TXNM Energy Inc (TXNM) 2003 Q2 法說會逐字稿

Good morning, and welcome, ladies and gentlemen to the PNM Resources second quarter conference call. I would like to inform you that this conference is being recorded and all participants are in a listen-only mode. At the end we will open the conference up to questions after the presentation. I will turn the conference over to Barbara Barsky, Vice President of Investor Services. Please go ahead.

Good morning. I'm Barbara Barsky Investor Relations officer with PNM Resources. I'd like to thank you for joining us this morning to review our second quarter results. Today's conference call with accompanying slides can also be accessed through our website. Please log on if you haven't to follow along the slides with us. With me here in Albuquerque are Chairman and President and CEO Jeff Sterba; Senior Vice President and CFO John Loyack; Senior Vice President of Power Marketing and Development, Eddie Padilla; Controller and Chief Accounting Officer, Robin Lumney; and joining us from out of town, our Senior Vice President and General Counsel, Pat Ortiz.

Yesterday afternoon, PNM Resources reported earnings for the quarter and six months ended June 30, 2003. That news release, together with the income statement and comparative operating statistics for the quarter and year are available on the investor section of our website at pnm.com. Please remember that some of the information we are providing today relative to earnings, regulatory issues, investments and other issues are considered in forward-looking statements within the meaning of Section 21 E of the Securities and Exchange Act. Actual results in 2003 may differ materially from our expectations. We caution you not to place undue reliance on these statements as actual results may be affected by a number of factors including weather, the local and national economies, interest rates, the performance of generating units and transmission systems, the competitive environment in the electric and natural gas industries, and various legal, regulatory and legislative outcomes the company is unable to predict at this time. For more information about these uncertainties and risk factors please consult PNM's 10-K filings for 2002, 10-Q filings for the quarter ended March 31, 2003, and PNM's 8-K filings with the SEC.

I'd like to introduce Jeff Sterba.

Thanks, Barb and good morning to all of you. Thanks for joining us today.

As you saw on our news release yesterday, we had a solid second quarter. The first quarter was softer than we hoped for but the performance of the second quarter has moved us back to being on track for meeting our earnings targets for the year. One thing to point out specifically about the performance this quarter has been our performance of the wholesale power market. We continue to see a bit of a recovery in the marketplace, certainly a lot of changes occurring in it. I want to recognize the success of our wholesale power marketing group which brought in additional profitable long-term business which stands us well today and will stand us well in the future.

A year ago we added the TNP contract which is a six year contract and it has now moved from a level of roughly 30 megawatts last year to 90 to 95 megawatts this year. Then in December they brought in the 80 megawatt contract for two years with the navy out of San Diego and most recently a package of contracts adding 50 megawatts over the next three years. These three contracts, I think, continue to add to the base of long-term stable revenue sources for our wholesale business.

Additionally in the midst of a national economic slump, we continue to see growth in local service territory. According to the latest report that I saw out of the Department of Labor, New Mexico's annual rate of job growth in April was second only to Hawaii out of the 50 states. Our average count, customer count, continues to grow. Up about 3% on the electric side and 2% on the gas side. Recall that the distinction between gas and electric is because we serve all of the rural areas, or almost all of the rural areas in the state on the gas side, and we only really serve the major metropolitan areas on the electric side so we have consistently seeing higher growth in our electric than our gas business. If we look at Kilowatt hour sales on the electric side, after normalizing for weather, we continue to see a solid 2% growth rate which is certainly less than the 3.5-4 we traditionally experience at least over the last 6 or 7 years, but in the face of what we see happening in the rest of the country, it's not a bad growth.

As you may be aware, unlike the east, in the Southwest we've experienced fairly hot and dry weather over the last couple of months. That certainly helped to boost demand in our market as well as throughout much of the west. On our system peak we set a new system peak this year up 14% from last year. A lot of that growth is because of firm wholesale sales that we've made, particularly the sales to TNP but we've seen retail peak 3.5-4% compared to last year. One of the things that we always look at is given our rate structure on the electric side for our retail customers and what we see happening on the wholesale market, is there much difference between where we make our money and is it better to sell a Kilowatt hour retail or sell a kilowatt hour wholesale. Of the prices on average that we see in today's wholesale market, we are relatively indifferent between whether it's a kilowatt hour on the retail side or kilowatt hour on the wholesale side. Obviously that can vary substantively by time of year and time of day, but on average given the forward prices we see and the prices we saw in the second quarter, we are fairly indifferent.

We are also on track with the most addition -- resource addition to our system, the 200 megawatt wind farm we are developing with FPL. We have received energy out of the facility that have been placed into the grid. The facility is not yet in commercial operation. There's still work going on to tune the machines and the software. We expect it to be in full commercial operation within 4-6 weeks.

We also entered into a settlement agreement with all of the parties to provide for a green tar [ph] tariff that will enable our retail customers to purchase directly wind power and other renewable energy upon the payment of an additional cents 1.8 per Kilowatt hour. That has been certified to the commission and we anticipate commission approval in the next four weeks or so. We'll adopt that so we are on target relative to not only that project but also to gaining the additional revenue streams we think we can get both on the retail side as well as wholesale side.

One other thing, let me touch on, the gas rate settlement which most of you, I'm sure, are familiar with. We, as you will recall, we entered into an agreement with the commission staff in our industrial consumer group and we held two days of hearings in mid-July on that proposed settlement. We had one intervener who is opposing that agreement but they did not submit testimony or allow testimony to go into the record and have any witnesses cross-examined by the hearing examiner or any of the other parties at that hearing. We anticipate that the stipulation will be certified by the hearing examiner by the -- let's say by early September, and would expect the commission order following before the end of October which would allow us to implement the new rates in November. Recall that that's a proposed 22 million increase in revenues and significantly improve the return on our gas assets which have lagged the returns that we expect out of that business.

I'm aware that some of our other utilities in the Southwest have recently announced their second quarter earnings and the ones I'm familiar with have announced downturns in the earnings compared to what was expected and compared to the second quarter next year and may be worth spending just a second on why I think the distinction. Obviously every company's situation is unique. One of the things to keep in mind about our strategy and our resource mix is that number one, we've been focused on building our long-term stable of contracts and moving less -- becoming less and less dependent on the short-term market. Second, we have fairly small level of dependence on natural gas as a boiler fuel. About 95 % of our resource mix on an energy basis comes from coal and nuclear so the increase in natural gas prices you see, while they effect the retail gas business, they have had less impact on the electric business. And for those of you that have followed us for some time, you know we have not counted on spark spreads being in a point where we could make any significant amount of money on gas assets that we have and true to form we've seen that by and large happen. Spark spreads have improved a bit but certainly haven't come to the point where running of our gas units on a long-term basis have yet been justified.

We also -- I think one other thing to touch on the wholesale business. While we've seen some deterioration in counter party credit worthiness because of obviously a couple of the players in the market going into chapter, we've seen them replaced by other parties that we are now doing business with that have strong credit quality. So we have not seen a diminution of the velocity of our transactions and ability to trade in the market. It's certainly isn't as strong as we would like it to be, but we have not been adversed in any significant way by some of the recent announcements of players having to -- either going into chapter or having to further reduce, pull themselves out of this market.

So, I guess in summary I think we had a strong quarter, as I said. I think it keeps us on track -- on target for our guidance that we've previously given and what I'd like to do now is ask John Loyack, our CFO, to provide more detail on the earnings report.

Thanks, Jeff. Good morning. Let me start on slide 6 with our EPS performance for the quarter and year to date. For the quarter earnings were up 60% while EPS was up 57% to 44 cents. We had no one-time items in the quarter. On a year to date ongoing basis EPS is up about 7.8% to 97cents. GAAP earnings were $1.66 versus 90 cents last year. Remember in the first quarter we had two one-time items. A gain of 95 cents on the adoption of FASB 143 and a charge of 26 cents for the write-off of separation costs associated with the elimination of deregulation in New Mexico. A very strong second quarter that helped offset weather and plant performance from the first quarter.

On slide 7, we'll walk through the quarter over quarter comparison. As Jeff mentioned, it's really a story of wholesale growth. We see a 19 cent improvement of EPS generated by our growing long-term contract business. The navy deal, the rampup of our TMP deal and our new 50 megawatts that were added during the quarter, helped to generate that improvement. We've also seen improved market conditions. That's added about 15 cents to our EPS. We see a return to more rational pricing in our market. As pricing was around $40 versus $27 a year ago and velocity continued to improve at 1.8 versus 1.6 a year ago. Utility margins improved slightly as cooler weather helped our gas business in April and May and we continued to see improvement in our off-system transportation sales.

On the cost side I think it's the same story we laid out at our year-end and first quarter call where we see about a $0.19 increase in cost driven by our new plants that we added in southern New Mexico late last year which added about 5 cents to our depreciation cost, higher interest cost, pension and benefit costs also increased.

As we move to slide 8, this is just a reminder in the first quarter we rolled out our new business segment reporting where we really focused on two business lines, the utility with our New Mexico electric, transmission and New Mexico gas and our wholesale electric business where we are providing more granularity around our contract, forward and short-term sales margins, so it becomes clearer as to where the profit is made in that business.

On slide 9 we'll walk through each of the segments earnings for the quarter to give you a better flavor of what's happened in each of our business lines. In the electric utility EPS is up about 11%. As Jeff mentioned earlier we are seeing 2% underlying growth in that business. Not too bad considering the spikey economic conditions we are facing throughout the year. On the cost side we are seeing production costs drop about 5%. That was largely due to maintenance schedules and we see savings from the workforce realignment that happened late last year and ongoing productivity initiatives.

On the GAAP side EPS dropped a penny. In the first quarter we talked about the elimination of a rate rider that was included in 2003 -- or 2002, but fully amortized by 2003. That was largely offset by some fairly good margin performance from our gas business. Margins were up a little over 2 million or 9%. We saw cooler weather in April and into May, in fact, heating degree days in April jumped to 243 from 105 a year ago and we see continued opportunity opportunities on our off-system transportation margins in our gas business.

On the transmission side, we saw a penny decline that was largely lower third party sales. Wholesale clearly is the real story for the quarter. 19 cents of earnings out of that business line versus a 9 cent loss last year. That's the margin story we'll walk through on the next side. Other costs up about 14 cents year over year. Benefit costs, we spent money or our gas rate case. Some refinancing costs and higher interest costs.

As we move to slide 10 to go through wholesale margins and revenues to reinforce when Jeff said, we are a bit different. Our flexible regulatory model, our long term contract growth strategy, strong relationships that allow us to add credit worthy counter parties and minimal reliance on gas all joined to create a very positive wholesale quarter. If we look at revenues for the quarter, revenues were up about $48 million or 56%. Long-term contract and forward contract sales more than doubled while short-term sales were up about 7.1%. If we look at gross margin, margins up $23 million or 16% and we doubled in all of our margin categories for the quarter. Long-term contracts margins were up about 12.8 million again reflecting our growth and contract business. Forward margins up 6.4 million, better market liquidity, better pricing and better utilization of our transmission paths and short-term margins were up about 3.1 million reflecting the improve margin plan availability.

On slide 11 let me confirm our earnings guidance for 2003 at the range of 1.80-2.05. If we think about that on a business segment basis, we would expect the utility operations to generate between $1.40 and $1.60. That's about 78% of our total earnings creating a stable earnings base. Wholesale will contribute about 40-45 cents in that range, about 22% of our earnings. Remember about 14% coming from fixed long-term contracts and 8% from the open market.

On slide 12, I'll finish with just going through our critical guidance factors which we haven't changed from the first quarter. You'll see short-term wholesale price at $41. Second quarter demonstrated that that is holding through the year. Velocity at 1.5. As Jeff mentioned we have had some warmer weather in our service territory. So as generation is sold more locally rather than on the wholesale market, that does hold down our ability to generate velocity. Spark spreads although improving, clearly not enough to really have an impact on the business and we continue to see our 2% retail growth.

Now let me turn it back to Jeff for a wrap-up.

Thanks, John. One of the last things I wanted to touch on was the financial strategy and this is shown on slide 14 -- I'm sorry. Slide 13. We continue to move forward with executing that strategy and I want to credit John and Terry and their folks with this effort. That strategy is really focused at,number one, lowering debt cost, and, 2, extending the maturities of the debt that we have coming forward in the near term, and, 3, maintaining the credit level rating at a level that will allow us to pursue the business opportunities as they arise which translated means improve the credit rating. I think we have made significant progress so far this year in implementing that strategy, we completed the refinancing of $182 million of tax exempt debt replacing 6.5% debt with adjustable debt that is today at 2.75%. That lowers our ongoing interest expense, extends the maturity on that portion of debt and gives us a flexible short-term component to our portfolio.

We've also made two shelf filings with the SEC during the second quarter, each of which has been declared effective, and in June we applied to the Commission for permission to replace 268 million in outstanding SUNs, the senior unsecured notes, with $300 million in new SUNs paying a substantially lower interest rate. With the lower rates now available, although they are not quite as low as three weeks ago, this new issue should create savings in excess of the redemption premium. If it doesn't create savings, we obviously don't do it. At today's rates, we think it's an effective transaction.

The soundness of our financial strategy and overall business plan continues to demonstrate itself and that's been reflected in S&P's position to raise PNM's outlook from stable to positive based on our improved business position.

As a wrap-up, I'd like to also touch on a few things that -- they don't necessarily deal with the finances of the company but I think they point to the long-term value that the company is able to develop. One, obviously, environmental issues are a pressing concern for all utilities. We are pretty pleased that the San Juan plant was selected to be included in the EPA sponsored database of outstanding environmental leadership practices. This follows on the track record of San Juan having been selected to be included in the national environmental track program which recognized top environmental performers who voluntarily go beyond regulatory compliance, and San Juan was only one of two coal-fire units, coal-fired power plants that was selected into that track. Now to be recognized in this additional effort by the EPA just confirms that ongoing good work our folks are doing.

Also in May we were recognized by the American Wind Association with the 2003 utility leadership award because of the New Mexico wind energy center which we hope to christen, if you will, in early October. When we made the decision to invest in that project, you know, that was a very big bite for us. 200 megawatts for many utilities is quite small, but for a wind investment, it's the third largest in the world and for our size, it represents a little over 8% of our generating capability from a capacity perspective. I have become more and more convinced that this project will serve us exceptionally well through the 25 years of its initial life.

Last for the fifth year in a row, Fortune magazine recognized PNM as the best company for hispanic as well as overall minority employees. That says something about the culture that we have developed here. We certainly believe in being representative of the communities in which we operate and serve. And those things coupled with being recognized as a number one utility in system reliability and having a call center recognized as one of the top three in the country last summer, I'm just very pleased with the progress our folks have made and continuing to do the things that may not show financial impact today, but will tremendously affect our financial performance in the long run.

So with those closing comments, I would like to open up ourselves to answer any questions that you may have.

Thank you, sir. The question and answer session will begin at this time. Should you have a question press star 1 or 14 on your push button phone until your question is acknowledged. If you wish to withdraw, press star 2 or 13. The questions will be taken in the order received. Stand by for your first question. First question is from David Groomhouse with Copia Capital [ph].

On your wholesale sales, can you describe the nature of your contracts? Are they peak contracts, shoulder month, full year and will we continue to see strong results through the rest of the year or do those tend to tone down in the summer because of retail demand?

Let me ask Eddie to address that. You'll be pleased with the answer.

Yes. In regards to the long-term contracts, those are generally very high capacity, high loop-back contracts, TMP contracts are full requirements meaning we serve all their requirements across the year which is about 60% loop factor. The navy contracts is a 24/7 around the clock deal. So we're serving 80 megawatts around the clock. 12 months out of the year. So we have the general nature of our portfolio sales represented by high capacity, high loop-back sales.

And the forward sales and short-term sales, are they more spot sales again full day or more off-peak?

The short-term sales are typically month ahead or balance of month and forward contracts are typically box sales; although, we do a lot of tailoring where we move them to 5 x 14s and things like that. But generally across the peak hours of the day.

Great. One other question. Industrial sales look like they were down for the quarter and I know you had one customer, major customer that transferred from retail to wholesale and I thought maybe that was the reason. Can you give more detail on that?

Kirkland Air Force base switched from a retail as part of our electric stipulation -- from retail to wholesale so that's the major reason for its decline. If you took Kirkland Air Force base and put it back into the retail side, you would have seen an increase in our industrial sales -- wouldn't have been significant but we would have seen 2.2% total increase. Industrial is an area of concern. We've got one customer, one of our semiconductor manufacturers that's on the bubble, it's been a Philips plant and Philips is closing it and a proposal where if it was taken private. I'd say it's a 50/50 chance of losing it but we aren't not seeing any other real degradation in our industrial load but neither are we seeing any significant increase. Businesses everywhere are being careful about planned expansion so we don't expect to see industrial growth pick back up in the near term but neither do we expect to see a big decline.

Thanks for the time.

Next question from Teresa Hill of Bank of America Securities. Go ahead, ma'am.

Thank you. First of all, could you give us an indication of what the weather impact was?

Yeah. Our growth, our kilowatt hour sales growth, was 2.2% on the electric side. When we weather-normalize it, it cuts it to 2%. Takes about 10% off the growth.

And on the gas side weather added about $1 million on gas margins because of the cooler April and May.

And you wouldn't happen to have any kind of metric to look at the wholesale side, would you?

That's very difficult because you've got multiple markets in which we operate. California weather is very different from northwest weather which is very different from the Southwest. So that's difficult to do, Teresa.

That's fair. I had to ask anyway.

I'll tell you what, if you find a source, would you let us know?

Yes. And I thought that the spark spreads were over $10 for the quarter and I know that for some of your gap plans, that would be sufficient to start looking at running them, did you run any gap plants in the quarter?

We are running one of them right now. In fact, two of them. Both of the new gas plants are running now, but I think in the quarter other than running it to make our commitments to TMP, we really didn't see the opportunity. We got to see spark spreads, you can't -- we really want to see about 15 to justify bringing them online. You can make a little bit of money but the start-up cost can eat you alive. We'd like to see around 15. We are running them, we ran them yesterday and running again today on sales. We see market prices move up with the outages that have occurred in the Southwest on a couple of power plants.

Okay. And then in terms of your shelf, looking at financing issues, how should we look at that, is that an indication you are still looking to apply assets, what are you looking -- I mean, what do you see right now in the marketplace. And also actually on your slide that shows your updated numbers for velocity and power pricing, is that just what the forward curve looks like now or what you are hoping to see in the third quarter?

Eddie, that pricing is really based on the forward-contracts.

We developed it an analytically it aligns to the forward-curve pricing.

And on the velocity piece, you'll notice as John mentioned, it's a reduction from what we experienced this year. Part of that is because as we've had higher retail sales, we don't get as much opportunity to maintain velocity. We're being, one could argue maybe a little conservative but we also don't make a lot of margin on the velocity so that's down a little bit. Then you're on-the-shelf issue. The answer is yes, we are still interested in looking at additional resources to add to the system. We have not yet found one that we are comfortable with that is priced as a point where we think it makes sense. Like a lot of folks, we've always been a bit hesitant about increasing dramatically our exposure on the gas generation side. So far we just haven't found assets that have come down to a price range that makes sense for us for the long-term. But part of the shelf obviously is to provide us flexibility. We have not made any decision to issue additional new securities. At this stage they're positioned for refinancing purposes but obviously if we find an appropriate asset, it would avail us to use it.

Thank you very much.

Thank you. Next question from Paul Fremont of Jeffries Company. Go ahead, sir.

Thank you. Can you give us an idea in terms of O&M and also in terms of replacement power costs as to what the impact of the Palo Verde steam replacement is going to be this year?

Would you say that again?

The work on Palo Verde scheduled for later this year?

For the steam generator replacement?

Right. Can you give us what the impact is going to be on '03 as a result of that?

Let me say a few things and ask Eddie to add anything. The recognition of that addage is built into our forecast. I don't have a specific estimate but a couple things -- when we lose a Palo Verde unit, that's 30 megawatts of generation on our side, but it only looks like a 65 megawatts because of a hazard sharing agreement with have with Tucson. So we have done things that mitigate the size of the loss of any Palo Verde unit for maintenance or for a forced outage. And we have adjusted the maintenance schedules for our units in recognition of the time frame that Palo Verde has been down. I don't know, Eddie, if you have any kind of a specific?

No. I would say in regards to the wholesale market impact, Paul, we are also closely monitoring the addition or the service of several new gas power plants coming on third quarter. So in regards to wholesale market activity, we should probably see that steam turbine energy replaced with gas energy during the quarter and subsequent to that.

And are you seeing any type of inquiry, scrutiny by the NRC in light of some of the other problems being experienced either at David Bessey [ph] or at [inaudible]?

Well, sure. All nuclear plants -- we've seen cost increases at Palo Verde over the last couple of years really driven by two things. One was security because of 9/11 and the second was the inspections required of the vessel head because of the Davis Bessey [ph] issue. And those came at not insignificant costs. We've certainly seen a level of increased scrutiny on the security side and on the vessel head side. Steam generators, obviously, are going to be very watchful of the process by which the steam generators have been replaced. But I think by and large, Palo Verde has continued to receive 1 ratings from the INPO [ph] and then the highest rating from the NRC in its reviews. Unfortunately, we have seen cost increases because of those issues but we haven't -- I'm pretty comfortable, very comfortable that Pinnacle is running the facilities in a very sound way and they're ahead of the curve on any issue that has come up in the industry dealing with the steam generators or with the reactor vessel heads.

Thank you.

As a reminder, ladies and gentlemen, should you have a question, please press star 1 or 14 on your push button phone at this time. The next question is from Steve Fleishman [ph] of Merrill Lynch. Go ahead, sir.

Hi, Jeff. A couple questions, first related to your long-term contract. Those are all accrual accounted, I assume?

Yes. And secondly in terms of -- we are seeing a differential in comments on you versus Pinnacle with regards, particularly to the kind of velocity data that you provide. Would you say that most of the short-term sales that you make go through Palo Verde hub? A big chunk of them do. Let me have Eddie answer that.

We've long talked about our unique market situation which we are situated at the four-corners hub, Palo Verde and we've also taken off some transmission positions that puts us in [inaudible] so we traded all three of those and also to the east through our inner connection.

Could you say that maybe there have been more issues at the Palo Verde hub than these other ones or is this a consistent velocity across most of the hubs?

Actually, Jeff mentioned that we've seen some other parties step in, most of those have been at the Palo Verde hub with the conclusion of the California IOUs now participating as well as some of the new IPPs that are interconnected to that vicinity. That's where the majority of our pickup transactions occurred.

It's fair to say though probably if you thought about it on a margin basis, we may have seen more margin pickup [inaudible]?

That would be a good observation.

So we've seen more volume pickup at Palo Verde but more margin pickup at Mead. That's the basic differential.

Okay. One other thing that Pinnacle mentioned is that there's been a lot of dumping of tests, energy in the market as all these new plants come online that can be kind of uneconomic. Can you comment on what you're seeing with respect to energy?

The statement is absolutely correct. You think about, what, 6,000 megawatts coming on in the Phoenix general area between Phoenix and Las Vegas and you get a lot of free commercial energy. Some of which frankly we have arrangements to sell. It doesn't affect us dramatically because remember, that's gas. Obviously if they are willing to cut their price below cost, there's some impact on the marketplace. By and large we are selling coal into the marketplace so our margin may shrink a little bit but doesn't cut it to negative because we are not gas on the margin given that we didn't count on spark spreads moving to a point to make money on gas. And I expect we'll continue to see that energy moving through the third quarter. Eddie, any further comments?

No. We'll be closely monitoring them in their precommercial mode, Steve. Of course, they may not have the luxury of being able to determine economically if they want to run or as they are in test modes. What we'll be monitoring is they move into commercial mode what will the strategies be?

The other point to make, Steve, while that puts more energy in the spot market, it is not energy that you can usefully tailor to make a product that has added value and that's what we do. So it hasn't affected our market maybe as much as it has affected some others.

Okay. And one last question and I may have missed this in your opening remarks, but can you comment on how the coal savings have been coming through from the renegotiated coal contract and also on that, any update on any litigation on the coal, the new coal mines?

Sure. Frankly, THP was lagging behind in the last quarter of last year and the first quarter of this year in terms of getting its production up to its budgeted levels. In the second quarter of this year though they have really turned the corner and are moving their production levels up to budgeted. We're seeing the kinds of reductions in ash content that we anticipated. We expect to see more, if not the ash contents drop from 26% to 21, 20. We expect to see it move down to 18% or so. So the savings are flowing through. We were a little concerned earlier in the year because their production levels were falling off to a point that we -- as to whether with an underground mine we would be able to maintain sufficient stockpiles and I think that issue has been resolved. They are making very good progress on setting up their next major pass with the long wall. I think they've gotten through a lot of the bugs they are working with and I think the cost savings will flow through as we anticipated. In terms of the litigation -- the specific litigation between the coal company and those entities that have gas leases, there is -- has that been disclosed?

I'm sorry, Steve. Hold on a second. Okay. I'm sorry. I don't remember what has been disclosed and what hasn't. There are settlement negotiations that are recurring with one of the plaintiffs. The other one I believe there has not been any substantiative negotiations. There isn't a settlement as of yet, so there's nothing to announce. But I think there are constructive negotiations going on now between the coal company. And I believe the coal company filed that so it is public information.

Thank you very much.

As a final reminder, ladies and gentlemen, should you have a question press star 1 or 14 on your phone at this time. If there are no further questions, I'll turn the conference back over to Ms. Barsky to conclude.

Thank you. Before we leave, I just need, in order to be in compliance with SEC rules to advise you that regarding the mention today of our plans to issue $300 million in senior unsecured notes to replace the $260 million in existing funds, that registration statements have been filed with the Securities and Exchange Commission with respect to these securities, each of which have been declared effective. This teleconference shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offers, solicitation or sale would be unlawful prior to registration or for qualification under the security laws of any such state. Any sales of securities covered by the registration statement will be made only by means of the applicable prospectus contained in the registration statement and prospectus supplements related to the specific securities being offered. If you are interested in receiving a copy of the prospectus or prospectus supplements, please feel free to contact me. And, of course, for any questions about the conference call or any further information, I'd be glad to talk to you. You can reach me at 505-241-2662. Thanks for joining us today. Have a good day.

If you wish to access the replay you may dial 1-800-428-6051 or 973-709-2089 with an ID number of 299516. This concludes our conference for today. Thank you for participating and have a nice day.