TransAlta Corp (TAC) 2011 Q3 法說會逐字稿

Good morning, ladies and gentlemen, welcome to the 2011 third quarter results conference call. I would like to introduce Jess Nieukirk, Director of Investor Relations. Please go ahead.

Thank you, Jenny. Good morning, everyone. I'm Jess Nieukirk, Director of Investor Relations, and welcome to TransAlta's third quarter 2011 conference call. With me are Steve Snyder, President and CEO; Bret Gellner, Chief Financial Officer; Dawn Farrell, Chief Operating Officer; Ken Stickland, Chief Legal and Business Development Officer; and Todd Stack, Treasurer.

Earlier this morning, we released our third quarter results. We hope you've 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 statements qualification, which is detailed in today's news release and incorporated in full for purposes of today's call. The amounts referenced in this review are in Canadian currency, unless otherwise stated.

I also remind the audience that IFRS requires us to deconsolidate our Fort Sask, SeaGen, and Wailuku facilities and report the results of these operations as part of finance lease or equity income on the statement of earnings. In addition, the non-IFRS terminology used in this call, including comparable earnings, comparable EBITDA, gross margins, and funds from operations is reconciled in the MD&A. Per share figures for the third quarter 2011 are based on an average of 222.9 million shares outstanding compared to 220 million shares in the third quarter of 2010. Please note financial information has been rounded to the nearest whole number.

On this morning's call, Steve Snyder will provide an overview of operating results for the quarter. Bret Gellner will provide details on our cash flow, comparable EBITDA, capital allocation, and balance sheet items. Before going to questions-and-answers, Steve will provide commentary on what investors can expect for the remainder of 2011. Steve?

Good morning. This is our third quarter in a row this year with earnings above our previous year. Comparable earnings per share in the third quarter were CAD0.27 versus CAD0.18 last year, an increase of 50%. For the first three quarters of the year, our comparable earnings are CAD0.91 compared to CAD0.60, an increase of 52%. These results are broad based, the product of strong operations, good renewable resources, strong availability, captured optimization opportunities, and solid performance from our energy trading team.

Looking at our generation segment for the quarter, our generation gross margins were driven by the diversity of our fleet. Regionally, western Canada was strong as a result of improved pricing in Alberta, offsetting poorer pricing in the Pac Northwest. In our renewable fleet, our hydro gross margins are up and we also had better wind margins for the quarter.

In our thermal fleet, coal margins also increased slightly with the addition of Keephills 3, helping to offset the move of our major Sundance 6 outage due to a transformer failure. Our teams were quick to respond and as a result, we were able to mitigate most of the impact of that event. In Centralia, we continue to economically dispatch our units, taking advantage of the lower prices. Economically dispatching our Centralia plant also allowed us to finish additional maintenance work without impacting the strong margin it delivers.

At our gas fleet, margins were slightly lower this quarter but this was predominantly the result of higher planned outages. Overall, when you look at our generation results on a year-to-date basis, comparable gross margins are up CAD65 million over last year. The results of the benefits of a well-diversified fleet.

I will turn now to fleet availability. It remained strong in the quarter at 88.3% and on a year-to-date basis availability has been 88.2%. These numbers are adjusted for the business decisions we made to economically dispatch Centralia.

Finally, our energy trading team delivered improvements yet again this quarter with gross margins coming in at CAD45 million. Year-to-date, energy trading gross margins have reached CAD97 million. Our energy trading team remains integral to our operations, with a major focus on contributing to our overall fleet optimization plans and providing critical market intelligence for our development and contracting activities.

In summary, we are seeing strong performance across the Company and the results are showing. We believe we are well-positioned for the remainder of the year. Before turning to the call over to Bret, let me comment briefly on the ongoing arbitrations at our Sundance units.

With respect to Sun 1 and 2, there has been no change in the timeframe for the arbitration panel to hear our claims of force majeure and of economic destruction. This continues to be scheduled in the March/April period for 2012. That lengthy period is not helpful in reducing market uncertainty, and in that regard, we continue to reach out to all the key stakeholders on this issue in the hopes of developing an acceptable settlement in a faster timeline. While we remain quite confident in our position with regards to a possible arbitration settlement, we do believe a faster, acceptable resolution would benefit all stakeholders.

With respect to Sundance 3, it is now clear that the force majeure arbitration is highly likely to remain outstanding until the more permanent repairs are completed on the unit in 2012. That will provide an opportunity for a thorough inspection of the unit. As such, we do not expect a final decision to be made until mid-next year. As always, we will update you once we have more information pertaining to either of these events.

Before I talk about the remainder of 2011, I will turn the call over to Bret to review the financials with you.

Thanks, Steve. Good morning, everyone. I am going to provide an update on our comparable EBITDA and our cash flow performance, both for the quarter and year-to-date. I will also provide an update on the status of our capital expenditures and liquidity.

So as Steve mentioned, the strong performance of the Company has continued into the third quarter. Comparable EBITDA was CAD29 million higher in this quarter relative to last year. On a year-to-date basis, EBITDA increased 22% relative to last year, which equates to CAD144 million more. In total on a year-to-date basis, our comparable EBITDA is at CAD804 million. The higher EBITDA on a year-to-date basis has been driven by positive contributions from the higher prices and volumes in renewables, higher prices in the coal fleet, and from trading.

In gas, higher prices were offset by lower volumes, which was due to more outages this year relative to last year. Overall, the improved performance reflects the benefits from the assets we've added over the last few years, our diversification strategy, and stronger market fundamentals in Alberta. The stronger performance has also resulted in higher returns on equity and capital employed compared to a year ago. For the first nine months, funds from operations are up 9% relative to last year or CAD49 million.

In the quarter, FFO was down slightly due to higher interest costs associated with the start up of commercial operations at Keephills 3 as well as due to timing of certain cash receipt. Year-to-date we have generated CAD620 million in funds from ops and, therefore, we're on track to meet our target of CAD800 million to CAD900 million for the year. As Steve mentioned, our trading team continues to perform well, generating gross margins of CAD45 million in the quarter and CAD97 million for the first nine months. As a result, we expect to finish the year in the range of CAD100 million to CAD125 million.

In terms of capital, we spent CAD114 million on sustaining CapEx in the quarter, of which CAD64 million was on major maintenance. For the full year, we still expect to spend between CAD310 million and CAD365 million, which includes the repowering of part of our hydro fleet and other productivity initiatives. We spent CAD29 million in the third quarter on growth and CAD83 million for the first nine months. Due to the timing of certain expenditures on growth, our outlook is now expected to be slightly lower at CAD110 million to CAD170 million for the full year.

Finally, our financial position at the end of Q3 remains strong and reflects our ongoing focus on maintaining investment grade credit ratings and a strong balance sheet. We also continue to maintain ample liquidity. As of September 30th, we had approximately CAD700 million of our CAD2 billion committed credit facilities available.

With that, I will turn it back over to Steve.

Thank you, Bret. As we look to the remainder of year, the majority of our planned major maintenance work for the year is behind us and we have good momentum in our operations. We will have incremental production from our first full quarter of Keephills 3, and we expect Alberta pricing to be above last year. However, some of these positives will be offset by the full quarter, higher interest and depreciation costs associated with K-3.

I would also note that we are 95% contracted for the fourth quarter in Alberta for in CAD60 to CAD65 range and in the CAD50 to CAD55 per megawatt in the Pac Northwest. We also remained focused on our cost structure and continue to find efficiencies. However, future improvements in productivity will increasingly come from productivity initiatives. These require investments and we are proceeding with several initiatives this year that will impact costs in 2011 but which will have excellent payback over the next couple years. Overall, our goal remains to offset inflation rate pressures through a combination of improved efficiency as well as productivity initiatives.

Looking beyond 2011, we now need to start repairing many of our coal units to adjust to the emerging environmental regulations. That means a revamp of their major maintenance schedules and scope of work. Our plans will be built on the basis of the proposed federal Co2 regulations that currently require the early retirement of coal plants.

Given the uncertainty in the regulations, flexibility will be a key here. We need to start to set up our units to run well for 10 to 15 years as opposed to the life extended for longer periods. The impact in 2012 will require an above-average maintenance schedule and related outage days. These investments will ensure we get the best returns and cash flow possible from our facilities facing any accelerated closure dates.

Let me conclude today's call by talking about growth. We have a solid track record when it comes to growth, especially over the last number of years. In 2009, we added over 800 megawatts of growth through the purchase of Canadian hydro and through the completion of our Kent Hills wind farm and our Sundance 5 operations. In 2010, we added nearly 200 megawatts through Summerview 2, Ardenville, and our Kent Hills expansion. And this year, we added nearly 500 megawatts as we brought online our 19 megawatt Bone Creek hydro facility and started commercial operations on the 450 megawatt Keephills 3 unit.

The completion of Keephills 3 is a significant achievement and one which will provide substantial value to our shareholders going forward. Next year, we will bring online over 120 megawatts of new growth through efficiency uprights at our Sun 3 and Keephills 1 and 2 unit and through the completion of the new Richmond wind farm in Quebec. Those projects are tracking well and we fully expect to complete them on time and, of course, on budget.

We believe these successes and the related experience now set up TransAlta to continue to drive disciplined and sustainable growth over the next decades. We have real opportunities in each of our core regions and we have the competitive advantages needed to execute on them. Within that context, our priorities remain Alberta and in terms of geographies and renewables and gas in terms of fuels.

In addition, we have just announced the opening of our US headquarters based in Olympia in Washington State, where we do want to strengthen our presence in the western US. Paul Taylor, President of TransAlta USA will lead our development and contracting efforts there. Paul's vast experience and knowledge of the western US markets adds a significant layer of strength for us to continue to grow and expand our footprint in these markets. We will discuss these opportunities and others available to us in our core markets in more detail at our Investor Day next week.

As I conclude today's call, I would just like to remind everyone this will be my last conference call that I will lead. Dawn Farrell will take over in the new year and lead our discussions on our fourth quarter call as our new CEO. In addition to congratulating her on this well-deserved promotion, I would like to extend a sincere thank you to each of you for your participation in all of these calls over the years, for your interest, your constructive input, and your questions. We always listen and try to improve at TransAlta and your input ensures that we keep the importance of our shareholders at the forefront of everything we do. I do hope to see many of you at our Investor Day next week.

With that, I would like to turn the call back to Jess for the question-and-answer period.

Thank you, Steve. 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 the media. We shall then respond to individual investors, so please identify yourself when asking a question. I remind you we do not provide guidance and that we shall answer your model-related questions off line after the call. Jenny, we'll take questions now, please.

Thank you, sir. We'll now take questions from the telephone lines. (Operator Instructions). There will be a brief pause while the participants register for their questions. Thank you for your patience. Our first question is from Linda Ezergaillis from TD Securities. Please go ahead.

Thank you. I have a question with respect to your energy trading business. Quite impressive that your gross margin has moved up so much this year. I'm wondering if we look in the medium term and longer term, how might we think of how much those factors that you're benefiting from and activity will continue? So should we think of 2012 and 2013 as maybe having one normalized CAD45 million to CAD65 million target range of gross margins or might we think of kind of a systemic shift upwards generally either somewhere between those two ranges or up to the current 2011 target range?

Linda, it is Bret. Yeah, I think if you just look at our historical average and look at it from that perspective, I think that's a good guide going into next year. Certainly, we can talk a bit more at Investor Day, but I think that's a good way to look at our business. No real change in terms of the risks and the markets we're focused on and the strategies.

So the factors that you're benefiting from this year, you're not highly confident that will continue or somewhat confident that will continue into at least the beginning of next year?

Again, I think if you look at an average, that will give you a sense that there is probably opportunity above what we did previous years, but maybe not as much as we're seeing this year.

Like it is three-year trailing average or something?

Linda, we don't change the risk profile, so generally speaking if markets a bit more volatile, we might do a bit better. If they're less volatile, we'll do a little bit less than that, but I think over a three-year period that average is pretty accurate.

Great. Thank you.

Thank you. The following question is from Juan Plessis from Canaccord Genuity. Please go ahead.

Thank you very much. I know you're going to go into this a little bit next week at your Investor Day, but just wondering if you can provide us with perhaps a brief update on your talks with potential counter parties with respect to long-term contracts at your Centralia plant, and maybe if you can give us a sense of timing?

Well, it's Steve here. The only update I can give you today is that we have our full team in place. We're in active discussions. I would say that with the current market conditions and with our contracted basis in Centralia, there is not an urgent need, there's no sense of urgency to that in the short-term, but our plan is that as we go into 2013, that we should have a good profile for the contracting, and I think it will take us the full year to get that in place, but there are just a lot of people to talk, they're complex negotiations, they're under the way. I think a good start but I think realistically it is mid-2012 before the beginning reasonable update to provide on the progress on that.

Okay. Thank you for that. As a follow-up here, I know a couple of quarters ago you gave us an indication of the potential repair costs for Sundance 1 and 2 units of in excess of CAD100 million. Just wondering if you can update us on the potential costs for that.

No, I think those -- there's no other changes in that whole process, and it remains subject to the arbitration at this point next year and we'll have to wait until is that plays out at this point.

All right. Thank you.

Thank you. The following question is from Paul Lechem from CIBC. Please go ahead.

Thank you. I was just wondering if there's any update on the Sundance 7 plants and where that might be in terms of your planning.

We still are progressing with launching Sun 7, and I think the one only area there that would be a concern today would be the transmission issue and we expect that to be resolved early next year, but right now our plan is a major gas plant in Alberta, and deal with the need for new capacity additions in the Province.

Can you give us some critical timelines on that process?

We're looking at the 2015, 2016 timeframe.

And, Paul, we'll give you some more updates on this next week.

Okay, thank you.

Thank you. The following question is from Michael McGowan from BMO Capital Markets. Please go ahead.

Hello. Good morning. Just had a question about the earnings guidance you had in your press release. You seemed to suggest only moderate growth in EPS for the remainder of this year yet it looks like you had a really good quarter in trading and your guidance which is just another really good quarter in trading in Q4, as well. So just wondering why you weren't a little more optimistic in the guidance.

Michael, yeah,I mean, as Steve indicated, certainly prices, Alberta fundamentals looked good, but remember our interest and depreciation costs do start to pick up in light of K-3 coming on. Centralia, even though we don't have a lot of open position there, prices remain a bit weaker. And on trading, we have given you guidance on the full year. I would say the trading is in line with what we achieved last year at this time. Remember, some of the value in the trading is already reflected in this quarter for next. And finally, not a lot of open position left in the fourth quarter.

Okay.

We're 95% contracted essentially as we go into the quarter, so a small amount of upside based on market conditions but we chose to make sure we were locked in much earlier in the year.

Okay. And maybe just a follow-up question. Looks like your corporate costs increased quite a bit, as well. You did reference some of the productivity improvements that you're making. Can you actually discuss these improvements and really what they entail?

No, I think they're a series of really small projects, particularly based in the plant and in systems where we can make investments that get deficiencies and production or in costs or in on the labor side, but it is really -- what it is is we focus on hundreds of projects, not on a major project, and the goal, as we said, is to find ways to offset inflationary pressures, particularly in Alberta, which is running around the 2%, 3% range, and so that's what we're trying to find in the cost structure. But some of them do require investments to get there. We have chosen to make some of those investments this year given the strength of the year that we're having.

Okay. Great. Those are my questions. Thank you.

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

Thank you. Good morning. I am not sure who wants to answer this one, but just on your wind power equipment, are you seeing declines in equipment costs just in general?

Andrew, Steve. Generally, yes with reduction in demand in the wind side for a host of reasons across the various geographies. We are seeing some opportunities to get the capital costs down, and so we will look seriously at where we have some opportunities to take advantage of that.

So then just to follow up to that would be is that really enhancing your returns or is it just lowering the price that you are getting on really offtake agreements?

I would say both, I hope. Some of it with the pricing coming down, some of it is being bid in, but our goal is on our wind projects that we would get reduced capital costs and with our track record a bid aggressively into projects and end up with same or higher return we've had in the past.

What it is, Andrew, also better volumes this year just relative to last year, particularly the first quarter last year was quite low, and so on a year-to-date, we're tracking better and so we get those margins and those flow through the numbers.

I think it just opens up new opportunities for us going forward, and we'll be looking at those seriously.

That's very helpful. Thank you.

Thank you. The following question is from Robert Kwan from RBC Capital Markets. Please go ahead.

Good morning. Steve, you mentioned just as you were talking about the Canadian environmental plan and the above average maintenance schedule for 2012 but also doing some things to preserve flexibility, and I am just wondering if you can give a little more detail around that, particularly with respect to are you talking about potentially taking plants down more often or less often and then is that spending more dollars or less dollars?

Yeah, we will give you a bit more flavor to this next week, Robert, but maybe just broad overview. The challenge we have today is that we don't know the rules, but we have to start thinking about what definitely is going to come down, we believe, is some form of accelerated closure of coal plants. What we would like to see is some flexibility in those rules. We think that will give the best economic answer, particularly for our customers, as well as for us, and at the same time allow actually a more opportunities to reduce Co2 faster than under the current proposals.

I think under what we have to do is make sure we're ready for any eventuality, so the assumption is we will have to probably close on an accelerated basis some of our coal plants. On that basis, we need to prepare to be flexibility to do that and the plan we're putting in place is going to build in flexibility on the assumption that we won't be life extending these plants, but running them to fixed closure date. We'll redo the scope of work to allow to us do that on the major maintenance. We'll give you more color about that next week in terms of the impact on 2012 and the benefits that we'll see coming from that particularly on cash flow in the coming years.

Okay, I guess we'll wait for next week. Maybe related to that, on the environmental plan, you talked about hoping to see a little bit more flexibility, and I am wondering is that resonating with the government given this is kind of the second kick at the can and there is a lot of input the last time around yet they still came up with rules that didn't have a lot more flexibility other than a little bit on substitution, which I don't think really helps you very much?

Well, there is two. One is the formal gazette process, and we have submitted, as I am sure other industry members have, our input to that process. Following that process, we have been told that there is another 30-day period where more discussions can take place and I think other members of the industry are certainly encouraging the government to look at flexibility as opposed to a prescriptive approach. Again, on the basis that if you do that, there's probably a better chance of do it in a more economical fashion and a better chance it could actually equal or more Co2 reduction. And at this point, I can't predict the outcome. I do believe, particularly in the current economic times, the government is open to practical common sense solutions and/or alternates, and we'll see what comes out of that and my hope is we'll know a good feel for that by year-end.

Okay, that's great. Thank you very much, Steve.

Thank you. The following question is from Paul Lechem from CIBC. Please go ahead.

Thank you. Steven, in your opening remarks you talked about the Sundance 1 and 2 process, and you made some comments about believing faster resolution would be in everyone's interests. Have you been in any direct discussions towards that end to try and sort of short circuit the process and come to a negotiated agreement?

What we've indicated to all the stakeholders is that we think it's a long time to have this much uncertainty in a marketplace and that we would be willing to sit down at any point in time to try to discuss a negotiated way to resolve it to everyone's satisfaction. People have heard that from us, they're thinking about it, and we'll see if that at least gets to formal discussions or not. At this point, we just have to wait for stakeholders to assess the situation. The reality is we do have more information, generally, than some of them. It may take some time to get caught up. I think they're working hard at it and at this point in time we'll wait and see if that leads to discussions or not.

Okay, but there haven't been any formal discussions outside?

It is just early stages of letting people think through the responses and we'll have to see where that leads to. There is nothing else happening at this point.

I got you. Thank you.

Thank you. (Operator Instructions). Our following question is from Michael McGowan of BMO Capital Markets. Please go ahead.

Hello. I just had a follow-up question on a point Robert brought up. Steve, you mentioned the potential of accelerated closure of some of your coal plants. Now, is that accelerated closure, do you mean potentially sooner than the 45-year life that it has been floated in the government's regulations or are you talking about the 45-year life?

I can talking about the 45-year life. So the 45-year life for our plants, I mean plants can last more than 45 years if you invest in them, so by definition if you close less than that life extension, I call that accelerated. And we don't have a sort of -- there is no known life for a plant, it's really a matter of how long it has been running and how much money you want to invest and those are driven by economics.

But the reality is when the government is saying 45 years for a number of our plants, it would mean we probably would close them sooner than we would if we didn't have that rule. And by the way, we're not against that rule. What we would like to do because it is prescriptive, it doesn't take into account the individual nature of our plants, and we feel that we can take into account the individual running rate of our plants that there's a better economical solution and potentially a chance to reduce Co2 further.

In addition, we'd like some flexibility around carbon capture and the pioneer project, the 45-year rule and the lack of a carbon tax puts the technology solution in jeopardy or delays it by many years; we think that's a wrong approach. A flexible approach would allow much greater opportunities, not only for our company, but all companies to introduce technologies to reduce carbon as opposed to just closing plants, which is not the most economical thing to do in some cases.

So all that accelerated means is it is 45 years by definition is accelerated, and we like flexible as opposed to prescriptive approach and we like the opportunity to use technology like CCS as opposed to delaying it or not being able to use it. It's as simple as that. That's our simple request.

Okay. Great. Thank you for that.

Thank you. We'll now take questions from the media. (Operator Instructions). Our first question is from Mark Barnett from the Morningstar. Please go ahead.

Interesting to be here in the media section, but anyway. Good morning, guys.

Good morning.

I had a quick question. You mentioned something about with your PPA pricing, obviously seeing costs come down on the supply side, but you had also mentioned some relief on demand, I guess. Maybe could you talk about a little bit of that and how lower demand is helping you guys in your costs?

I am not quite sure, Mark, if I understand the question. Is it related to the PPAs?

No. I'm sorry, when you were just were discussing your construction, your construction costs for going in for PPAs.

On the wind projects?

Yes, sorry about that.

Sorry. Okay. Well, all we've seen is that with the reduced demand for generation capacity because of the current economic difficulties in many jurisdictions, there is obviously less demand for power, less demand then for wind, and that less demand is meant that the wind generators are more competitive on pricing, so that provides some lower cost opportunities to help offset perhaps a weakness in pricing in the marketplace. So we are going to take a serious look at where, if with our purchasing team, if we can get some excellent costs on the capital side of the wind business, we might be able to use that to find some opportunities in the marketplace where prices may be reduced but the lower costs allow us still to participate. So we'll just work on that and we'll see what opportunities arise over the next 12 to 24 months.

Okay. Thanks for that. And then second, I am sure you will discuss this a little more next week, but in terms of developing your western US footprint, aside from that new gas plant that you would like to build, is there any -- is this going to affect maybe how you are looking at that footprint? Are you looking more at renewables given the lower costs or is it sort of a new build only or are you going to be looking to maybe make acquisitions?

I think we would look at -- remember, we look at the western market as all of the western USA and Canada, so it would be from basically BC down to California. We would certainly be looking primarily at renewables and probably we would look at certainly asset acquisitions. And in terms of gas, that would be probably largely focused in supplying the Pac Northwest as coal plants come off due to the regulations that have been put into place there. So our focus is gas in the Pac Northwest and renewables in the rest of the western US and probably more assets than green fields at this point in time.

All right. Thanks. Congrats to you and Dawn.

Great. Thank you.

Thank you. The following question is from Dina O'Meara from the Calgary Herald. Please go ahead.

Good morning. Thank you for taking my question. With the shutting down of the Sundance 1 and 2 units, your pricing scenario in Alberta strengthened, and I am wondering, seeing as you spoke about the accelerated maintenance and possible shutdown of other units, do you have any candidates in line to shut down in the near future?

We have no plans to shut down any plants. We may be under the federal guidelines forced to accelerate some plants in the future, and I would say relative to Sun 1, 2, the addition of Keephills 3 into the market has largely replaced that volume, and we're already seeing in the fourth quarter that impact on pricing being reduced slightly from the third quarter. We want to run all of our plants as long as we can, but we will meet any regulations that are imposed on us for Co2. And I did mention earlier that we are going forward with our Sun 7, which is a new 700 megawatt gas plant to be built in the area west of Edmonton, and we are still targeting to bring that on stream 2015, 2016, subject to all the permitting and transmission certainty.

Just a follow-up question. Are you facing any regulatory scrutiny around the decision to bring down Sundance 1 and 2.

No, no, look, the Sun 1, 2, was actually driven by boiler regulations. We have -- that boiler is not safe to operate, and we are following those regulations and simple as that. What's going to happen in terms of the (inaudible) and PPA system for the costs associated with that, that is up now for an arbitration panel to determine the costs of that and how they should be allocated, and so we'll leave it there.

Well, I was just wondering about -- well, obviously the boiler issue had to be dealt with, but TransAlta took it a step further saying that the replacement would be too costly to justify with plants of that age.

That's in lieu of the pending federal legislation 45-year rule. Under that rule, if it goes forward, those plants would have to close in 2017 and 2018, and what we're saying is in order to justify new boilers in those plants, which would be required to restart them or almost new boilers, that investment cannot be returned in the timeframe left. It is a simple economic equation, therefore, it doesn't make economic sense to restart those units.

Thank you. Those are my questions.

Thank you. There are no further questions registered and I would like to turn the meeting back over to Mr. Nieukerk.

Thank you. I'd like to thank everybody. That concludes our third quarter 2011 conference call. As always, I am available after the call for any follow-up Q&A.

Thank you, gentlemen. This concludes today's conference call. Please disconnect your lines and thank you for your participation.