CenterPoint Energy, Inc. (CNP) Q3 2011 Earnings Report, Transcript and Summary

Good morning, and welcome to CenterPoint Energy's Third Quarter 2011 Earnings Conference Call with senior management. [Operator Instructions] I will now turn the call over to Marianne Paulsen, Director of Investor Relations. Ms. Paulsen?

Thank you very much, Thea [ph]. Good morning, everyone. This is Marianne Paulsen, Director of Investor Relations for CenterPoint Energy. I'd like to welcome you to our third quarter 2011 earnings conference call. Thank you for joining us today. David McClanahan, President and CEO; And Gary Whitlock, Executive Vice President and Chief Financial Officer, will discuss our third quarter 2011 results and will also provide highlights on other key activities. In addition to Mr. McClanahan and Mr. Whitlock, we have other members of management with us who may assist in answering questions following their prepared remarks. Our earnings press release and Form 10-Q filed earlier today are posted on our website, which is www.centerpointenergy.com, under the Investors section. I remind you that any projections or forward-looking statements made during this call are subject to the cautionary statements on forward-looking information in the company's filings with the SEC. Before Mr. McClanahan begins, I would like to mention that a replay of this call will be available until 6:00 p.m. Central Time through Wednesday, November 9, 2011. To access the replay, please call 1 (855) 859-2056 or (404) 537-3406 and enter the conference ID number 14698131. You can also listen to an online replay of the call through the website that I just mentioned. We will archive the call on CenterPoint Energy's website for at least 1 year. And with that, I will now turn the call over to David McClanahan.

Thank you, Marianne. Good morning, ladies and gentlemen. Thank you for joining us today and thank you for your interest in CenterPoint Energy. This past quarter was a very good one for the company. We had a strong quarter from an earnings standpoint, and after 7 years, we resolved the long-standing issues associated with our true-up proceeding. Our press release and 10-Q provide details around our business unit's financial performance this past quarter, so I won't repeat the specifics. But let me summarize the performance of each business unit and talk a little bit about their prospects. Houston Electric had an outstanding quarter, and is having a really good year. This past summer was the hottest summer on record for Texas. This drove the largest part of Houston Electric's earnings gains. I was really pleased at how well our system performed when faced with a stressed that the extreme heat placed on it. We've also taken the opportunity to invest more in system hardening and reliability, which benefits not only this year, but the years ahead as well. The future looks bright for this unit. While we can't count on repeating the weather-driven earnings we experienced this year, we can count on a solid and growing service territory. We have added more than 35,000 customers since this time last year, and believe we'll see a continuation of that pace of growth next year. Very few areas around the country are experiencing this type of economic activity and growth. Capital expenditures should approximate between $500 million and $600 million annually, as we build infrastructure to serve new loads and automate the grid. The primary earnings headwind this unit faces comes from the rate changes implemented this past September. This will have a negative operating income impact of approximately $35 million next year, when the effect of the change in depreciation rates is also taken into account. Our gas distribution unit is having another outstanding year, attributable primarily to our business model and expense control. Annual rate adjustments in a number of our jurisdictions continue to help us recover increased investments, as well as reductions in gas usage without the necessity of a major rate proceeding. This significantly reduces the amount of regulatory lag we would typically experience. Like most of the industry, we are very focused on pipeline safety and integrity. As a result, we are planning to accelerate the replacement of some aging infrastructure and increase our system improvement expenditures. We expect rate base will grow at a much faster pace, as overall capital expenditures are likely to increase to between $300 million and $400 million annually, compared to a historical level of about $200 million. Our midstream businesses are also doing well. As expected, our field services unit demonstrated from infrastructure investments we've made into Haynesville and Fayetteville shale areas. Our gathering volume increased by almost 5% over the previous quarter, and averaged over 2.2 billion cubic feet per day. About 1 billion cubic feet per day was gathered out of the Haynesville shale. Gathering volumes from our traditional basins were down about 2% from the previous quarter, in line with our expectations. Next year, we expect the volumes out of Haynesville will reach 1.5 billion cubic feet per day by the second quarter. We expect volumes out of the Fayetteville and Woodford to increase as well. While a number of producers are shifting their emphasis from leaner shale plays to more liquid-rich plays, our principal customers have maintained a consistent level of drilling in these shales. Natural gas prices, however, have weakened, which could potentially impact our customers' future drilling programs, and will impact the value of our retained natural gas volumes as well. While we continue to see gathering opportunities in the Mid-Continent, we are also focused on diversifying and expanding our gathering footprint into more liquids-rich areas like the Eagle Ford, Granite Wash and Marcellus. Our Interstate Pipelines earnings were down from last year, primarily due to the exploration of an above-market backhaul contract earlier this year, and the impacts of a restructured long-term contract with our natural gas distribution affiliate. Reduced basis has also resulted in a decline in our off system sales. However, we were able to offset some of this revenue loss with new contracts, primarily electric generation customers, as well as increases in some ancillary revenues, or services, I should say. Going forward, we expect considerable competition for new businesses in contract renewals from other pipelines in or near our footprint. We anticipate basis will remain compressed, and all system revenues will be adversely impacted. However, we believe there are continuing opportunities to serve customers on or near our pipeline with special focus on power generation customers. We currently serve 22 natural gas-fired power plants. There are over 40 coal plants within 50 miles of our system and we anticipate that retirements in more stringent regulations will lead to increased use of natural gas. Our Competitive Natural Gas Sales unit's financial results were down this quarter. Our retail business continues to perform well. However, reduced gas price volatility and the lack of geographic and seasonal basis spreads have reduced wholesale optimization opportunities. Some of the pipeline in storage capacity we contracted for in the past, no longer provide value, and in some cases are underwater. Much of the uneconomic capacity will terminate over the next 18 months. We are also releasing some of this capacity early, and expect to recognize the economic loss in the fourth quarter of this year. Our focus is on expanding our commercial and industrial base and increasing our product and service offerings. Now let me turn to our true-up appeal. As most of you know, in September, we reached a settlement with the PUC staff and other intervenors, resolving all matters in our true-up appeal. The settlement allows us to recover approximately $1.7 billion, out of which, we must pay the legal fees associated with this preceding, and the financing costs to issue transition bonds to securitize this amount. Last month, the commission approved the settlement and a financing order for the issuance of the bonds. We expect to issue the bonds later this year or early next year. Gary will give you a little more color around this process in a few minutes. As you would expect, we are pleased that this issue is finally resolved, and we can now look to the future. The obvious question, what will we do with the securitization proceeds? Our first priority is to invest this money in our existing businesses and to acquire similar assets. We will be disciplined in our approach. Our portfolio have -- of energy delivery businesses provides us with significant opportunities for investment. Of course, we'll have to be patient and diligent in evaluating these opportunities. We have talked in the past about reducing outstanding debt and a modest stock buyback program with a portion of the proceeds. While these alternatives are still viable, our first priority will be to invest the money in our businesses. Let me conclude by expressing how excited and confident we are in the future of CenterPoint Energy. With the receipt of the true-up proceeds, we have a unique opportunity to build a stronger company, which will benefit both our shareholders and customers. Our balanced portfolio of electric and natural gas businesses have served us well since our formation 9 years ago. We recognize the energy markets are changing. Lower prices and ample supplies of natural gas will benefit both our electric and gas distribution utilities. At the same time, it will present both challenges and opportunities for our midstream and energy services businesses. We look forward to building from our strong base and continuing our track record of strong performance for our shareholders. I will now turn the call over to Gary.

Thank you, David and good morning, to everyone. Today, I will update you on the expected timeline to issue the new transition bonds, the replacement of our revolving credit facilities and our revised earnings guidance. I'll start with the transition bond. As David mentioned, the Texas PUC issued a financing order on October 27. We have been working with the PUC staff, as well as our financial advisor on various aspects of the issuance, and we feel we have made excellent progress. There are 2 key gaining items in preparing to go to market. First, the credit rating agencies have to establish a rating for the bond. And second, we need to register the sale of the transition bonds with the SEC. We will issue the bonds as soon as reasonably possible in order to take advantage of historical low interest rates for the benefit of our customers. We are making solid progress on all aspects of the preparatory work, and at this point, we anticipate we will be able to market the bonds either late this year or very early in the new year. In September, we had a very successful syndication of our new revolving credit facilities and closed on 3 5-year senior unsecured facilities totaling $2.45 billion. The economic terms and covenants are in line with other recently syndicated facilities. The drawing cost under the new facilities are approximately 100 basis points higher than the cost of the previous facility. We are very pleased that we have locked in our short-term liquidity sources for the next 5 years. Finally, let me discuss our earnings guidance for the year. As David discussed, we are very pleased with the overall financial performance of our businesses this year, and this morning, we said that we expect 2011 earnings to be at the high-end of our guidance range of $1.04 to $1.14 per fully diluted share. On a guidance basis, which excludes the earnings impact of recording the true-up settlement, the change in the value of Time Warner stocks and the related ZENS securities, as well as the timing effects of mark-to-market in inventory accounting, we earned $0.95 per fully diluted share through the third quarter. In providing earnings guidance, we have assumed normal weather for the balance of the year. And we have taken into consideration our year-to-date performance, as well as various economic, operational and regulatory assumptions. Now, I would like to turn the call back to Marianne.

Thank you, Gary. And with that, we will now open up the call to questions. In the interest of time, I would ask you to please limit yourself to one question and a follow-up. Thea, would you please give the instructions on how to ask some questions.

[Operator Instructions] And we do have a question from Carl Kirst with BMO Capital Markets.

The first question I had, just to David, to your comments about the first priority to invest. I was wondering if maybe you could comment on what you're seeing as far as the M&A market, given some of the multiples being paid right now. And when you say it's similar assets, is that -- do you have a preference, if you will, whether it is increased T&D or going more after sort of the gas infrastructure?

The last one, first. We don't have a preference, we like our portfolio today. We're willing to invest in more electric or gas distribution utilities. But at the same time, we like the midstream business, and we like to invest there as well. It's really going to depend on where we have the most opportunities, and the ones that will create the most value for us. We know on the regulated side, it's a little bit more difficult to do M&A there, but it's not impossible, certainly, and there are assets that come on market from time to time. You're right, I think the midstream businesses, some of the multiples that have been paid lately are pretty rich. And we're not going to do anything that is not going to create value for us. So you have to have some real growth potential in those -- for those assets to pay that kind of multiple, I would think. So we have seen some opportunities. We've looked at them, and we continued to look at them. And we're really getting -- we're going to spend some time in the next 3 to 6 months to really decide where the opportunities are and if there are any real opportunities in one sector or the other.

And maybe just a follow-up on the earnings and the top end of guidance, I guess, it's kind of an implied $0.18 to $0.19 for the fourth quarter. And considering Field Services should be continuing to move ahead, I didn't know if there was something of specific note maybe that you felt was holding you back. And here, I guess, I'm really more referring to perhaps wholesale marketing, and so I thought I'd kind of get the feeling in when we entered into 2011, the idea was retail would be 30 to 35, and the wholesale would be break even. So I'm trying to kind of get a sense of where we may be falling down on that for the year.

You're right, Carl. We did say that, and that's what we had intended to do, but we have not been able to have our wholesale business break even. Our retail business, as I said, is doing just fine. But we're still having losses in our wholesale business. We're going to try to get out from under some of the capacity that we're not using today. We've already posted some of that for release. We're going to take some losses early in the fourth quarter. So that's a little bit of headwind there that you noted. I would also remind you that we do have the rate case. The full impact of the Houston Electric rate case will be felt in the fourth quarter. That's probably $10 million, give or take, impact in the fourth quarter of this year. And there is a little bit of timing issue around Field Services. We have these guaranteed throughput agreements. We booked some commitments in the third quarter because we know that our suppliers are not going to make their full -- or our customers are not going to make their full volume commitment. So that kind of moves between quarters. And we probably took a little bit more in the third quarter because they were just not going to make it than we had earlier anticipated. But overall, for the year, we're right where we thought we would be. There's just a little bit of movement between quarters.

[Operator Instructions] And the next question will come from the Lauren Duke with Deutsche Bank.

I wanted to ask about the DCRF mechanism that was authorized in Texas and whether you guys plan to file for that rider and if you see potential to kind of ramp up CapEx at the distribution -- on the distribution side with that rider in place?

Lauren, we do plan to file with it. It's probably not going to be in '12. It would probably be in '13 before we file with it. As you know, the commission passed that rule earlier this year. We can file once a year. I think it's in April. The new rates would be implemented in September. It covers any new distribution investments, but some of those investments are offset by any deferred taxes that are associated with them and a few other items. But we do see value in it. It's not quite as good as we want it, but I think we do see value. We plan to use it; it would probably be 2013 before we have our first filing.

And then just one other, if I might. Can you comment on -- I know you’ve talked about some of the gathering RFPs that are going on that you guys are participating in, and just potential timing to hear about some of those and whether that's something that we should still expect at this year or we're looking more towards next year?

We’ve had a number of lines in the water, so to speak. We've been looking at a lot of different assets that come on the market. The RFPs that we referred to earlier, those have been delayed. In particular, the one that we were most interested in was in the Eagle Ford area. That one has been delayed into next year. We had expected that would be this year. And then there are a few items -- a few that we expect to happen in other liquid-rich plays that just haven't come about yet. So I would say that the RFP process that we've discussed in the past has really been shoved out into next year.

The next question will come from Yves Siegel with Crédit Suisse. Yves Siegel - Crédit Suisse AG, Research Division: If I could, could you elaborate once again on the opportunities that you're looking at in terms of midstream? Would you change the balance of the mix between regulated and nonregulated if the opportunities set and the return profiles are more attractive in the midstream?

You know, today, our midstream business -- and let me speak specifically about Field Services. It represents probably less than 20% -- between 15% to 20%, maybe 17%. And I think we would see that percentage increasing, but there is a given I think, level that we can go to before we start impacting our credit risk profile, and we're sensitive to that with the utilities we have in our portfolio. So yes, I think we can increase the size of midstream relative to the rest of our portfolio, but I think we have to be cautious that we can't go too far. But I think there's ample room in it today to increase it. And really, that's where we see a lot of the potential growth opportunities, so we are very interested in looking at that. Yves Siegel - Crédit Suisse AG, Research Division: And then so -- and I hate to keep coming back to this. But given those comments, given the amount of cash that you'll have, how does that sort of calibrate with the notion of perhaps doing an MLP or not doing and MLP?

We have said that we would do an MLP or consider it in the -- if we get some -- either a large acquisition or a significant amount of growth, which we need to fund. And I think that's still our position. Today, we do -- we are going to have an ample amount of proceeds to invest. Having said that, I think the MLP has to be still part of our toolkit. If, in fact, we find something bigger that we want to buy or if we get into a situation where we are having a lot of more rapid growth than we are today, then I think we would look to the MLP if that's the case. Yves Siegel - Crédit Suisse AG, Research Division: Well it'd be a good problem to have.

Yes, it would be. I agree with you wholeheartedly. Yves Siegel - Crédit Suisse AG, Research Division: I'm going to go over the limit, so I apologize, but any thoughts in terms of how you may approach the regulatory environment, given Houston Electric and the hit that you're taking there? Could you see a filing coming up soon?

We're going to have a good solid year this year as you would expect, but we're going to have -- because of the weather. But we're going to have a good solid year even when you weather adjust. As I look to next year, I think next year is going to -- we're going to be -- have a good solid year. We're going to -- I think we'd have a good opportunity to earn our regulated rates of return on a normalized weather basis. So I don't think there's any near-term rate case. And if we can grow this business, customer growth is looking pretty good, then maybe we can delay our rate case into the 2013, 2014 timeframe. But at this stage, we think next year is going to be pretty solid, so there's certainly not going to be anything on the table next year.

Our next question will come from Faisel Khan with Citi.

On the -- once you receive the proceeds and book this gain on the true-up, does this pretty much reset your debt to total cap ratio kind of in a more normalized range with other utilities? Or are you still -- do you still have room to go on the debt to cap area?

I looked at some figures on that, and I think we're going to be pretty close to 40% equity once -- when all is said and done. So that is, I think, within striking distance of our peers. We'd probably like to have a little bit more equity in our capitalization, but not much. Gary, you may want to add to that.

No. I think that's right, David. And also if you look over the long-term, we do have some debit holding company that we've made headway. And over the long-term, you'll see -- I think we will not refinance as the holding company, and refinancings will be -- our financing in the future would be at the regulated utilities. So I think 60-40 is -- this is a significant move and recognized by the credit rating agencies. And as David said, I think it now gives us the flexibility with the cash coming in, a good strong balance sheet, and the opportunity to be very disciplined and thoughtful to execute our growth plan going forward.

And following the approval by the PUCT for this transition bond offering, is there anything else outstanding or is this pretty much it, this $1.695 billion?

This is it.

And then also on the diluted shares outstanding. It seems like the drip is still on, is that right? Because the -- I think diluted shares continue to ramp up a little bit?

There maybe -- just a little bit but no, the drip is not on.

Savings plan and drip are no longer on, Faisel. There probably is some on benefit plans and there's some old options that are outstanding that get exercised from time to time. But there's not anything -- shouldn't be anything big there, I would say.

Last question for me. On the midstream side. The 260 Bcf of throughput in the quarter, can you give us an idea or break that down by new projects versus your legacy portfolio? What would you do have going on in into Haynesville obviously, versus what you have from your pure legacy midstream portfolio?

We have -- let's see if we have that broken out easily here. We were averaging 1 Bcf a day in Haynesville for the quarter. And we had a little -- plus or minus, about 800 million a day in our traditional basins, and about I think, 350 or so in the Fayetteville, Woodford areas. Those are round numbers, and I haven't gone to calculating all that stuff out. That's a per day, the 206 is total volumes. I would say that the -- let me see something here. Those are the relative contributions from each of the areas. We just have to do the math to make sure that all adds up to approximately 206 for the quarter.

And the 800 a day on the legacy portfolio, is that still declining in kind of a mid to high single-digit range?

It declined about 2% from the second quarter. It's leveled off. It obviously is still declining a little bit. There's still some rigs working, not a lot. And once you -- you don't have -- the first year or year after you quit drilling is the biggest decline. So we're not having the types of steep declines that we saw in 2009 and 2010. But they're still declining just because they're being depleted.

Our next question is from Andrew Weisel with Macquarie Capital.

Most of my strategic questions have been answered, but I do have one bookkeeping question. The equity component of the true-up, I guess, will be recognized over the life of the securitization bonds. I just want to verify from what you said in the past. You're going to -- will you be considering that ongoing earnings, and about how many years would you expect that bond to last?

Andrew, yes, we would consider that ongoing earnings. And I would expect that the high end would be 14 years. We'll have to look at the traunching, there may be some 5s, 10s and a bit longer. So we'll have a lot of clarity for that -- on that, obviously, when we sell those bonds and we can give you sort of the exact numbers then. But the math is exactly -- it will be amortized over the life of those -- the average life of those bonds.

The next question will come from Steve Fleishman with BOA.

Just thinking about the use of proceeds in the environment we're in. Obviously, in -- particularly in your gas businesses, there's been a lot of -- it's been a pretty attractive market environment and stocks, currencies have all done well. So I'm just -- it sounds like you're going to be pretty patient with the use of proceeds, and I'm just wondering, do you think you really tend to be so patient in this environment? And also, do you sense any opportunities that, from a competitive standpoint, to make sure that you've got -- make sure you've got competitive opportunities to -- particularly on the GNP side, where it's been tough to get new projects?

We would rather, as you would expect, Steve, build rather than buy. Organic growth and building new systems are much more attractive than buying especially at today's multiples. But I think there are some potential opportunities out there we continue to look at. I think -- we're not going to let this money, say, got to go do something right today. I think we are going to be patient. I think that is the message, but we are going to be very active, diligent. We're going to decide, is there something here over the next 3 to 6 months? Now it may take longer to execute it, but we have to decide how long do we want to hold the money, to try to invest it as opposed to looking at some of the alternatives. But I'd say by midyear next year, we ought to have a pretty good idea and hopefully we'll be able to spend some of this money before then. You might have picked up in my comments, we do think our CapEx and our -- both our Gas Distribution, as well as our Electric Utility, is going to pick up from this year. So we'll spend a little bit more in those areas, but obviously, we're not going to spend all our money in just that area. So we're going to have to find some new investments, but we're not going to do anything that doesn't create value for our shareholders. If it's not a good deal, we're not going to spend the money just to spend it.

And can you just remind us kind of the framework you look at when you're looking at investment or acquisition opportunities? Kind of how you look at accretion, dilution, returns? What kind of framework you're using?

We have hurdle rates for each one of our businesses. And clearly, the investment has to meet the hurdle rate over the long term. And I would say that we're not looking to have very much dilution at all. I guess, there could be a little bit in the first year, but we're not looking in any long-term dilutive type transactions.

Our next question is from Ali Agha with SunTrust Robinson.

I jumped on a little late on the call, so I apologize if you're going to repeat this. But could you just remind us again, so the use of proceeds, how much has been earmarked for, say, CapEx or internal growth versus debt or equity reduction? Could you quantify that?

We didn't, Ali. What we have said is our first priority is to invest the money. That's our number 1 priority. We have some debt maturing in a little over a year, in 2013. And obviously, some of that debt, we could actually buy in today at par. But we're not going to use the money in that -- for those purposes until we have really scrubbed our investment opportunities, and then we'll decide if we should take out some debt or buy back some stock. But at this stage, our number 1 priority is to invest in all our business.

And related to that, David, I mean, obviously, Field Services will have a very strong year this year as expected. When you look at the base that you're creating in 2011 and your projects moving forward, what kind of growth rate should we be expecting for that business in -- over the next few years?

I think we'll still have growth from just our existing contracts in the Haynesville, Fayetteville and Woodford. They're going to continue to go up to their contracted capacity. Today, they're not there. They're about 2/3 of it, especially in the Haynesville. So I think though, that our expectations around expansions, where we thought they would actually expand from 1.5 to maybe up to 2.9 Bcf in the Haynesville over the next 5 years, I think we've tempered some of our expectations there. And while -- we don't think that's going to happen in the next couple of years. It may ultimately happen and we hope it does, but we had expected that might happen in late '12 or '13, and I think we're pushing that out a little bit. Now we still talk to our customers routinely, and we just have to read the tea leaves a little bit when we do that. But expansions are probably pushed out a little bit. So we're going to make sure we capture all the growth of our existing contracts and there's some additional, I think expansions, small ones, that we'll see in that light. But our real goal is to try to go with some of these customers to some other areas. We like to diversify our footprint. We're pretty much Mid-Continent based today, and we would like to diversify that base zone.

And the last question, David. Again, I thought I heard you correctly, but just to be clear. Did I hear you that you're saying that when you look at your existing portfolio and the net on CapEx, that you're not contemplating an MLP structure for the pipeline field services, but if a big growth opportunity comes up, you would contemplate it at that point. Did I hear that right?

You did. With the level of proceeds we're going to get, we don't see really any need right now to go out and do an MLP. Having said that, if we get into a very high growth area or have a big opportunity, we would certainly consider it.

Because one of the exercises you were going through was not as a source of capital, but as a valuation enhancement exercise. That was complete and you did not reach the conclusion that, that will be a valuation enhancement in setting up an MLP?

I would say that the results are mixed. I think there are definitely examples that you can find where an MLP appears to enhance the value of the sponsoring -- the C corp behind it. And at the same time, there are those examples where it doesn't appear to have value. So I don't think that's going to drive our determination if we use an MLP or not. But I think a good solid financing source for a growth business, I think is something we would -- is the reason we would consider it.

The next question will come from Jim Krapfel with MorningStar.

In light of the expected securitization proceeds, how does that change your thinking in regards to the 2012 dividend payout level, if at all?

We haven't considered that yet, Jim. But I would think that -- we look at continuing earnings and cash flow, and I think we need to make sure we see where we are going to invest this money and the level of earnings we're going to get before it really influences our dividend decision. I think our dividend decision next year is going to be based on our current businesses plus what we've done up to that point in time.

Okay. So maybe your early indication on your list you added about -- I think it was $0.01 onto your dividend and some -- is that something really like in the ballpark we're looking at in 2012 or maybe a little bit higher?

We're really aren’t ready to discuss that at this time. We generally look at the dividend level in the first quarter of the new year, and that's what we'll do this coming year.

The next question will come from David Frank with Catapult Capital.

David, I know there's a lot of talk about potential uses of the cash. I guess, as management and you're – I don’t want to say you're in the later part of your seniority there, but you know -- but you're sitting there with $5, you're going to be -- have almost $5 per share of cash on there. How important it is for you guys to see that this cash is spent, you grow the business, and you kind of ride out into the sunset or -- how open would you guys be to actually selling the company?

David, I think you know the answer to that. We're not looking to sell our company. But we are absolutely focused every day on how do we create more value for our shareholders, and we think we have a unique opportunity with the proceeds we're getting. So I'm not sure we're going to ride off into the sunset before we get it all spent, but we're going to get it invested and used long before we get out of here.

You have a follow-up question from Carl Kirst with BMO Capital Markets.

Just 2 quick ones. The first is, with respect to the third quarter earnings on the electric side, it sort of looks back in the envelope that the weather impact down here was, call it to be $35 million, $40 million of EBIT. I know sometimes it's difficult to tease apart, but is that roughly what you guys are seeing or...

Yes. We think that weather and usage was about $35 million, $36 million. And we're pretty sure that at least $25 million to $26 million is weather, and probably a little bit more. We had a drought together with this extreme heat, and I'm not sure our weather models captured all the impacts of weather. But of the $36 million, we're pretty sure that $25 million, $26 million is weather driven.

And just a second question, you sort of touched on a comment with respect to perhaps reviewing the dividend in the normal time in January, but as we think about use of proceeds, fairly large sum of money, and just kind of given the market today and kind of how they're rewarding sort of yield growing companies, in 2011 we saw a dividend bump of around 1%. Is there any change in the thought of the framework of using some of that cash, earmarking some of that cash for potential dividend bumps rather than, say for instance, share buyback?

Not at this time, Carl. We have a guide that we use. 50% to 75% of ongoing earnings, we pay out in dividends. We're at the top-end of that range. We need to grow earnings to grow dividends. But I don't expect that we'll take this money and make any kind of special dividends. What we want to do is invest it, drive our earnings and then drive dividends, and that's our goal.

There are no further questions at this time.

Thank you very much. Since we do not have any further questions, I'm going to end the call. Thank you very much for participating today. We appreciate your support very much. Have a great day. Thank you.