埃克西爾能源 (XEL) 2007 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Xcel Energy third quarter 2007 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded today, Thursday, October 25, 2007. I would now like to turn the conference over to Mr. Paul Johnson, Managing Director of Xcel Investor Relations. Please go ahead, sir.

Thank you, and welcome to Xcel Energy's third quarter 2007 earnings release conference call. I'm Paul Johnson, Managing Director of Investor Relations. With me today are Ben Fowke, Vice President, Chief Financial Officer for Xcel Energy, and several others who can help answer your questions. This morning, Ben will discuss our third quarter results, existing regulatory developments, and earnings guidance for 2007, 2008.

Please note there are slides that accompany this conference call which you can find on our web page. Before we begin, let me remind you that some of the comments we're about to make contain forward-looking information. Significant factors could cause results to differ. For more information, please refer to our filings with the SEC. With that, I'll turn it over to Ben.

Thanks, Paul, and welcome everyone. It's been an outstanding quarter for Xcel Energy in many respects. Earnings from continuing operations were solid. We received a favorable outcome in our Minnesota depreciation filing, and we closed the book on the COLI litigation. In addition, just last week, S&P increased the credit rating of Xcel Energy and all subsidiaries by one notch. I'll comment on each of these, as well as our increased 2007 earnings guidance, in the introduction of our 2008 earnings guidance.

Let's start with third quarter results. Earnings from continuing operations were $0.57 per share for the third quarter of 2007, which compares with $0.50 per share for the third quarter of 2006. Earnings from continuing operations increased by $0.07 per share for the quarter, largely due to higher electric margins which increased margins by $0.15 per share and lowered depreciation and amortization expense which increased earnings by $0.02 per share. These positive factors were partially offset by higher O&M expense which decreased earnings by $0.05 per share, a higher effective tax rate which decreased earnings by $0.04 per share, and other items, which, together, reduced earnings by $0.01 per share.

Now let's get into the details. Our retail electric utility margins increased $105 million for the quarter, largely driven by rate increases, riders and sales growth. Electric revenue and margin increased about $31 million from the PSCo Electric retail rate case and $8 million from the MERP rider in Minnesota. Our weather adjusted sales growth was a solid 2% for the quarter, contributing $16 million of increased margins. Our year-to-date weather adjusted sales grew to 1.7% which is in line with our annual guidance range. For additional detail and other items that affect electric margin, please see the table in our Earnings Release.

Turning to operating expenses, our third quarter O&M expenses increased $34 million or 8.2% compared with the same period last year. About $13 million of the deviation is due to conservation program costs which were recovered through our revenue rider. In addition, $11 million of the increase relates to a reclassification of transmission fees which occurred in 2006 and had no impact on net income. Because of these unusual items, the year-to-date increase in O&M expense of 4.1% is more representative. We're now forecasting our annual O&M expenses to increase about 4%.

Another positive development was a $17 million decrease in depreciation expense for the quarter. As you recall in June, NSP-Minnesota filed an amendment to the depreciation petition with the Minnesota Commission. The amendment recommended lengthening the life of the Monticello nuclear plant by 20 years effective January 1, 2007, as well as some other smaller remaining life adjustments. In September, the Minnesota Commission approved the depreciation filing which resulted in a $31 million depreciation expense reduction. Partially offsetting this were normal increases in depreciation expense resulting from our capital investment program.

As far as income taxes are concerned, we had an effective tax rate of 35.6% for continuing operations in the third quarter of 2007, compared with an effective tax rate of 31.4% in 2006. Lower rate in 2006 was primarily due to a $10 million of tax benefits recognized in the third quarter last year for the reversal of regulatory reserves. A higher tax rate during the third quarter of 2007 reduced earnings by approximately $0.04 per share. Well, that covers our results from continuing operations.

Total earnings for the third quarter of 2007 were $0.58 per share, compared with $0.53 per share for 2006. As a reminder, COLI is accounted for as discontinued operations, and that represents the primary difference between total earnings and earnings from continuing operations.

I would now like to comment on some recent developments. I'm very pleased to announce that the COLI dispute is officially behind us. As you may recall, in June, we reached a settlement in principle with the United States government regarding our corporate-owned life insurance policies. As part of the settlement, we agreed to pay a total of $64.4 million in full settlement of the government's claims for tax, penalty and interest for tax years 1993 through 2007. On September 21, a final settlement was reached with the United States. The terms of this final settlement are essentially the same as the agreement we've reached in June. As a result, we will surrender our COLI policies by the end of October and make our final payment to the government.

Now let's take a look at our regulatory initiatives, starting with a case that we resolve spread during the quarter. In Minnesota, we had requested a natural gas rate increase of $16.8 million based on an ROE of 10.75%. Interim rates went into effect in January 2007. In August, the Minnesota Commission approved an increase of approximately $11.9 million based on an ROE of 9.71% and an equity ratio of just under 52%. We have asked the Commission to reconsider its ROE decision and expect that they will take up our request later this year.

As far as pending rate cases are concerned, in July 2007, SPS requested a New Mexico retail electric rate increase of $17.3 million, and a rider to recover purchase power cost from the Lee Power combined-cycle unit that will go into service in mid-2008. This is the first general rate case filed by SPS in New Mexico since 1998. Intervener testimony is currently due in December, but because the staff recently requested an extension of the procedural schedule, we expect new rates to take effect in the second half of 2008.

In June, NSP-Wisconsin filed a combined rate case requesting a $67.4 million electric rate increase and a $5.3 million natural gas rate increase. Both filings were based on a requested ROE of 11% and an equity ratio of almost 54%.

In October, the Wisconsin staff filed testimony recommending an electric rate increase of $ 44.1 million and a natural gas increase of $4.3 million based on an ROE of 10.75% and an equity ratio of almost 54%. About half of the staff's adjustments are based on updated information which will not have a financial impact on NSP-Wisconsin. We expect the Commission to reach a decision in December and final rates to take effect in early 2008.

Looking to the future, I mentioned last quarter that we plan to file a Colorado electric rate case this fall. However, after reviewing several factors, we determined that we can achieve our financial goals in 2008 without filing this case. Many of the Colorado rate mechanisms already in place will enable us to recover some costs outside of a general rate case. This factor, combined with stronger sales growth and a shift of costs from our retail to wholesale jurisdiction, will allow us to extend the timing of this filing by about a year. We think that delaying the rate case is the right thing to do, and it will allow all of us, the company, the Commission and the staff, to focus on other key filings that we plan to make this quarter. In fact, next month we will be filing our resource plan in Colorado, which lays the groundwork for meeting our resource needs for the next ten years. At the same time, we will be submitting some DSM and transmission plan filings, and we've also recently filed a transmission rider request. As a result, we now plan to file an electric case in Colorado in 2008, with rates based on a forward test year and effective in mid-2009.

Turning to NSP-Minnesota, we also plan to file our Minnesota resource plan during the fourth quarter. As in Colorado, the resource plan gives us a forum to work with the Commission on deciding how we're going to meet the energy and environmental needs of the state. In addition to filing the resource plan, we will most likely file a Minnesota electric case in late 2008, with interim rates effective in 2009 and final rates effective later that year. We're also planning on filing a North Dakota electric rate case later this year with interim rates going into effect in 2008. Finally, we also plan to file a Texas electric rate case in 2008.

Well, included in the Earnings Release is our updated capital expenditure forecast. As you know, a key component of our strategy is establishing a clear path to recovery. It's what we call getting the rules right before we invest the capital. We feel fortunate that our regulators in our major jurisdictions recognize the need for significant investment and have worked with us to ensure the appropriate regulatory treatment. The kind of response validates our business strategy. While we've given you a fair amount of detail on our capital expenditure forecast, you should be aware that the forecast will evolve, and it's not written in stone. We'll continue to evaluate it based upon changing customer needs, potential investment opportunities, regulatory approval and recovery, and other conditions.

To assist you, we have broken the forecast down into two sections, committed and potential. The committed category represents projects that have been approved by the Commission or further along in the approval process. Since the last update, the five-year forecast for committed capital has increased by about $250 million, to a total of $9.3 billion. We have added some smaller projects, which are included in base operating capital along with nuclear fuel. And those projects are driving the increase. We were able to partially offset the increases with timing changes to the Sherco plant upgrade and CapEx 2020 transmission projects.

As mentioned, the updated capital expenditure forecast includes potential projects such as wind generation, natural gas generation, and transmission that could result from our resource plans in Colorado and Minnesota. As we have discussed with you in the past, we believe that both customers and shareholders will benefit if we increase our ownership level of the incremental generation coming onto our system. We will address that issue in our resource plans. And because regulatory approval is required, we felt it more appropriate to provide a range of capital expenditures rather than a point estimate. As a result, we focused -- we forecasted capital spend for that five-year period to be in the range of $10 to $10.8 billion.

In the near term, we plan to finance the CapEx forecast through a combination of cash from operations, the utilization of our net operating tax loss carry-forward, the dividend reinvestment program, the issuance of debt, and a hybrid security. Depending on the level of expenditures within the forecasted range, our plans may also require a modest equity component to fund accretive capital investment opportunities. The ultimate need, amount and timing of equity will be based on capital investment opportunities, the opinions of rating agencies and market conditions. However, we expect to deliver EPS -- an EPS growth rate of 5% to 7% even if equity is issued.

That brings me to our earnings guidance. I'm happy to say that the outstanding year-to-date progress we've made enables us to increase our guidance for 2007 earnings from continuing operations to a range of $1.38 to $1.42. Today, we're also introducing our 2008 earnings guidance with a range of $1.45 to $1.55 per share. This guidance is consistent with our growth objective. Comparing the midpoint of our 2008 guidance to the midpoint of our updated 2007 guidance range projects a 7% increase. We have included a complete list of our 2008 guidance assumptions in our press release, but here are a few of the highlights. We are assuming normal weather patterns are experienced during the year, reasonable regulatory outcomes in our pending and planned rate cases, a revenue increase of $65 to $75 million as a result of regulatory approval of various riders for MERP, Minnesota and Colorado transmission, and Minnesota renewable energy. We're assuming no material accruals related to the SPS regulatory proceedings, weather adjusted retail electric sales growing approximately 1.8% to 2.2%, O&M expenses increasing between 3% to 4%, and finally, depreciation expense increasing approximately $60 to$ 70 million. So that covers our 2008 guidance.

Before I take questions, I would like to comment on the S&P credit rating upgrade. Obviously, credit quality is extremely important, and this is a significant event for us. In S&P's press release they cited Xcel Energy's strengthening business profile and supportive regulations in our key states as the basis for the upgrade. We're extremely proud of our ability to get the rules right through various recovery mechanisms, and we appreciate S&P's recognition of our efforts. Well, that concludes my prepared remarks. Let's open it up for questions.

Thank you. Ladies and gentlemen, at this time we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS). Our first question comes from the line of Daniele Seitz with Dahlman Rose. Please go ahead.

Thank you. I just was wondering, what type of tax rate assuming for 2008?

32% to 35%, Daniele.

Okay. That's a wide range. Also, I was wondering, where are the cost on the holding company level coming from? Is this a holding company, or could you elaborate on that?

Could you repeat the question?

At the holding company level, it seems to be some negative -- I mean, higher negative input, and I was wondering, where did that come from?

Oh, okay. I'm sorry, I didn't hear you at first.

That's okay.

It's primarily, Daniele, related to the hybrid that we're going to issue later this year between $4 to $500 million. So it's associated interest and the interest expense that's associated with it.

Okay. And it will be at the holding company level?

That's correct.

Okay. And how much do you intend to issue?

Probably between $4 to $500 million.

Okay. Great. And when will you have the life extension on the nuclear capacity? When will all of this project be granted or authorized by the Commission? Is it already authorized?

The Monticello plant is already authorized, and that's why we could make the depreciation filing to reduce depreciation because of the extended 20-year life. Prairie Island 1 and 2 are probably in the 2010 time frame. And construction will begin towards the latter part of this decade or beginning in this five-year forecast and extending into the -- outpass the forecast cycle.

And the effect on the earnings the same way as Monticello had it, when do you anticipate that to come through?

From Monticello?

Prairie Island.

Well, the filing would be made in 2010, and I think that --

Oh, much later. Okay.

I think that would have to be -- you're talking about the depreciation potential. That would be made in 2010. Clearly, the regulator will have a chance to take a good look at that. So, we'll have to see about the EPS and factor that.

Great. Thank you so much.

Our next question comes from the line of Greg Gordon with Citigroup. Please go ahead.

Hey, Greg.

Good morning, guys. When you look at the earnings guidance for '08 and the earnings growth aspiration, does it or doesn't it contemplate the additional potential resource planned capital expenditures? And if you were to hypothetically hit the high end of those incremental capital spending opportunities, even including the financing drag associated with that, would you be looking at a slightly higher earnings growth aspiration?

Potentially. Potentially, Greg. I think we have a range out there, and so I think it's all subsumed in that kind of range. Now, as I said in my remarks, if you're looking at using the midpoint of this year's guidance range and the midpoint of next, the 7% increase, so we're very comfortable with that.

I understand. And I'm -- but I guess my question really -- those earnings guidance numbers were given to us before you identified these incremental growth opportunities. And so, is there another offsetting expense issue or lower expected returns that would cause you to not be biased higher if you were to maximize these opportunities, or am I missing something?

Well, I think we're talking about potential additional CapEx of $100 to $200 million in that potential range. And depending upon when that came in the year would depend upon the earnings stream. So there's a lot of ifs associated with it, Greg. And, yes, I think they would be good opportunities, to maybe answer your question on a more macro level. But depending upon the time and et cetera would depend upon how much they could shape the earnings pattern for 2008.

I'm not really focused on 2008 per se as much as I am focused on the growth opportunities over the entire period.

Yes. I think what that would do is push us potentially in the upper end of our expectation of 5% to 7%. And if you look at what we've done over the last two years, we've delivered more than that. We're going to strive to exceed that where we can. Good investment opportunities with good recovery mechanisms could potentially do that, but I think there's a lot that has to play out before we could make those kinds of assumptions.

Thank you.

Our next question comes from the line of Ashar Khan with SAC Capital. Please go ahead.

Hi, Ashar.

Hey, how are you doing? Congratulations.

Thank you.

Ben, just going back to -- I guess you gave us a time line of the rate cases, but generally, if I can go back to which jurisdictions would still be hugely underearning -- Am I right? The biggest one would be Texas Electric, that still would be underearning in '08. Is that a fair -- and that's why you go for a rate case?

Yes. Ashar, as you know, we were not pleased with the rate case treatment that we got earlier. And so we recognize that 2008 will be a very important year to see if we can establish the right regulatory climate and the right regulatory recovery mechanisms, just like we have in other jurisdictions within our portfolio of utility companies. So you're spot-on. And the SPS, we anticipate we'll see some improvement next year, but not nearly the type of improvement that we need to consider a constructive regulatory environment.

Okay. And then on your resource plan, you're still contemplating filing for the IGCC or -- I didn't hear it this morning. I'm just trying to understand. What is contemplated in the resource plan in Colorado?

Let me try to explain it to you. We don't have capital expenditures associated with the potential IGCC project in the forecast through 2011. When we file the resource plan later next month, we are anticipating having the IGCC project as a potential option for the Commission to consider, but that option would take place later in the resource planning period process than we had anticipated earlier in the year. We're working through things like sizing, cost, et cetera. And until we do that, we didn't think it was appropriate to start talking about IGCC in this near-term forecast.

Okay. So the IGCC is, right now, because it's probably later in the decade, it's not in the numbers at all in the potential numbers. Is that correct?

That's correct.

Okay. Thank you.

Thank you.

Our next question comes from the line of Reza Hatefi with Polygon Investments. Please go ahead.

Good morning.

Hi.

So next year, you'll be filing a Colorado rate case, and will you also be filing a Minnesota rate case?

Yes, that's the plan right now.

So basically both of them would go effective mid- '09, or is the Minnesota going to be a little bit earlier than that?

Minnesota, typically, you start to recover on an interim basis. I think it's within 60 days normally after the filing. So we would anticipate that if we, as we plan, filed the Minnesota electric case next year, the interim rates would go into effect at the early part of the year. That would be '09. And then in Colorado there is no such interim-type relief, so you would probably be looking at rates being effective somewhere in the middle of the year. Of course, that would depend on the filing and a number of other factors.

Is it fair to assume that the increased capacity cost -- you incurred some this year and will incur some more next year. And I believe it's split between SPS and Minnesota. That at least the Minnesota portion will sort of get trued up in your next rate case?

Yes, that's a component of service that you're allowed to collect on. And of course, in the SPS side, we are anticipating that some of those increased capacity costs can be collected on an interim basis when we file a rate case in Texas.

Okay. And your increased CapEx guidance, I was looking back at a slide from the summer with your previous guidance, and in that -- in those slides, you used to have a nuclear field component which ranged from about $100 to $160 million a year. Is that now embedded in these numbers on the new guidance, or is that not included in this guidance?

No, it is embedded. I'm glad you asked that. That's embedded in the base capital numbers.

Thank you very much.

Our next question comes from the line of Paul Ridzon with KeyBanc. Please go ahead.

Paul.

Good morning, Ben. How are you?

Good.

You dialed back your gas growth a little bit. Is that just because you're seeing conservation?

We have been seeing conservation. But I think it's pretty consistent with what we've been saying that customers continue to conserve, so conservation is generally being offset by new customer growth. That's why, Paul, that we have been, as we file rate cases, continuing to push for more and more decoupling mechanisms.

How successful have you been in that effort?

Partially. The last Colorado gas case had a partial decoupling mechanism put in place. We would like to see more of it. In some of the smaller jurisdictions we have complete decouple. So we're making steady progress is how I would categorize it.

Have you given any more thought to your lack of scale in the nuclear and a strong market for those assets?

Well, we certainly are aware of what others are doing, but these plants have run very well for us, Paul, and they're great for the customers. I think our job now is to make sure they're good for the shareholders, as well. We've recently reintegrated the NMC which is the consortium we were part of. That's gone very well. So I think we're positioned to own these plants and operate them well. And, again, what we'll need to focus on is some better recovery mechanisms so that it's good for the shareholders, as well.

And you said COLI is officially behind you.

COLI is done.

Congratulations.

Or it will be in a few days. We'll surrender the policies at the end of the month.

Great. Well, thank you very much.

Thanks.

Our next question comes from the line of Dan Jenkins with State of Wisconsin Investment. Please go ahead.

Good morning.

Good morning. A couple things. First on the life extension of Monticello. Have you received or filed yet with the NRC for that life extension? Yes, we have.

Okay. And do you anticipate when you'll be filing for Prairie Island with NRC?

I think we're anticipating 2008, next year.

Okay. And then related to -- you laid out your capital expenditure forecast ,and I was wondering if you have similarly laid out when you'll need to issue either debt or hybrids and whatever related to that. Have you forecast that for '08, as well?

Well, we're going to do a hybrid. The plan is to do the hybrid, as I mentioned earlier in the $4 to $500 million range, in the fourth quarter of this year. Looking forward, as I mentioned on the call, we've got good strong cash flow from operations. We still are running off the NOL tax benefits.

I think we have about $400 million cash benefit to recognize through this time frame. We'll do some additional debt, potentially some modest amounts of equity. And I know we get a lot of questions around that, and all I can say is it really will depend on that potential range through 2011 whether it's $10 billion or $10.8 billion. And just to help everybody with remodeling and clearly recognize that market conditions and things change, but I would say modest to me means that if we're on the upper end of that forecast, if we're on a $10.8 billion side of that forecast, we might need $3 to perhaps $400 million of equity to support our credit rating. We're very pleased our credit has been upgraded. We want to keep it that way. And that kind of equity to support good accretive investments, I think, is the right call. But that's a big if. That's the -- We have almost $1 billion of CapEx in that -- between the low end and the high end there. So hopefully that helps you, Dan.

Okay. That's in addition to the equity you're getting through the drip?

That would be in addition to the equity from the drip and normal benefit plans, yes.

Okay. And then I was just wondering if you could comment as to what you're seeing as far as economically in your service territories, particularly from industrial customers and so forth. Are you seeing any slowdown, or are things pretty much the same? Could you comment on that?

Yes, I can. It's -- actually, we were, as we talked -- at this time last year, we were starting to talk about having to watch the sales growth pretty closely because we were seeing it slow down. As things progressed this year and over the summer and looking forward, we look to be in pretty good shape, and that's one of the reasons, for instance in Colorado, why we could avoid filing a rate case next year. So we haven't seen -- maybe we were leading the curve. I wish I could give you more details. But things look like they're proceeding along, and we've got a good strong sales growth rate forecasted for next year as a result.

Okay. Thank you.

Thank you.

Our next question comes from the line of William Young with Lyondell Capital. Please go ahead.

Good morning.

Good morning.

I was just wondering, with the tax rate that you commented on before of 32% to 35%, is that directly -- that's higher than what it has been in the past? And I was wondering if that's directly related to the COLI issue going away.

That's the primary -- that's the primary aspect. COLI, I believe, was -- reduced our effective tax rate by about, what was it, 400 basis points. And then we've had, over the past few years, some kind of one-time things that have also reduced that ETR. So you're absolutely correct.

Okay. Actually, someone else asked about the CapEx before and the nuclear field being folded into the base and other category. So I was also just looking at the capital expenditure forecast from previously, and it seems that there was another line for the BART projects previously, so I was wondering if that was also folded into the base and other lines?

Yes, it was.

Yes?

We just didn't think it was big enough to warrant its own separate line.

Okay. Can you just comment a little more on the potential projects? Is this all going to be in Minnesota and Colorado? And when will -- when can they potentially move into a committed phase?

Well, we'll try to get -- one of the things we want to do at our analysts day that we're having in December is give some more details around what we're seeing in the resource plans, as we have -- at that point we will have already filed in Colorado, and will be very close to Minnesota. So hopefully, we're going to give you more detail. But your assumption is correct. It will be CapEx that potentially comes out of those resource plan filings, and it will be in the areas of owning wind. You've heard us probably say before we're the number one retail providers in the nation of wind, but we don't own much of it. We want to start changing that. We're looking at what it takes to meet some of of those aggressive standards, not only in the form of bringing on wind but what it means to the system.

So you'll be seeing things like more gas generation and as well as starting to work with the state and the Commission and the staff to address carbon and other environmental goals the state has. So we're pretty excited about it, and I should also mention then there's transmission, if you like wind, you have to like transmission. So we're excited about it and we'll -- I think it will be a very good process we'll go through. Then we'll have the clarity to start actually going out and executing that, and that potential range will start to narrow.

Okay. It seems like the categories that you're going to fund these potential projects, you would be able to get enhanced recovery if they are approved also that rate.

That's right. They typically do come with enhanced recovery. And in our key states, in Minnesota and Colorado, I think our regulators have been very supportive of what we're trying to accomplish and have backed that with good enhanced recovery mechanisms.

(OPERATOR INSTRUCTIONS). Our next question comes from the line of Nathan Judge with Atlantic Equities.

Good morning.

Hey, Nathan.

Sorry. Can you hear me now?

I can hear you.

Great. Just wanted to ask, what are the pros and cons related to keeping nuclear as part of your system?

I think the pros are that it's a very low-cost, carbon-free source of generation, and we've run the plants very well, and I think with the reintegration of NMC having gone so well, there's no reason to think that we won't run it very well in the future. On the cons, it tends to, as I think you know, increase your business risk profile by a notch. So you have to address that.

As we're looking at putting more money into the expanded CapEx, which will increase capacity by 200 megawatts plus, again, another benefit for the customers, but to date we don't have any form of enhanced recovery mechanism to do that. And then of course there's volatility associated with nuclear fuel and maintenance due to additional security and other requirements that have come out, have been pretty significant over the last few years. So those are some of the cons. But I think, again, we have a very supportive Commission. They really understand the value of nuclear. We like our plants, and I think the pros outweigh the cons. We need to work on the cons, but that's where we are.

With the sale of some of the various plants and now NMC being only operating the Xcel plants, have you lost enough economies of scale that possibly there could be some near-term changes in operations or increased costs?

Well, it's a very good question. We were part of NMC, but as you know, we were kind of a last one standing in NMC. So as members left ,the NMC took action themselves to start reducing cost ,and so now -- so it's been a gradual reduction in those costs, and so we've seen that, over the last few years, this last integration, we downsized it one more time. Keep in mind that most of those costs are at the plants, and there would be no change to that. So as we reintegrated it, some of the -- maybe some of the lost economies of scale seemed to be made up with the synergies of bringing in the administrative aspects, same benefit programs, same systems, all the normal things you would think of. So it's pretty much neutral.

And just finally, when you're looking across your system, are there potential assets that could be monetized in lieu of issuing equity?

Well, we will always be good portfolio managers, Nathan, and we look at those opportunities. But we like our group of utilities. I think we have some work to do at SPS. We're working hard to get that regulatory environment improved and make it consistent with our strategy, which is get the rules right before investment. The other parts of our portfolio, I think, are performing very well.

Thank you very much.

Thank you.

Our next question is a follow-up from Dan Jenkins, State of Wisconsin Investment. Please go ahead.

Hi. I was just -- I saw that you had filed to bring the nuke plants back in house. And will that have any real operational or financial impact at all?

No, again, I think the integrations went very well. We've got the organization in place. Most of the personnel remains at the plants where they've always been. We've right-sized the administration or the administrative side of the shop, and there's been some synergies that we've seen. So I think operationally and financially, we're in good shape.

Okay. And then I noticed for '07 you had the Minnesota transmission CapEx. Is that FERC-regulated, and will that result in an increase in your FERC revenues?

It's primarily a state-regulated plan with the only FERC aspect of it would just be the portion allocated to our wholesale business, which is pretty small in Minnesota. I guess the short answer is it's state-administered.

Okay. Thanks.

Our next question comes from the line of Daniele Seitz with Dahlman Rose. Please go ahead.

I was just wondering if there was any consequences on the accident in the gas plant ,and if you could bring us up-to-date on that?

Well, there's not much too bring you up-to-date on, Daniele. The investigation continues. I think there's five agencies that are looking at it. So we're just cooperating and doing what we can, and the investigation will take as long as it needs to take. And at that point, we can give you a better sense of what's going on. That said, we don't anticipate any financial consequences, but let's wait and get through the investigation, and we can give you a more definitive response.

And your impression is that you will get it before year-end?

Will it be back on line before year-end?

Yes, and the other thing also is that the investigation will be done before year-end, do you think?

I'm going to take a stab at that answer, then I'll ask Mike Connelly, our general counsel, to correct me. I think -- What I'm told is it could take two weeks to two months, and it just depends. Mike, is that --

That's correct. We don't know right now how long the investigation will take, nor when we'll be able to get the plant up. We should have more information, I would expect, in the next week to two weeks, and as we have it, we'll certainly provide it.

Thank you.

I am showing no additional questions at this time. Back to you for any closing comments you may have.

I want to thank everybody for participating in our call this morning. We look forward to seeing many of you at the fall EDI conference, and if you have any follow-up questions, please contact Paul and the IR team, and I hope to see you also at our analysts day in New York. With that, I'll let you go and thank you.

dies and gentlemen, this conference will be available for replay starting today at 11:00 a.m. CST and available until Saturday October 27th at midnight. You may access the conference replay by dialing 303-590-3000 or 1-800-405-2236 and entering the pass code 11098672. That concludes today's conference. Thank you for your participation. You may now disconnect.