TransAlta Corp (TAC) 2010 Q1 法說會逐字稿

Good morning ladies and gentlemen, welcome to the 2010 first quarter results conference call. I would now like to introduce Jennifer Pierce, the Vice President of Investor Relations and Communications. Please go ahead.

Thank you Jesse, and good morning everyone. Welcome to TransAlta's first quarter 2010 conference call. With me today are Steve Snyder, our President and CEO, Brian Burden, our Chief Financial Officer, Ken Stickland, our Chief Legal Officer, and Frank Hawkins, our Vice President and Treasurer.

Earlier this morning we released our first quarter results. We hope you had a chance to review them. Additional operating information will be posted on our website after this call. All information provided during this conference call is subject to the forward-looking statement qualification, which is detailed in today's news release, and incorporated in full for the purposes of our call. The amounts referenced in the review are in Canadian currency, unless otherwise stated. In addition, the non-GAAP terminology used in this call, including comparable earnings, operating income and gross margin is reconciled starting on page 21 of the MD&A. Per share figures for the first quarter of 2010 are based on an average of 219 million shares outstanding, compared to 198 million shares in the first quarter of 2009. Please note financial information has been rounded to the nearest whole number.

On this morning's call, Steve will provide an overview of operating results for the quarter. Brian will provide details on our cash flow, depreciation, capital allocation, and balance sheet items. Before going to questions and answers Steve will provide commentary on what investors can expect for the balance of 2010, and the recent Memorandum Of Understanding that was signed between TransAlta and the State of Washington.

With that, let me turn the call over to Steve.

Good morning. Our first quarter results reflect the strong operational improvements we have made across our fleet. Our first quarter 2010 comparable earnings per share of CAD0.31 is a significant improvement over the CAD0.18 achieved a year ago. We also achieved net earnings of CAD0.31 per share, compared to CAD0.21 per share in quarter one of 2009, again, a significant improvement. These gains have been driven primarily by our base operations.

There were fewer planned outages in the quarter, and substantially fewer unplanned outages. As a result, for the quarter, we achieved fleet availability of 91.4%, compared to 86.4% a year ago. Solid fleet availability was realized with each of our plants individually, achieving at or above the targets we presented at Investor Day last November.

On the market side, continued per market conditions and poor wind resources in January and February did not provide opportunities for us to translate our operating performance into even better earnings. While some pricing impacts were mitigated through our disciplined contracting strategy, electricity prices remained extremely soft in the quarter. In Alberta, spot prices during the quarter averaged only CAD41 per megawatt hour compared to CAD63 a year ago. This was driven mainly by low natural gas prices, as well as higher availability from our own coal fleet over last year. Pacific Northwest prices also remained soft, although slightly above last year. Average spot prices in the region settled around $42 per megawatt hour, compared to $35 last year.

Despite excellent availability our wind resources in the quarter were down approximately 30%, compared to what we would see in a normal year. As a result, expected production from our wind facilities was lower by roughly 200 gigawatt hours. This phenomenon is consistent with the effects of El Nino, which typically only impact the first two to three months of the year. And we have already seen wind resources pick up throughout April. Past years have shown recovery of wind volumes in subsequent months in an El Nino year.

Finally looking at energy trading, gross margins for the quarter were CAD14 million, only slightly below the CAD15 million achieved last year. Overall, we are off to a good start to the year.

Before I provide an update on what to expect for the balance of the year, and commenting on our MOU with the State of Washington, I will turn the call over to Brian Burden.

Thank you, Steve. This morning I will cover both our cash flow performance for the quarter, and our operations, maintenance and administration expenses. I will provide an update to our sustaining and growth capital spending for 2010, and also give an update on our liquidity and financial metrics. I will also cover briefly the changes we've have made to our Alberta coal fleet depreciation rate.

So, cash flow from operations in the first quarter was CAD174 million, compared to CAD83 million a year ago. The primary drivers of the CAD91 million increase were more favorable changes in working capital. And for the full year, we continue to expect to achieve CAD850 million to CAD950 million in cash flow from operations, driven mainly by higher cash earnings. Our operations, maintenance and administration costs for the quarter decreased CAD14 million compared to last year, as a result of reduced planned maintenance activities in the quarter, partially offset by the acquisition of Canadian Hydro.

Turning to our capital spending for 2010, during the first quarter our total sustaining capital spend was CAD45 million. For the full year, we continue to expect sustaining CapEx to be in the CAD295 million to CAD340 million range. A breakdown of this can be found on page 20 of the MD&A. As it relates to major maintenance, while the overall capital and OM&A spend continues to be in the CAD200 million to CAD225 million range, the quarterly split for the major maintenance expenditure has changed. Quarter 1 actuals were approximately 13% with 121 gigawatt hours of lost production. For the remainder of the year we expect Quarter 2, 50% to 55% and approximately 1,400 gigawatt hours; Quarter 3, 15% to 20%, approximately 375 gigawatt hours; and Quarter 4, 15% to 20% with approximately 250 gigawatt hours lost.

Our growth CapEx spend in the first quarter was CAD77 million, primarily related to Keephills 3 and Summerview 2. Our expected growth capital spend for the full year remains in the range of CAD460 million to CAD520 million. A breakdown of this can be found on page 19 of the MD&A.

Looking at our balance sheet strength, as always, we continue to focus on maintaining our investment grade status. As at March 31 our ratios were as follows. Cash flow to interest coverage was 4.6 times; our range here is 4 to 5 times. Our cash flow to debt was 20.4%; our range here is 20% to 25%. And our debt to total capital was 54.9%, with a range of 55% to 60%. We continue to maintain ample liquidity through the CAD2.1 billion we have in committed credit facilities. Last month we issued CAD300 million of 30-year bonds in the US, which paid down short term debt and bolstered liquidity to CAD1.1 billion as at March 31st.

I would now like to give you some background to the decision to change the depreciation schedule on our Alberta coal asset. As described in our MD&A, this change was due to a change in useful life of our fleet. As many of you know, last year we undertook a detailed and comprehensive unit by unit review of the condition of each of our units, and we looked closely at the life cycle of each unit.

In addition to this work, we also began a comprehensive review of the true useful economic life of each of the units, and compared this with others in our industry. As a result of this work, we have determined for most of our coal assets that a 45-year economic life is more reasonable operating life expectations, without adding any additional major capital to extend the lifecycle to 50 or 60 years. Previously we were generally using end of PPA life. And the estimated favorable annual impact of this change is CAD21 million, and it will be reflected in depreciation expense, and cost of goods sold.

You will also see that we have updated our estimate of Wabamun decommissioning costs. As we got closer to the actual date of this shutdown, we were able to contract much of the work for less than what had been previously provided in our financials. As a result, we have reduced the asset retirement obligation by CAD10 million after tax. This is both an earnings impact now, and a future cash saving from lower decommissioning spend in future.

So with that, I will turn the call back over to Steve.

Thank you, Brian. As we look forward to 2010, we will continue to drive performance and productivity in our base operations. We also see opportunities to sustain our availability improvements while achieving even more efficiencies in our major maintenance spends. We remain confident in being able to achieve our goals of 90% overall fleet availability, and provided markets do not deteriorate any further, we can achieve low double-digit comparable earnings per share growth and cash flow from operations of CAD850 million to CAD950 million for the year. Clearly we need to and will be, and remain very disciplined in both our contracting strategy and our cost structure. Our goal is to maintain our OM&A flat to last year through productivity improvements. We continue to look for windows of opportunity to contract our output to mitigate any further potential downside to market prices. As a result, we are now 92% contracted for 2010, and 86% contracted for 2011. For 2010, the average price for our merchant contracts in Alberta remains in the CAD60 to CAD65 per megawatt hour range, and for the Pac Northwest, the average price is now in the $50 to $55 per megawatt hour range. For 2011, our average merchant contract prices remain at CAD65 to CAD75 per megawatt hour for Alberta, and at $55 to $60 for the Pac Northwest.

Let me now shift focus to talk about the MOU which we signed yesterday with the State of Washington. This is a positive step for TransAlta, for the State, and for progress on our climate change objectives. Last May, Washington's Governor Gregoire issued an Executive Order, which directed the Department of Ecology to work with TransAlta to find ways to cut the Centralia facility's greenhouse gas emissions in half by 2025. We are supportive of this initiative, as it recognized that our Centralia plan is the only nonregulated coal facility in the state, that coal mining is no longer economical in the region, and that there are very limited carbon capture and sequestration options locally. The MOU outlines the process to be used to develop that plan. It provides clear objectives and the timelines we will follow with the State to develop an agreement to transition the State to cleaner energy resources, while importantly protecting jobs, the local economy, and our shareholders.

This collaboration is essential. The Centralia plant currently supplies approximately 10% of the State's power. And it also provides critical grid support when Washington State needs it most. That is why all the parties want to ensure the following. That investors are treated fairly, the lights stay on in Washington State, consumers are protected from sudden price spikes, that transition to a cleaner energy future occurs in a reasonable and orderly fashion, and employees continue to have jobs in Lewis County.

Given the ongoing uncertainty and risk with regards to any future federal GHG legislation, we believe the best way to mitigate that risk and protect value to our shareholders is by getting to work today with the State of Washington through their Department of Ecology. Under the MOU, the target is to produce a draft agreement for public release in July. Public consultations will then begin around the State to review any draft agreement. That draft agreement may require action by the legislature, which would include a public legislative process. As this process evolves and a draft agreement is reached, we will keep all our investors up to date. With that, let me turn the call back to Jennifer for our question and answer period.

Thank you, Steve and Brian. So that we may rotate through callers, we shall take one question and one follow-up from each caller before moving down the queue. We shall answer questions from the investment community first, and then open the call to media. We shall then respond to individual investors. So please identify yourself when asking a question. I remind you that we do not provide guidance, and that we shall answer your specific model-related questions offline after the call. Jesse, we will now take questions, please.

Thank you. (Operator instructions). There will be a brief pause while participants register. Thank you for your patience. The first question is from Linda Ezergailis, please go ahead.

Thank you. I have a question with respect to the Board's dividend policy. I guess historically, the view was that a 60% to 70% dividend policy was appropriate of earnings, and I am wondering, would credit metrics be a trigger to reconsider kind of a long-term dividend policy, or what is the latest thinking on that?

Obviously, Linda, the dividend policy was always looking over the longer term. So the 60% to 70% was the longer term. Obviously, as you go through cycles, you will have sometimes that higher rate. And also we make sure that any dividend increase that we have done is sustainable. But the other thing that we look on is obviously our cash flow. As you know, our dividend at CAD200 million plus is a small proportion of our overall cash flow. So I think those are the two things we look at. Cash flow and the policy and the sustainability. So I think, we are very happy with the current policy, but as I say, it is over the long term that the 60% to 70% would come back into play.

Okay. Thanks. Just as a follow-up, congratulations on the MOU in Washington. When we look to Alberta, how might we think -- and with some of the Canadian government's recent announcements, how might we think of the potential scenarios for coal plant phaseouts, and what would TransAlta be advocating to replace any phaseouts of coal? Would it be something similar to what you are forwarding in Washington with a replacement capacity with fair returns?

Linda, it is Steve. Well, first, I just reiterate that the two situations are quite different, as I said in my comments. In Washington State, we are the only nonregulated coal plant. There were really no coal reserves there in the State, and limited opportunities for carbon capture. Alberta is quite different. We have significant coal reserves. We have a significant amount of our availability is through coal plants, and we have excellent opportunities for carbon capture.

So I think the approach here will be different. I think you have seen in some of the announcements currently coming from the various governments that they are taking a different approach. But having said all of that, our approach on this is that we believe there are some opportunities in North America in general, and in Alberta, to do some coal to gas transitions for some of the older plants. We do think that coal will play a longer term role in Alberta through technology, and I think all of those will be part of any solution that the Federal government and the provincial government come to agreement on, relative to GHG policy. More unknowns still in the Canadian context, but moving forward with good intent on all the parties.

Okay. Thank you.

Thank you. Your next question is from Bob Hastings with Canaccord. Please go ahead.

Thank you. And to just follow-up on Linda's question on the asset life. I was glad to see that you once again were conservative in your numbers when you were doing them for the closing of Wab 4, and you have been able to recoup CAD14 million pretax. But when we look at the sort of life extension of the Alberta coal-fired assets in light of pronouncements or discussions with Ottawa, what was the reaction, or can you give us any flavor around those discussions last week with Mr. Prentice?

Bob, it is Steve. Obviously, I can't do that. All of the discussions at this point are all sort of information gathering, and there will be a lot more work to be done yet. But I think generally speaking, there is a sense that we will need to use all the options in Alberta, so I think we need to look at some coal to gas conversions, I think we need to look at the coal option and I think we will need to look at the hydro option. So I think all are out there.

I think bottom line everyone is on the same wave length, which is we want to do something to physically reduce CO2, we want to do it in an orderly fashion and we don't want to take too much optionality out too soon because that could come back to haunt availability and supply and reliability 10, 15 years out. So I think everyone is on a measured, steady pace right now, and I think that is constructive

Yes, I would agree. Certainly a lot of uncertainty out there. I think there are a lot of options. I guess my question was, how conservative might it be to extend asset lives with all that uncertainty?

Well, we have been looking at all of that within our fleet, and I think Brian had some comments about that in his comments. The good news about TransAlta is we do have excellent optionality. We have sites that would be excellent to permit for potential gas plants. We have plants at various ages, some of which would make excellent candidates for life extension with new technologies. And so I think we will keep all of those options open and pursue all of them as we go forward. Our goal would be that we would maintain our capacity and our low cost structure through that whole process.

And we do think, Bob, at 45 years, that that is very realistic, and still reasonably conservative and in line with the strategy and how we are maintaining those plants, so we feel comfortable with that.

Okay. Thank you. Just to follow-up, one of the things, Steve, you mentioned, was that you look for low-double digit increase to earnings this year. What was the base you were using off last year?

Last year's number.

Is that the normalized number of around CAD0.90 or CAD0.92?

As you know, Bob, we don't give guidance. So basically, we are saying we'll do at least double-digit off the CAD0.90.

Oh, off the CAD0.90, okay. Thank you very much.

Thanks, Bob.

Thank you. Your next question is from Matthew Akman with Macquarie. Please go ahead.

Thanks. I have a question for Brian, a quick financial one. And then maybe a bigger picture one for Steve. Brian, why are you guys still paying cash tax given all the renewable you have just added to the portfolio? Is that an ongoing thing? I am just surprised you paid CAD7 million in cash tax in the quarter.

There is some cash taxes that we pay outside of Canada. So you will still see some smaller cash taxes. But it will be limited because most of the -- you know, Canada and the US, we do -- we have started to pay some tax in Australia, and also we do have some tax that we have to pay on deposit. But it should still be a pretty low number, Matthew.

Okay. Thanks. I guess maybe this one is for Steve. Steve, has there been any conversation about what the replacement generation fuel type would be, and whether there is any prospect of doing anything in that location or around it, other than natural gas? Have you done any testing on wind in the region, for example? I don't think there is any prospect for new hydro development in the area, but what are your thoughts on that?

I would rather have the cash tax question, Matthew. But having said that, let's just separate the two. In Alberta, I think definitely natural gas will be part of the mix, a bigger part of the mix in Alberta as we go forward.

Just for Centralia, I am talking.

Oh, just for Centralia, then I would think that the options there are around probably gas and renewables probably in the form of wind would be an optionality there. And there may be some hydro possibilities. I think that would be more likely to be done by the regulated utilities in the market. But from a TransAlta perspective, we would certainly be looking at non-hydro renewables as well as gas.

And remember, Matthew, we do have a gas plant there located in Centralia that we don't use very much at the moment.

Okay. So it sounds like primarily this is a replacement of coal with gas at Centralia?

Well, not primarily, but I think for Washington State, that has a high probability. But we have to go through this process over the next three to four months to sort all of that out and look at all the economics. But I do think that natural gas will play what I call an important interim step, as we try to reduce CO2 in North America while we sort out large scale hydro, large scale nuclear, and other technologies. In the short term, gas is a good fallback. I don't think we should rush the gas, but I think it plays a role.

Okay. Thank you.

Thank you. The next question is from Andrew Kuske with Credit Suisse. Please go ahead.

Good morning. I just want to talk a little bit about the double-digit earnings growth that you anticipate you may be able to achieve. In the context of some of your past presentations, you had earnings outlooks in a low case, medium case and high case scenarios. So if I was to look at some of those past presentations, it would seem right now that effectively what you would be guiding to would be more what was classified as the low case in the past, with Alberta power prices being roughly in that CAD45 to CAD55 megawatt hour range, and the Pac Northwest at CAD35 to CAD45. Is that a fair characterization?

Yes, it is. It is directionally correct, I think.

So would that be effectively the low case would be now more of a --?

Remember, Andrew, I am not going to give guidance out here. Trying to give you a directional sense. I think we have said at least double-digit. You have seen what we said about the 2012 on Investor Day. So that is the sort of area that we will be targeting to make sure through cost reduction and through being very productive around availability that we are trying to get to. But as I say, we said at least low double-digits, so --.

But to the extent, Andrew, you are using natural gas as a proxy for power prices going forward, we are clearly today in a CAD4 to CAD5 gas world. And you can look at the forward curves and make your own speculation on what they will be going forward after that.

But just on a little bit of a different question but somewhat related. If you think about the natural gas market today, and then looking out at the forward curve, and then in relation to your commercial operations and the trading business, are you seeing any signs of volatility or an increased opportunity to do some structured product? Are you seeing signs of heat rate compression across a variety of markets?

I think in the short term, I think we are not seeing much volatility at all. As you know, prices are depressed in both markets. We have seen a little bit of pickup in Alberta just in the last month or so. But as you know, Andrew, prices have been fairly depressed. We are not seeing that volatility. I think that will start to come through as prices start to improve, but it is anybody's call on whether that is 2011 or whether that is a little bit later. And it probably will be, I think, earlier improvement for Alberta than potentially we see for the Pac Northwest. Because, as you know, Pac Northwest is on the margin for most of the time on gas prices, and therefore, until natural gas improves, that might take a little longer. So that would be our general view.

And with that view, do you have a view on basis differentials? Across the US, the basis is almost nonexistent through most markets.

Andrew, we are not going to give you our outlook on the market.

Okay. That is fine.

Let's go to the next caller.

I appreciate it. Thank you.

I will take yours.

Thank you. Your next question is from Michael McGowan with BMO Capital Markets. Please go ahead.

Hello. Good morning. With respect to the MOU that you signed at Centralia, and the new build you are looking to participate in, are you seeking to put in place additional contracted capacity there, and release your merchant exposure, or would the new capacity build to replace Centralia also contain some merchant exposure?

To be determined, Michael, but I think that directionally it would be to be more contracted.

Okay. So directionally you are looking to increase your contracted?

I think what both parties would like to do is, from our side, we would like to reduce the risk to our shareholders, and on the State side, they'd like to reduce the risk to the consumers. I think in there is the mutual answer for both of us.

Okay. Just as a follow-up question that's somewhat -- or very unrelated, I didn't see in the earnings release the contribution from Canadian Hydro. Are you able to break out the production from those assets, and the earnings contribution this quarter?

I mean, what we generally do whenever we buy a company or whatever, we don't split out then that company separately. Obviously, you can see that if you look into the sections that we have broken out, the renewable section and in eastern Canada, where as you know a lot of their wind was. So you will be able to see, I think, if you look through that -- and obviously, we can give you a bit more indication offline --those variants. But it is mainly in the sort of detail, and there will be detail obviously in the production summary that comes out after the call. I think you will be able to get that information. But no, we won't be pulling out Canadian Hydro. That doesn't exist now. We have Ontario wind, et cetera.

Okay. Thank you very much.

Thank you. Your next question is from Linda Ezergailis. Please go ahead

Thank you. With respect to your continuing analysis of your plant lives, you have completed your coal plants. I am just wondering what the preliminary thinking is on any sort of chance of further reducing depreciation expense by extending the lives of maybe some of your other non-coal plants?

Yes. I don't know that there will be anything material, too material on that, Linda. We are working through that. I am not going to second guess it, but, yes, we have got our gas and hydro ones we want to look at. Again, we will be conservative and very balanced on this because in one way it is good to get that reduction in depreciation, but in other ways we have to be conservative from a financial point of view on these things.

Okay. Just another follow-up question, a point on clarification on your Washington MOU. Within it, there was some talk about phasing out the reduction in coal generation. Is the thinking that as the coal generation is phased out, that in parallel, any sort of alternate generation would be stepped up, or is there a potential for the coal to be phased down in an accelerated way, faster than new generation can come up?

Linda, it is Steve. That is the whole point of the exercise, to ensure that -- right now, the target is reduce emissions by 2025, and the question is how do we achieve that. And since we are such an important part of the supply system, we have to do that in conjunction with ensuring reliability. The whole part of the MOU, the whole point of the discussion is, how can we do this so we ensure supply and hit the target by 2025? So it is clear, to the extent that coal reduction is reduced, it has to be offset by new production of another fuel, and the timing and pace and how we will contract that are the elements of the discussion with the State. So hopefully we can give you the specific details by year end. But right now we are just starting the process.

Okay. Thank you.

Thank you. Your next question is from Robert Kwan with RBC Capital Markets. Please go ahead.

Thank you. You did CAD0.31 in the quarter, of which CAD0.04 to CAD0.05 was the one-time Wab ARO benefit. Now that Wab has come out, and there was very little maintenance during the quarter, I'm just trying to wonder, absent of a significant change in power prices, is there something else either in the quarter or in future quarters, that provides upside to kind of CAD0.25-ish being a pretty good quarter for you going forward?

I think, as you know, in the second quarter of last year we had a CAD0.03 loss. So we see that there will be improvement in the second quarter. We actually are seeing better availabilities coming through, as you have seen. We are controlling our costs well.

So I think that, and you have seen there is some sort of improvement in depreciation in this year which has a year effect. As Steve said, we do see double-digit growth at least, and we have made the comments around what we are trying to get to at low prices. I think I have given you enough information there to say to you that we are going to have a solid balance of year.

Okay. But basically, Q2 is obviously going to be soft, you have a lot of maintenance. But 3 and 4 probably look something like Q1?

We can't talk specific quarters, but I think you are correct in reading the MD&A, and seeing we have a heavy maintenance quarter in Q2. Traditionally our business is much stronger in Q1, Q3 and Q4. So those are good estimates, Robert, in that regard.

Okay. Thanks, Jenn. Are there any thoughts on slowing down construction? You have only spent a little bit on Ardenville, so there is still I think about CAD100 million to go, just in light of low power prices?

No, not at this stage. We are fully committed to doing Ardenville.

Okay (multiple speakers).

I think that is a good project. With the must run capabilities, we see that being a good project. And the sooner we get it up, and the cash coming in, the better off we will be.

Okay. Will it make money at current Alberta power prices though?

Yes, it will.

Okay. Thank you.

Thank you. Your next question is from Petro Panarites with CIBC World Markets. Please go ahead.

Thank you. Just some specifics on the turnarounds for this year, because you indicated previously that Sundance Unit 4 early, 2010, and following that, a turnaround in Unit 6 in the summer. Can you provide us with an update on the specifics there?

Sun 4 is currently in its outage. And then Sun 1 will follow that towards the end of the second quarter. And we have got a Centralia outage in the second quarter as well. So as you've seen, we have got heavy major maintenance in the second quarter.

Okay. And just shifting gears, decision window, I guess for the extensions of Sundance 1 and 2 are basically at hand. When do you think you might be able to provide more detail about what your intentions are there?

It is Steve, Petro. We are not [an urgent] there. We have several years. And largely, it will depend on the outcome of the discussions with the provincial and federal governments, both of their targets. And then we will be able to make a conscious decision.

I think we outlined at one of our Analyst Meetings in November that it is more like 2012/2013-type decision. So nothing says we can't accelerate that, but we have certainly out to that timeframe. The PPA goes to 2017. We probably have even a few more years' leeway than that. So we have lots of time on those and no rush. We are waiting for the resolution between the province and the federal government on what the targets and process will be on greenhouse gases

Great. Thank you.

Thank you. Your next question is from Matthew Akman with Macquarie, please go ahead.

Thanks, guys. Just on the Centralia replacement generation again. Do you guys see TransAlta as having to own the replacement generation that goes up there? And the reason I ask is, you may have better investment opportunities somewhere else, depending on what they consider as a fair return under the MOU, and it would be unfortunate to have to spend CAD2 billion or CAD1.5 billion, or whatever it is, if the return isn't at the hurdle rate that you can achieve on building renewables or what have you. So how do you think about the need to own the new replacement generation?

Matthew, it is Steve. Clearly, we have indicated to the State preliminarily that we would like to be part of that supply chain in that State. And we need -- to do that, we need to make, to your point, have a return that exceeds our hurdle rate. They fully understand that. And I think they have indicated they would like to see us there and they understand our need for the hurdle rate.

So at the end of the day, obviously if we can't achieve a hurdle rate, then we have to take a relook at that. At this point I am confident that we will achieve our hurdle rate, and in that case, we would probably want to go forward. But that will be at the end of the day one of the key decision points for us in this process. And right now, as I sit here today, I feel good about it. We will see how that progresses over the coming year.

Okay. Thank you.

Thank you. There are no further questions from analysts. I would now like to turn the meeting back over to the presenters.

Great. Thank you, Jesse. We will give the media an opportunity to ask questions if they have them.

(Operator Instructions). There are no questions registered at this time. I would now like to turn the meeting back over to Ms. Pierce.

Great. Thank you so very much. We appreciate people's participation in our call today, and certainly if you have any follow-up questions, Jess and I are available to take them one on one. Have a good afternoon.

Thank you. The conference has ended. Please disconnect your lines at this time, and we thank you for your participation.