Fortis Inc. (FTS) Q3 2010 Earnings Report, Transcript and Summary

Good day ladies and gentlemen and welcome to the ITC Holdings Corp. Third Quarter Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference to our host, Ms. Gretchen Holloway. Ma’am you may begin.

Good morning. And thank you for joining us for ITC’s 2010 third quarter earnings conference call. Joining me on today’s call are Joseph Welch, Chairman, President and CEO of ITC and Cameron Bready, our Senior Vice President, Treasurer and CFO. Last night, we issued a press release summarizing our results for the third quarter and for the nine months ended September 30, 2010. We expect to file our Form 10-Q with the Securities and Exchange Commission today. Before we begin, I would like to remind everyone of the cautionary language contained in the Safe Harbor statement. Certain statements made during today’s call that are not historical facts, such as those regarding our future plans, objectives and expected performance are considered forward-looking statements under federal securities laws. While we believe these statements are reasonable, they are subject to various risks and uncertainties and actual results may differ materially from our projections and expectation. These risks and uncertainties are discussed in our reports filed with the SEC such as our periodic reports on Form 10-Q and 10-K, and our other SEC filings. You should consider these risk factors when evaluating our forward-looking statements. Our forward-looking statements represent our outlook only as of today and we disclaim any obligation to update these statements, except as may be required by law. At this time, I’d like to turn the call over to Joe Welch.

Thanks, Gretchen, and good morning everyone. I would first like to set the stage for what we expect be a rather brief call today given our reason comprehensive, strategic update at our Investor’s Day in late September. Since only a month has passed, our review today will be concise and focus on the highlight for the quarter, as well some of the key takeaways from our five-year plan. Once again our results for the quarter continue to demonstrate our strong operational and fiscal performance for further bolstering our confidence, and our ability to successfully execute our 2010 goals. Perhaps more importantly these results are also reflective of the progress we have made in, continuing to solidify a foundation for ITC to leverage as we move forward on executing our five-year capital investment plan. This plan provides for approximately $3.9 billion of capital investment in transmission the infrastructure from 2011 to 2015. And this framed us around improving reliability, facilitating access to all generation, reducing congestion, improving efficiency, lowering cost of delivered energy. Our capital plan reflects our ongoing strategy of achieving best-in-class operations at our existing operating companies are also playing a meaningful role in the build out of the 21st-century transmission system in the U.S. through our development efforts. While investments in our base to operating companies to support improved reliability and replace ageing infrastructure have driven our growth over the past several years. These investment opportunities are beginning to slow as our existing systems mature, and we are able to achieve our target in best-in-class performance level. However, much work remains to be completed in these systems and they remain critical to our investment plan, as well as our overall strategy as they provide a key competitive advantage in our development initiatives, which are becoming increasingly important to delivering long-term sustainable for the company. As we have discussed previously, we continue to recognize the needs for significant investment in transmission infrastructure in the U.S., driven primarily by long-term reliability needs of a grid, as well as the desire to achieve certain broader public policy goals. On the reliability front, a variety of studies continues to demonstrate the need for significant investment in new transmission infrastructure, simply to address the reliability needs of the transmission system. As we have stressed, not only is the existing transmission system in the U.S. inadequate to meet the evolving need of the 21st-century energy intensive economy, it is also and equated and require significant investment to just maintain the status growth. In addition to addressing the pure reliability requirement, momentum in the U.S. to build out a more robust transmission system to support long-term reliability needs, as well as broader public policy initiative, including increasing the penetration of renewable resources remain strong. The impacts of renewable integration continue to be long-term drivers for the transmission investment in the U.S. In light of the evolving world, these resources are expected to play in the overall generation mix going forward. The development of renewable resources in particular wind generation has advanced over the years to satisfy a variety of objectives. One such objective is development aim at providing an economic generation alternative when other fuel prices increase like we saw with natural gas prices in 2008. This form of wind development tends to be quite variable based on the relative economics of wind generation development, relative to the prevailing commodity price environment, and the cost of other competing resources. Given the current commodity price environment, much of this type of wind development has slowed in the U.S. Another more fundamental role of renewable development is to incorporate a certain amount of clean renewable fuel sources in to our generation portfolio. In order to reduce the machines and provide for long-term sustainable generation sources which is ultimately the goal of renewable efficiency standard. As we look at the near-term the base line requirements for wind development in the U.S. is expected to be driven by current individual state RPS mandate. Today approximately 30 states have existing RPS mandate and another seven states have RPS goals. In the Midwest, ISO or MISO footprint, there are currently 25,000 megawatts of RPS mandate in member state. However, only about 8 to 9,000 megawatts of renewable capacity currently exist in the region. Consequently, we believe our that transmission development will advance in the near-term to support current RPS mandate and regional reliability needs, while ultimately supporting a broader, larger EHP, regional EHV overlay. Longer-term, we still look to the implementation of the national RES to drive further expansion of the transmission system to accommodate more renewable resources. For example, the implementation of 20% national RES would serve to increase the renewable capacity needs of the MISO region alone to over 40,000 megawatts, further supporting the need for additional, renewable development and transmission investment in the region. While it is important to recognize the compelling need for transmission investment in the U.S., it is equally important that the reforms are made to prevailing transmission policy to facilitate filing these needs overtime. This is why we are increasingly encouraged by the recent momentum around transmission policy reform at FERC. As we have highlighted previously a critical driver of transmission policy reform is the first Notice of Proposed Rulemaking or NOPR which proposes to change our transmission plan. Built and paid for in the US, the NOPR is currently in the comment and review process at FERC and we continue to expect a final rule in spring of 2011. The first effort to modify transmission planning and modernize the rules around transmission cost allocation are key components to developing the flexible and adapt a transmission system needed in the U.S. to support a broad a array of objectives. While policy reform continues to evolve on a national level, we are continuing to focus our development efforts in the near-term on the regions that offer the most favorable stable transmission development landscapes to ITC, which we believe to be the South central and North central regions. Both of these regions are actively engaged in studying and planning for large EHV overlays necessary to address reliability need and renewable integration and have implemented planning processes or undertaken large scale study to support their planning effort. In addition both regions have existing policies or are evolving policies around cost allocation for regional transmission project within their footprint. This landscape coupled with our strategic footprint within these regions underpins our ability to successfully develop projects and expand within these regions over time. As we look to the South central region primarily the Southwest Power Pool or SPP progressive planning in cost allocation methodologies supportive or regional transmission, expansion have been developed and implemented. SPP’s policy provide for a longer-term comprehensive view of planning to transmission the system to the integrated transmission planning or ITP process, while also providing regional cost allocation for EHP projects or projects 300 kV in above through its high way, by way cost allocation. In the North central region primarily the Midwest ISO, we continue to see positive policy development both with MISO’s new proposed cost allocation methodology, and MISO’s regional planning efforts with Regional Generation Outlet Study or RGOS. MISO’s proposed cost allocation methodology currently on file with the FERC provides for resale cost allocation of multi value projects or MVP, which are projects intended to have reliability benefit, economic benefit and also help achieve public policy goals. The filing is currently in the comment and the review period at the FERC and MISO has requested approval of this proposal at the FERC’s open meeting in December. In addition to MISO’s MVP cost allocation proposal, we continue to see progress with MISO’s RGOS planning initiatives. The RGOS study which was undertaken with the purpose of developing a set of transmission portfolio to meet state renewable energy requirement as well as address regional reliability needs, ultimately calls for an EHP overlay in the region. MISO is starting to advance portions of this overlays through the identification of a first-day projects are got start-up projects, which total approximately $4.5 billion of the investments within the MISO footprint. The Oregon start-up projects are considered no our regret projects needed to support reliability needs as well as to support state RPF mandates within the region. The current group start-up projects include segments or portions there all within an ITC footprint. MISO has indicated it will continue to study these projects and intend to include the ultimate group of start-up projects in MTEP in 2011 as MVP projects. Given the recent developments, we have seen on the regulatory front, we believe our availability to strategically position ourselves around a new transmission buildup is more critical than never. We continue to view our transmission model as the key advantage given the longer-term focus required to ultimately be successful with transmission development. We also look to other strategic advantages including our existing operating footprint and proving transmission development track record, as we consider our ability to be successful without transmission development opportunities. With the progress we have made during 2010, we remain confident in our ability to continue to create long-term, sustainable growth for our shareholders by investing in transmission and we’ll provide long-term benefits to our customers. At this time, I’ll turn the call over to Cameron to provide an update on our financial results and outlook.

Thanks everyone and good morning. I will begin by providing a brief summary of our financial results for the third quarter and year-to-date periods. For the third quarter 2010, ITC reported net income of $38.4 million or $0.75 per diluted share. This compares with net income of $37.8 million or $0.74 per diluted share for the third quarter of 2009. Net income for nine months ended September 30, 2010 was $108.9 million or $2.13 per diluted share, compared to $97.3 million or $1.92 per diluted share for the same period last day. As the reminder, 2009 third quarter and year-to-date results reflects impacts of recognition of $9.3 million or $0.11 per diluted share of regulatory assets at ITC great claims. Results for the 2010, do not include recognition of any such regulatory assets. In addition to these items, other key drivers that contributed to year-over-year (Inaudible) and increase net income for the quarter and year-to-date period did a higher rate base and allowance for funds used during construction at all operating companies. Higher net income for the quarter in year-to-date period delivered non-recoverable expenses and a lower consolidated effective income tax rate. These increases in net income for the quarter and year-to-date periods were partially offset by higher interest expense, resulting from our financing activities for ITC Holdings, which were completed in late 2009. Financial results for the third quarter and year-to-date period also reflect the first July approval of ITC Midwest appreciation study, which revises estimated appreciation range utilized for ITC Midwest. The new depreciation rates are effective January 1, 2010 and result in an annual reduction of depreciation expense of approximately $5 million, as compared to the estimated depreciation expense that was previously reflect in rates for 2010. ITC Midwest posted revenue requirements in transmission rates for 2010, assuming the higher depreciation rates for the full year. The impact of reducing ITC Midwest deprecation rate resulted in a reduction of depreciation expense of approximately $2.5 million for both the three and nine months ended September 30, 2010. And a corresponding decrease in operating revenues of the same amount. The remainder of the impact will be reflected in fourth quarter results. Due to our rate making model, there’s an insignificant impact on net income and earnings per share resulting from change in depreciation rates. For 2010, the difference between old depreciation rates and new rates will be reflected in the year’s rough calculation. Going forward, the transmission rate paid by our customers will reflect a benefit of lower annual depreciation expense for ITC Midwest. The improvements in net income and earnings per share for the quarter and year-to-date periods are also reflective of our continued success in implementing our capital investment plans. But the year-to-date 2010 period ITC invested $333.2 million in capital projects at its operating companies, including $45.5 million, $102 million, $175.6 million and $10.1 million at ITC Transmission, METC, ITC Midwest and ITC Great Plains respectively. Our successful financial performance in the first nine months of 2010 was further demonstrated by the increase in our dividend, which was effective for us September 17th quarterly payment. The dividend increase of 4.7% raised our quarterly dividend 33.5% per share or $1.34 per share on an annualized basis. And represented the fifth consecutive annual increase in our dividend since our public offering 2005. As we’ve stated that important aspect of our dividend policy is to maintain a dividend payout that balances are decided to reward shareholders in the near-term with our need to efficiently finance the long-term capital requirements of the business, which will ultimately drive growth. We continue to believe that our current dividend policy strikes the appropriate balance between these two objectives. I would like now to turn to our overall capitalization requirements and liquidity positions starting with our long-term financing needs. As we have discussed previously with the completion of the METC prior replacement in May of this year and the financing debt security of ITC Holdings and ITC Midwest in late 2009. We have satisfied our entire long-term financing calendar for 2010. With our 2010 financings complete, our focus is shifted to assessing opportunities to take advantage of the very attractive interest rate environment we are currently experiencing and to listening the company for the upcoming refinancing of certain revolving credit facilities. After having explored a variety of options that would allow us to exploit the current rate environment, we determine that the option available to us was the header portion of the interest rate exposure for the expected refinancing of $267 million of ITC Holdings, 5.25% senior notes through July 2013. In September, we were successful in marking in a portion of the interest rate exposure for the refinancing of the senior notes at ITC Holdings, by entering into a $15 million notional amount forward starting interest rate swap. The interest rates swap effectively locks in the underlying treasury rate for the expected insurance of the new 10-year senior notes at 3.6%. The interest rates lock qualifies our hedge accounting treatment and as such any gains or losses on the effective portion of the swap will be recorded to accumulated other comprehensive income between the trade date and the effective date of the swap that will not impact net income. We continue to monitor the capital markets closely and (inaudible) adds in the future if we believe that the conditions are appropriate. As our account liquidity position as of September 30, 2010, we had $74.3 million of cash on hand in $268.2 million of net undrawn revolver capacity, bringing our total liquidity position to approximately $342.5 million. Our revolving credit facility is now have a total consolidated capacity of $285 million, which is reflecting and executed in July of this year $255 million of Lehman capacity from the facilities. Now withstanding this reduction in credit facility capacity, our liquidity position has been boasted in 2010, largely due to very strong operating cash flows. For the nine-month ended September 30, 2010, we reported operating cash flows of $298 million, an increase of $111 million over the same period in 2009. This increase is primarily due to the question of $63 million related to the 2008 attachment overthrow of amounts, as well as additional revenues co-acted in 2010 as a result of higher monthly peak loads compared to what it had been forecasted in developing our 2010 network transmission rates. Peak load for the year-to-date 2010 period is approximately 4.7% better than the load forecast utilized to establish our 2010 rates. Consequently, we are currently projecting that we will end in the year in an aggregate payable position with respect to our cash financial up for 2010. Turning now to our outlook for the reminder of the year, as a result of the progress we have made during the first nine months of 2010, we are raising our full-year earnings per share guidance. Our 2010 earnings per share guidance is increasing from a range of $2.70 to $2.75 per share to a range of $2.75 to $2.80 per share. Our increased earnings per guidance once again reflects a strong financial performance we have seen in the first nine months of the year. And our expectation that we will deliver on our capital investment plan for the year consistent with the guidance we are reaffirming today. I would note that we also continue to see some earnings outside from lower interest expense and plan due to afore mentioned improvement and operating cash flows, lowered non-recoverable development expenses, as well as lower overall consolidated effective income tax rate. 2010 capital expenditure guidance remains in the range of $420 million to $460 million, including $50 to $60 million, $130 to $140 million, 220 to $235 million and $20 to $25 million, for IT fee transmission, [Messy], ITC Midwest and ITC Great Plains respectively. Once again I would note the capital guidance for ITC Midwest includes approximately $17 million of capital for the acquisition of certain assets form northern states power company or subsidiary of Xcel Energy. ITC Midwest acquired the contractual rights to purchase these assets is part of the acquisition of Interstate Power and Light company’s transmission assets in 2007. We’ve filed for approval of the acquisition of these assets at both the Minnesota Public Utilities Commission and at the FERC. However, the approvals are not received this year, this capital investment will more or likely will not be delayed into 2011. As Joe discussed, our continued strong performance provide the fundamental build as we begin to turn to 2011. ITC has initiated earnings and capital guidance for 2011, which provides for earnings in the range of $3.20 to $3.30 per share. And capital guidance in the range of 560 to$640 million. Capital expenditures for ITC transmission, Messy, ITC Midwest, in ITC Great Plains are expected to be approximately 60 to $75 million, 155 to $117 million, 225 to $250 million and 128 to $145 million respectively. We are reaffirming our preliminary 2011 guidance today. Looking forward at last month’s Investor Day, we unveiled our new five-year plan, which is largely premise on investing approximately $3.9 billion in new transmission infrastructure over the 2011 to 2015 period. The capital investment plan is comprised of approximately $1.5 billion of investment in our base operating companies, approximately 1 billion in generated interconnections and approximately $1.4 billion in development projects. This overall capital plan does include some larger key projects, which continue advance at a regulatory process and in degree pre-construction activities. I will briefly update you on the status of those now. First, roughly 50% of the generated interconnection category relates to the Michigan (Inaudible) project at ITCTransmission. The project received approval from the MISO Board on August 19. Subsequent to receiving MISO’s approval to the project, ITCTransmission filed for siting with the Michigan Public Service Commission. The project is eligible for and expedited six months siting approval process and based on this, ITC expects siting approval in early 2011. Pre-construction activities are expected to begin after receiving siting approval with the material ramp up in capital spending expected in 2001. In addition, our development projects continue to include our three advanced projects at ITC Great Plains, which are Hugo to Valliant, KETA and Kansas V-Plan, totaling approximately $517 million in investment opportunity for the 2011 to 2015 period. These projects continue to advance nicely and remain on track to meet anticipated in service dates. Ride way acquisition is now completed for the Hugo to Valliant project and construction activities are ramping up. We continue with ride away acquisition activities for both basis of KETA. Finally ITC Great Plains plans to follow up our siting approval of the Kansas V-Plan project in early 2011 and expects to begin pre-construction activities for this project in the second half of 2011. Based on preliminary planning results from SPP, we expect the Kansas V-Plan project to move forward at a double circuit 345 kV configuration. However, SPP does continue with its analysis of the appropriate voltage for the project and we expect additional information in early 2011. ITC’s year-to-date financial performance once again reinforces our track record in meeting the commitments that we set and provides a stable foundation for ITC to continue to build on with our new five-year capital plan. As we noted, the exclusion in this plan should provide for compound annual growth and earnings per share in the range of 15 to 17% over the five-year period. With that, I’d like to open up the call to answer questions from the investment community. [Sienna]?

(Operator Instructions) We have a question from Daniel Eggers with Credit Suisse. You may begin.

With looking at the strong third quarter results that look like there is always been a response to you just increased reliance coverage of the nickel. Can you may be think about the fall of roughly $0.08 to $0.13 into the fourth quarter as the sort of one-time items that we should be thinking about, obviously don’t know a seasonality? And then also why the nickel been rolling to ‘11?

Okay. I will start at the beginning. First of all, as it relates to Q4, as we talked about previously, the development express is that we have in the business due tend to have in flow from period of period. and I think given some of the progress that we’ve made on a verity of funds with development initiatives, we in due expect in the fourth quarter have some drag adjusted with activities is in advancing those initiatives that we didn’t see in the third quarter. So as we think about the impact in Q3 certainly not of all that is due to the higher realized coverage than what we had forecasted, some other are due to one lower non-recoverable expenses than we had forecasted in that particular quarter, as well as containing to see an overall effect of income-tax rate lower than what we had forecasted. So we don’t expect either the latter few items to contribute to ‘11 results as well as we expect to return more normalized levels in 2011. As for the revenue up with we’re seeing in 2010, some of that will carry forward into 2011 in terms of our cash needs. It certainly at this point, though wasn’t enough for us to justify or suggests that we should change our 2011 earnings guidance.

Okay, that’s helpful. And then looking at SPP, I see I think that on the 25th, I see the priory property projects re filled for higher capital spending. Wasn’t the plan involved with this or as we expect to higher than, I think it started with 310 million of spending.

Our current forecast has about 300 million outstanding associated with the B plan project. And as you recall, I think it was in Q1 of this year that we released that cost estimation for the double circuit 345 kV configuration for the V-plan. That remains the estimate for the project. We obviously provided that publicly in first part of the year and have been working with SPP with that cost estimate since then. So if that’s not an estimate that just came out in the last couple of the weeks, that’s been out for several months now.

Thank you. Our next question comes from Michael Bates with Davidson & Company. You may begin. Michael Bates - Davidson & Company : Hey, guys. Just a quick question for you. Earlier of this year, I remember reading about a potential rule change of the FERC that would remove and then come in, utilities right of first refusal with regards to transmission development. Do you guys have any commentary that you can offer on that or how you expect it to impact your competitive landscape?

Well, first of all, the proposed rulemaking and FERC is seeking comment on it. There is two outcomes obviously that they’ll make no change, make some change or change it totally. I don’t think that with a planning process that we have today, where in the RTOs, you have a pretty much centralized planning for transmission expansion that removing the right of first refusal totally makes much sense. And so I don’t think that they’ll go that way. There does draw the question in those areas where they do not have centralized planning through an RTO. And at which time there’s no way to get a project approved that I think that FERC will take a long hard look at that. Form us personally, we’re in the development business, and so, on the one hand, we’re working real hard to make sure that our development efforts are always competitive. So if they remove it, we’ll continue to compete the best we can. However, on the other side of the coin, we also have bought in a lot of transmission space. And I don’t vision anyone coming in and planning transmission in our space to too aggressively since we’ve been pretty active in getting it done. So I don’t look forward to have much impact on us one way or the other.

I think the one thing I would add to that is that in the RTO markets that we operate in, we don’t necessarily think that the road for us has really been the impediment to building transmission. What’s been the bigger impediment to building transmission are frankly the sort of antiquated rules and the cost allocation methodologies that have existed historically. I think by addressing those, you’re really moving to the larger impediments to building transmission and it’s not really an existing road further. It’s standing in the way of getting transmission build. So we don’t think it needs to be changed, but it’s just that will adapt depending on what direction they go. Michael Bates - Davidson & Company: Sure, I appreciate it. And just the follow-up on the last question that was asked. Your updated guidance so looked a little bit low in light of the earnings growth that we’ve see in the first three quarters of the year. And Cameron, you said that, at least I think, you said that there were development expenses that didn’t really come through in the third quarter that might show up in the fourth quarter. Can you give us an idea of what the impact was in the third quarter, pushing those developments and expenses out?

Well, year-to-date we’ve incurred the development expenses of about $5.6 million and we had about 3.1 in the third quarter. I think as I mentioned before, we have a lot of initiatives on going right now from a development perspective that are moving to the point in the development cycle where we’re going to need to start deploying more dollars for external resources for either economic studies, planning studies and what not, that tend to be bigger drains on the development expenses than we incur in the early stage of developing projects. So I think was obviously cautious as we roll into the balance of the year in terms of advancing these development projects wanting to make sure there were properly supporting those with the right financial resources and obviously, offset them, ensuring that we set expectations that we have a high confidence on our ability to meet. So once that we are sure, we do expect to have increased expenses in the fourth quarter of the year. So sharing with those activities as we continue to move through the pipeline. And I think our guidance reflects our best estimate where we see the full year shaking out all those factors considered.

Thank you. Our next question comes from Jay Dobson with Wunderlich Securities. You may begin.

Just to follow-up on this development expense. You said, it was 5.6 million year-to-date. Is it still short of your expectation, I guess more on an annual basis not specific to tend but we would be spending 10 to 15 a year on recoverable development expenses?

I think that, what we were shared at the Investor Day, Jay was an estimate that would range sort of 15 to 20 million year in total for all non-recurrable activities, which would include our development activities. So we still feel like that’s the right number you know in certain years, the development expenses are going to be greater as we’re advancing projects. But as we said here today, that still feels like a right around on non-recurrable expense, we are in business year-over-year and again it includes things beyond just development activity, there are certain aspects of the business lobbying and charitable donation and other community activity that we do that are not recoverable, so that it’s an aggregate pool of dollars that are set aside for non-recoverable activities of which development typically is the lions share.

Okay. Fair enough. So much to do in the math here and looking like even at the high-end 280 you would be flattish in the fourth quarter. We really have to take that 15 to 20 back out to 5.6 tax effect and see that’d be sort of tend to may be $0.15 drag in the fourth quarter such that it would get you to a flattish sort of number, am I reasoning that right?

Yeah generally, I mean, as I said not all of the balance of the non-recoverable is development. So there are things that we are spending money on and have spent money on through the course of the year that are non-recoverable and will continue in the fourth quarter. But as I said, we do expect some bit of a ramp up in Q4 on some of the development activity, which could cause quarter over quarter be closer to flat, because we didn’t see those same activities in Q3.

Got you. And then SG&A, I know those increase would appear to be largely recoverable since the development of non-recoverable were down at the quarter, but what accounted for that big increase in the SG&A in the quarter?

Yeah, again. If you go back it to ‘09, we made considerable efforts to mitigate expenses and keep expenses down at normally so as a result of the macroeconomic environment that we were experiencing in Michigan. I mean, I think, as you fast forward to 2010, we have returned to more normalized levels of spending from both M&A and SG&A perspective mainly in the recoverable areas as again the economic environment has stabilized we reached that rate for 2010 and we had returned to more normalize business operations as opposed to last year which was very focused on mitigating expenses as a result of the macro issues we were facing.

And then last question, I’m not sure if this is for you or for Joe, I guess the only thing that strikes me and not want to shake my finger at a great quarter, you guys have a lot credit for that, but was there things that changed between the 27, September and now that sort of give you an upside because you did sort of confirmed your guidance on the 27th and I’m just wondering what’s different today, if anything certainly again it’s a very high-class problem to have sitting here with better-than-expected earnings?

Yeah. It’s a fair question and then we’re not oblivious to that. I think, the biggest thing that changed as we got Q3 behind us, we saw roads for September, August, July in the increasing cash flow that resulted from that and that the impacted of that has on our business in terms of (Inaudible) borrowings that we need, holding company level to fund our operations. And that really, probably sitting here between September 28 and today that’s the biggest item that I think impacted our thinking around our full-year guidance as well as the quarter. At the time we had the Investor Day, we didn’t have the quarter closed out, and we just want to prepare to get in front of our skies so to speak in terms of increasing guidance, before we know exactly how the quarter was going to shape out.

And I think the other thing to bolster what Cameron said is that the macroeconomic conditions that existed a year ago, and (Inaudible) the year prior really undermined all of the statistical collection of book data that we have. And we’re really experiencing, if you will, a totally different economy here in southeast Michigan. So we haven’t really got our arms around what those low profiles are going to look like going forward, how roads going to return. We are just now seeing some, what I call coming back to normal activities, especially in the automobile and manufacturing area. And we had extremely warm summer in relation to what had happened in the year prior. So, our ability to forecast those and feel comfortable wasn’t quite what it was a couple of years ago. So, we’ve stayed cautious and conservative all the way.

Thank you (Operator Instructions). Our next question comes from Neil Kalton with Wells Fargo. You may begin.

Just a question, Westar in the last day or two announced an intention to do about a $1 billion worth of lines in Kansas. And I imagine some of these, when you look at the map, some of these might cross over, maybe projects that you have idea that you would like to do longer term as well? And I wondered, your comments on Westar announcements to reactions, is it positive, negative or sort of neutral to your strategy in Kansas?

I would say it’s more neutral to our strategy in Kansas. Our strategy has been to always partner with people to go to transmission. And as a result of that I mean, Westar or anyone else is not the first person to announce that they’re going to build all the transmission to serve everybody in the United States. So these are pretty common events for everybody, but we’re here for the longhaul and we’ll stay there for the longhaul?

I think, as we think about our strategic positioning in that market, given the assets we’ve acquired, the assets we have in construction and development that are going to be in service over the next two to three years, I think we still feel very good about kind of how we are positioned to be successful in the market in the longer-term. We’ve said before the fact that other participants in the market are desirous of building transmission. It’s somewhat of a double edged sword. I mean on the one side, it’s great that other people are recognizing the need and beginning to advocate for the things that we’re advocating for, have been advocating for, for some time now. So the more support there is for the advancement of these types of projects, the more likely it is they are actually going to move forward. And the flip side is, obviously that there is more people instead in participating in it. And I don’t think we certainly have an issue with that. And I think at the end of the day, as we think about how we’re competitively positioned, we very much light our model and we like the attributes we bring to the table. I don’t think it really changes long-term our ability to be successful in that market.

Thank you. I’m showing no further questions at this time. I would now like to turn the conference back over to Gretchen Holloway.

This concludes the question-and-answer portion of our call. Before I end the call today, I’d like to thank everyone who participated. Anyone wishing to hear the conference call replay available through November 2, 2010, should dial toll-free 800-642-1687 for domestic or 706-645-9291 for international. The pass code is 17923639. The webcast of this event will also be archived on the ITC website at https://investor.itc-holdings.com/events.cfm. Goodbye, everyone and have a great day.

Ladies and gentlemen that concludes today’s conference. Thanks for your participation and have a wonderful day.