) Sorry, go ahead, Mark.

No, go ahead, Faisel.

I was going to ask, is it -- does it really have to be in order? Is the DOE committed to reviewing each application in order? And if they were going to do one application every few months, does that put you guys on track to get the permit when you want? Or are they going to -- do you think they will issue permits in batches?

Let me -- I will try to answer that. I think we're all speculating on what we think the DOE is going to do, and so there is a high degree that we will be incorrect. But I think we all thought -- a lot of us, and not just us at Sempra but other companies as well, Dominion and others, all thought that there may be some of this would come out in batches. It seemed reasonable to think that, that was going to happen. It hasn't happened yet. That doesn't mean that it won't happen. It could.

But our belief is that even if we stay on the schedule that Moniz has laid out, and he does do them one by one, under some thoughtful process, we still believe we will get ours by the end of the year. So I think we feel comfortable that we're on track to do this. As Debbie said earlier, it is not a -- it is an important permit, obviously. We have to get it to secure our financing, and all of the other things. But as long as we get it this year, or very early next year, we're still on track and it doesn't really -- it doesn't change our timing, as long as it is within a reasonable time frame.

Okay. Understood. And then I was also wondering if you guys had any opinion on the low carbon fuel standard and the carbon prices we're seeing in those forward markets now? And if that has any sort of impact to you guys, or if that is just a pass-through to the consumer?

Yes, I will have Mark --

Let me tell you, from a business perspective that we are looking at, we have talked a little bit in the past. We are looking at LNG and natural gas as a fuel, and a lot of low carbon standards, especially in the shipping industry, is things that we're looking at. And we see opportunities there to provide infrastructure to that industry -- both shipping and the railroad industry, to use natural gas. And so we do think that there is going to be some real benefits and growth opportunities in the future around those kinds of regulations.

Okay. And any update on natural gas vehicles and transportation infrastructure for natural gas vehicles? You guys put a lot of stuff on your website related to this topic. I was wondering if something is moving forward at SoCalGas or maybe outside of SoCalGas.

We've done a lot of work at SoCalGas on the fleet side, and we have a lot of fleets operational now. We also were able to put something in place at so Cal gas which is a compression services tariff, where we can actually serve compressed natural gas directly from our pipeline system. So we're doing those kinds of things. But I think probably the more interesting things are some of the things that we're doing in our US Gas and Power and looking at the potential to develop some market opportunities there. Mark, you want to --

Just as I said, I think the opportunities that look -- have the best potential to really be significant in the near term, I think are on the commercial side, both on the maritime and railroads and large haul trucking and those kinds of things, as opposed to passenger vehicles.

Okay. Understood.

Greg Gordon, ISI.

It is actually Jon Cohen. Greg's on FE (laughter). You got the B team. What is the earliest date that you could lock down financing for Cameron? And is there any way to hedge out your interest rate risk between now and when you close on your construction loans?

Yes. Let me have Joe talk about that, because we were just talking about that this morning, and we've done some analysis on the interest rate impact. And also Joe, do you want to --

Sure. What we're focused on is getting these commitments later in the year. We want to make sure that we do them in the right time frame, so that commitments don't expire before we actually draw down on the money. But it is progressing very well. There are more meetings going on all the time, and we're getting very strong indications of interest. So the financing is going along very well.

We will look to new hedging when we have the commitments in place, and we're talking to our partners about that. Interest rates have moved some, but it is pretty modest. The impact is really pretty modest based on the numbers we have in our plan. So we will, in fact, do a significant amount of hedging. The timing will be probably closer to the end of the year, or beginning of next year, depending on when we and the partners agree on the structure.

Okay. Great.

Ladies and gentlemen, this concludes today's question-and-answer session. At this time, for closing remarks, I would like to turn the conference over to Debbie Reed. Please go ahead.

Thank you. Thank you all for joining us today. And as always, we have Rick Vaccari and his team available to answer any follow-up questions you have from our call today. And thank you very much for being with us.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation.