Fortis Inc. (FTS) Q1 2012 Earnings Report, Transcript and Summary

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

Good morning everyone, and thank you for joining us for ITC’s 2012 first quarter earnings conference call. Joining me on today’s call are Joseph Welch, Chairman, President and CEO of ITC, and Cameron Bready, our Executive Vice President and CFO. Last night, we issued a press release summarizing our results for the quarter ended March 31, 2012. 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 expectations. These risks and uncertainties are discussed in our reports filed with the SEC, such as our periodic reports on Forms 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 maybe required by law. A reconciliation of the non-GAAP financial measures discussed on today’s call is available on the Investor Relations page of our website. In addition, on December 5, 2011, ITC and Entergy Corporation made an announcement regarding an intended transaction. Investors are encouraged to read the proxy statement and perspectives in its entirety regarding the proposed transaction as well as any other relevant documents when they become publicly available. These documents will contain important information about the proposed transaction. A free copy of the proxy statement and perspectives as well as other filings containing relevant information will be available without charge on the SEC website. Copies of the proxy statement and perspectives and the filings with the SEC that will be incorporated by reference in the proxy statement and perspectives can also be obtained when available and without charge from ITC or Entergy. Information regarding participants or persons who maybe to be deemed to be participants in the solicitation of proxies with respect to the proposed transaction is contained in ITC’s proxy statement for its most recent Annual Meeting and Entergy’s proxy statement for its most recent Annual Meeting, both of which are filed with the SEC. I will now turn the call over to Joe Welch.

Thanks Gretchen and good morning everyone. Given our rather comprehensive update on our fourth quarter 2011 call just a couple of months ago, our prepared remarks for today will be brief and will be focused on the strategic and financial highlights for the quarter. I’m once again pleased to share with your today solid operational and financial results for the first quarter of 2012, which positions us well to deliver on our full-year commitment and our long-term strategic plans. These plans are largely focused on successful execution of our standalone five-year capital investment plan coupled with continuing to advance our previously announced transaction with Entergy through the approval process in a manner that maximizes the probability of a successful close of the transaction. On the operational front, system performance for the first quarter of 2012 remained quite strong particularly attributable to the relatively mild winter, winter weather experienced across the Midwest. While the weather implications were generally minimal for the quarter with actual load coming in close to our forecasted amount, the Midwest region did experience more frequent severe weather events including some destructive tornados within the region. Fortunately, our systems sustain no direct hits and continued to perform well during these severe conditions. As we highlighted on our last call, our new standalone five-year plan for the 2012 to 2016 period is largely in line with our previous plan with identified investment requirements in our base operating system, network upgrades to support generator interconnections and for new transmission infrastructure through our development portfolio. The plan calls for a further significant ramp up in our annual capital investment levels in 2012, once again requiring the company to effectively adapt and execute on an expanding and more diversified capital investment plan while also furthering our goal of overall best-in-class performance of our systems. Our investment plan within our base operating remains on track with and are progressing on schedule. In fact, in March, we announced that we have selected a Michigan company M.J. Electric of Iron Mountain to build the Thumb Loop Phase 1 line segment, which is 62 mile stretch or just under half of the total project mileage. M.J. Electric’s selection was based on competitive biding process as well as their history of safety and successful project completion for ITC in this very specialized field. Awarding this contract was an important milestone in inventing the Thumb Loop project which is the largest single project we have undertaken and it’s a critical to supporting transmission upgrades in this region of Michigan. It also serves as another example of how our strategic alliance relationships with vendors capable of undertaking these large projects ensures that ITC will remain well positioned to execute on it’s transmission investment incentives going forward. We have also continued to highlight our successful – success around our development effort. First with the MISO approval of it’s basket of MVP projects in December of last year and also through our recent announced expanded partnership agreement with Sunflower and Mid-Kansas for future projects within SPP region. As we have highlighted, our developed portfolio includes certain regional and lower voltage projects within the SPP region that we anticipate will be assigned to ITC Great Plains under the co-developed agreements that we executed in February. These projects could include major regional transmission projects assigned to Sunflower or Mid-Kansas by SPP as well as local lower voltage projects identified by either company. Our previous development success within the south regional – south central region were premised on similar partnership agreements with the co-ops in the area and these new agreements highlight the success of our approach to these partnerships. On the regulatory policy front, not a great deal has transpired since our last call and our efforts remain focused on Order 1000 implementation with activities in both SPP and MISO along with other surrounding regions. With that said, one new development on the policy front worth of highlighting was FERC’s order issued in late March in response to the 7th Circuit court’s decision with remanded FERC’s approval of these postage stamp allocation methods for high voltage new transmission facilities in PJM. In FERC’s March order, the commission reaffirmed the use of a postage stamp allocation methodology for the facilities rated 500kv and above, but indicated that this does not preclude PJM from adopting another approach in compliance with Order 1000. Within the March order, FERC elaborated on it’s broad based cost allocation principles further solidifying it’s views, specifically the commission noted that PJM’s regional transmission expansion process identifies system-wide needs and provides for the annual reallocation of the cost of high voltage facilities based on a load ratio share helping ensure that the cost of these projects are allocated to those who are likely to benefit. Additionally, they noted that while a majority of the 500kv and above transmission projects appeared through the expansion plan where intended to address reliability violations in the PJM region, all parties benefit from an integrated system that ensures deliverability to all regions. Further, FERC stressed the one of the key principles that we have sought to reinforce which is that the construction of the high-voltage transmission line surge to accommodate future changes in resource mix and benefits both the importers and exports of power. The commission added that having found these that there are system-wide reliability benefits associated with the new 500kv and above transmission facilities, it is reasonable to conclude that these benefits are broadly shared by system users. The order provides another example of transmission policies being adopted by FERC that should serve to promote transmission investment and supports our strategic vision and standalone five-year plan. While our business continues to perform well and we remain very much on track with our goals and objectives, we also remain focused on successfully implementing our transaction with Entergy Corporation. Under which Entergy will separate its transmission business, merge it with ITC in a tax-free Reverse Morris Trust transaction. Since our December 5th announcement, we have been largely focused on our initial outreach plans which have involved significant interactions in meetings with key constituents in Entergy’s operating region. This effort, which we view as critical to the overall success of the transaction, has provided us an opportunity to explain the proposed transaction effectively introduce ITC and our independent transmission model to the region as well as it’s inherit benefits and better understand the perspectives and concerns of the parties who will be actively involved in the regulatory approval process. Overall, this effort has been productive and informative and we believe that it will ultimately help facilitate a more constructive regulatory approval process. As we continue our outreach efforts, we also have begun the process of preparing and refining the applications and testimony that will be made with the various retail jurisdictions. These applications are required at the retail level for a change in control of the Entergy transmission business along with certain financing that will be executed in conjunction with the initial spin of the transmission business under Entergy. We expect to finalize these applications and initiate a sequenced filing scheduling beginning mid-September. Further, we are also in a similar position with respect to our FERC applications, which are required to consummate the transactions. These applications include approval for the change in control of the Entergy transmission operating companies that will be created as well as establishing new rate peers for these operating companies. Similar to the retail level applications, we expect to have these applications completed and filed mid-summer. Other key approvals required for the transaction include, ITC shareholder approval, pre-merger notification under the Hart-Scott-Rodino Act and the receipt of an IRS private letter ruling. We expect to initiate these processes during the second and third quarters of 2012. Our expectation is that based on the current filing schedule, the timelines anticipated for each of these activities should allow us to close on the transaction in 2013 as it initially contemplated. Lastly, as you are likely aware, one of the conditions to closing on our transaction with Entergy is that they receive approval to join an acceptable RTO, which we expect to be satisfied through a successful conclusion of Entergy’s efforts to join MISO. Last week an important milestone in this process was reached when FERC conditionally approved MISO and its transmission owner’s proposal to establish a transition period for the integration of Entergy. Entergy is currently in the process of seeking approvals from its retail regulators to join MISO and such approvals are expected in a timeframe that will support the anticipated closing of our transaction in 2013. As you can see, 2012 promises to be a busy year for many fronts. However, we believe that our efforts on the – over the past several years to position the company internally from a leadership and organizational perspective and externally from a strategic perspective have positioned us well to deliver on our stand-alone plan while also successfully advancing the Entergy transaction toward closing. Our first quarter results serve to reinforce my confidence in doing just that. I will turn the call over to Cameron for the financial update.

Thanks Joe and good morning everyone. As Joe noted and given the small amount of time that has passed it’s our last update. Our prepared remarks today on our financial results are also relatively brief. I will begin with providing a summary of our financial performance for the first quarter of 2012. For the quarter, reported net income was $46.1 million or $0.88 per diluted share as compared to reported net income of $42 million or $0.81 per diluted share for the first quarter of 2011. Operating earnings for the first quarter 2012 were $48.5 million or $0.93 per diluted share compared to $42 million or $0.81 per diluted share for the first quarter 2011. Our operating earnings for the quarter exclude after-tax expenses of approximately $2.5 million or $0.05 per share associated with the Entergy transaction. Consequently, operating earnings are reported on a basis consistent with how we provided our earnings guidance for the year and excluding the aforementioned item that was not reflected in guidance and does not impact the future earnings potential for the business. The increase in operating earnings year-over-year was largely attributable to higher income associated with increased rate base and AFUDC at all our operating companies partially offset by one, lower revenues associated with the amortization of the ITCTransmission rate freeze revenue deferral which expired in May 2011; and two, lower general, administrative expenses in the first quarter 2011 due to the recognition of a regulatory asset associated with the Kansas V-Plan Project, which did not reoccur in the first quarter of 2012. As a reminder, the first quarter of 2011 included approximately $0.04 per share associated with the amortization of the ITCTransmission rate freeze revenue deferral. This rate freeze related to the 2003 and 2004 timeframe and with amortized over a five-year peak period beginning in June 2006 and ending in May 2011. Consequently, results for the first quarter of 2012 did not include this item as it is now been fully amortized. Full year results for 2011 included approximately $0.06 per share associated with this item that will not reoccur in 2012. In addition, the recognition of the Kansans V-Plan regulatory asset increased first quarter 2011 results by approximately $0.02 per share. Normalizing for these items for the quarter, our Q1 2012 operating earnings increased 24% over the corresponding 2011 period. Our continued success in executing our capital investment plans remains a primary driver of our financial performance. For the three months ended March 31, 2012, our capital investments totaled $203 million across all of our operating companies. This amount includes $41.1 million, $39.8 million, $92.4 million and $29.7 million at ITCTransmission, METC, ITC Midwest, and ITC Great Plains, respectively. These capital investment levels for the first quarter 2012 reflect a significant ramp up that Joe noted earlier. By comparison, in the first quarter 2011, we invested $128.9 million in our capital projects. The relatively mild weather we experienced this winter, allowed us to get a strong start on our capital plans for 2012, which positions us well to meet our overall goals and objectives for the full year. We’re pleased with our financial results for the first quarter as they came in very much on plan. As a result of this performance, we are reaffirming our annual operating earnings guidance of $3.90 to $4.05 per share excluding any anticipated expenses associated with the Entergy transaction. Further, we are also reaffirming our aggregate capital investment guidance for 2012 of $730 million to $830 million, which includes $185 million to $210 million, $155 million to $180 million, $295 million to $325 million and $95 million to $115 million at ITCTransmission, METC, ITC Midwest, and ITC Great Plains respectively. Turning down to our financial requirements for the year, as discussed on the 2011 year-end earnings call, with the successful completion of the ITC Midwest notes in January, our financing calendar for the reminder of the year remains relatively light. We currently anticipate refinancing the ITC Midwest revolving credit facilities in the second quarter and expect to execute additional fixed debt requirements at ITC Holdings and METC in the second half of the year. As for our liquidity position, as of March 31, 2011, we had $23.1 million of cash on hand and $391.2 million of net undrawn revolver capacity bringing our total liquidity position to approximately $414.3 million. Our total capacity available under our revolving credit facilities is currently $666 million. We continued to believe that the business is very well capitalized with the appropriate liquidity and access to capital to effectively fund our plans for the remainder of 2012 as well as for our five-year planning horizon. As we have discussed previously, we have placed a great deal of emphasis on ensuring that we have the balance sheet strength and financial flexibility to continue to execute our strategy on a long-term basis and believe that we have achieved that objective. Lastly, as Joe noted previously, we remain focused on delivering our standalone five-year plan while we also advance our Entergy transaction towards closing. Our standalone plan is largely premised on investing approximately $4.2 billion in new transmission infrastructure over the 2012 to 2016 period with a focus on delivering reliability and other economic benefits to our customers while creating a 21st century grid. And the plan is comprised of investments in our base operating companies to improve reliability, replace aging infrastructure and interconnect new generating resources as well as our development portfolio of projects that include regional infrastructure projects along with local projects needed for reliability purposes. I would now like to turn to updates on some of the key projects within this plan. We made good progress with the Thumb Loop project, with the selection of a contract are to build the first segment of the project. We expect significant capital investments associated with the Thumb Loop to begin this year. This project provides the critical transmission infrastructure necessary to support the previously approved wins on development in the state of Michigan. All of the projects at ITC Great Plains, which include Hugo to Valliant, the KETA project and the Kansas V-Plan, remained on schedule for completion. Importantly, during the first quarter of 2012, ITC Great Plains received NERC certification as a transmission operator which will allow us to operate these projects in SPP as they are placed into service. Receipt of this certification is another example of our focus on operational excellence which serves to set ITC apart in many other transmission developers. Our ability to both develop transmission infrastructure projects and operate them in a manner that complies with stringent NERC requirements is a critical aspect of our overall development strategy. We anticipate that the Hugo to Valliant project will be placed into service in the next few weeks and the first phase of the KETA project is scheduled to be placed into service in June. We are very pleased with the progress we have made with ITC Great Plains and we and our partners are excited to see the first projects in this region go into service for the benefit of customers. This represents a very important milestone for our development business. In addition to our SPP activities, we are also in the process of initiating our internal activities to further advance our portions of the four MISO MVP projects that ITC is undertaking including commencing routing studies to support our citing applications in various jurisdictions. As a reminder, the total portfolio of MVP projects approved by MISO includes approximately $5.1 billion of investments in new regional transmission infrastructure and is the result of an extensive stakeholder process. These projects are expected to provide broad regional benefits commensurate with costs and also support approved state and federal energy policy mandates in the MISO region. ITC expects to invest more than $600 million in its portion of these MVP projects. Our performance and execution in the first quarter builds on our solid foundation of delivering on commitments that we make to both customers and shareholders. Further, we have made good progress with our efforts to advance the Entergy transaction to closing and remain on track with our overall expected timeline for completing the transaction. As we have communicated previously, we strongly believe that we can execute effectively on our standalone strategy while advancing the Entergy transaction, the combination of which we feel provides a compelling value creation opportunity for investors. At this time, I’d like to open up the call to answer questions from the investment community.

Thank you. [Operator Instructions] Our first question comes from Jonathan Arnold from Deutsche Bank. Jonathan Arnold – Deutsche Bank: Hi good morning guys.

Good morning Jonathan. Jonathan Arnold – Deutsche Bank: I have couple of questions, the first one is, my impression is that the – its the preliminary phase of preparing your regulatory strategy and filings for the Entergy transaction has gone a little longer than you’ve been initially thought it might. Can you give us any insights into what, if you what the discussions are focused on? What are the key areas of concern you’re coming up against and any inclination as to how you might be able to address some of those?

Sure Jonathan. I’ll be happy to take a stab at that. Just in response to the first aspect of your question, I wouldn’t suggest that it’s gone on longer than we would anticipate it. It’s pretty much on schedule with what had originally expected. As you can imagine, coordinating our activities with the variety of constituents across four stage jurisdictions as well as the City of New Orleans. In addition to the activities at the Federal level obviously that are important to ensuring the success of the transaction, it’s a pretty time consuming process. We expected it to be and it’s frankly gone on as long as we had originally anticipated and probably would. The discussions have been as you can imagine, pretty broad based. They focused on a little bit of everything. Number one, explaining what is a relatively complex transaction to a large group of constituency; don’t perhaps follow these types of corporate activities day in, day out. So there has been a little bit of an education process with respect to how the transaction works, why was structured the way it was and why the structure of that we’ve incorporated we feel is the best structure for effectuating the overall effort. I’d say the second area of concern or – concern is a wrong word, the second area of focus has been on introducing ITC. This is an area of the country that’s probably not entirely educated at this point on the independent transmission model and a lot of our focus has been to introduce ITC, it’s operating record, how we run our business, how we plan for our business and what we bring to the region in terms of an operator and how the independent model we believe adds value to the overall enterprise. And then thirdly, it’s been focused on the key issues that we know, the retail regulators in particular going to have, which are certainly how this impacts their jurisdiction over regulating the assets and certainly what are the anticipated implications from a rate perspective of executing this transaction. So those largely are the key areas that I think we’ve been focused on discussing with constituents broadly. There has also been a large group of users and customers that we’ve been trying to interact with as well and certainly their concerns are focused on reliability and how we’ll interact with them as an owner and operator of the system. But I think overall, the effort has been productive and informative as Joe suggested. And I think at this point, we’re using a lot of the – those conversations, feedback we’ve received to ensure that as we’re preparing our applications and testimony, we’re trying to be a thoughtful and fulsome as we can be to address issues and concerns that we know the constituent groups are going to have in that region. And ultimately as we said, we feel that it’ll lead to a more constructive and more efficient regulatory approval process. Jonathan Arnold – Deutsche Bank: Thank you, Cameron. I think Joe talked about sequencing; it was the word he used on the slides around the filing. Should we anticipate that you’ll kind of do pretty much all the states in one and federal separately or is it possible that states potentially be sort of on different tracks?

I think the sequencing that Joe described is purposeful because some states have timeframes under which they are required to act on applications and other states do not. So I think the state filings will begin mid-summer as Joe suggested and then we will sequence them shortly thereafter, there won’t be a wide spread. I wouldn’t expect between the time, we started making the filings and when we finish making the filings in each of the jurisdictions, but we would expect the federal filing to occur around mid summer as well. So it’ll be timed around the same time we started making the state applications. Jonathan Arnold – Deutsche Bank: Okay, great. Thank you for all of that answer. Thank you.

Thank you. Our next question comes from Jay Dobson from Wunderlich Securities. James Dobson – Wunderlich Securities: Hey, good morning.

Good morning, Jay.

Good morning. James Dobson – Wunderlich Securities: Cameron, maybe just finishing on that last question because I think there is a little confusion and maybe it’s directly to Joe. Joe, did you say mid-September for the state filings or did you say mid-summer? I realized it was mid-September and I think Cameron just said mid-summer for states.

It’s mid-summer. James Dobson – Wunderlich Securities: Mid summer? Okay.

Yeah. Everybody is blistering to me that I misspoke. James Dobson – Wunderlich Securities: No, no, no worries, no worries, we like mid-summer better than mid-September.

It happens to the best of us. James Dobson – Wunderlich Securities: That’s – no, no, absolutely, absolutely may even fairly usually. So if we think about that then Joe, I mean as you’ve gone through these merit of discussions with these folks, is it anticipated that it should be about a 12-month process? I’m sure the first question you’re asking is how long this is going to take? So I do respect you’ve got that number of other items on your priorities to talk to these folks about, but for those of us sort of starring at the transaction and sort of looking how long it’s going to take, maybe give us an idea your latest read.

Well I think that we are always hopeful that we’re going to get it done in 2013 and that has to happen I mean just basically. As Cameron laid out, some of the jurisdictions have statutory requirements when they have to take action and some do not. And that really ties in part parcel to why we’re taking the extra front time because we want to make sure that we understand fully especially in those areas that they don’t have a timestamp to get things done with that we can may truly address all of their issues and concerns in our filing to hopefully get that done but we would like to be done by mid 2013, I mean just to be candid. James Dobson – Wunderlich Securities: Got you, that’s perfect. And then Cameron, two other questions, first on sort of hold-co development costs and I’m thinking about the non-recoverable ones. What were those in the quarter relatively to a quarter ago?

They were roughly the same quarter-over-quarter at around our total non-recoverables for Q1 are in the $5.5 million, $6 million range. James Dobson – Wunderlich Securities: Got you.

Pretty much within overall guidance as we’ve laid out on an annual basis of sort of $20 million to $25 million of recoverable expenses. James Dobson – Wunderlich Securities: Perfect. And I imagine this last question is a pretty small item but you put in the press release, so I’ll make you to find your words. When you’re talking about the cost you put as well higher general business expenses primarily related to increased information technology support. Can you help us understand what’s going on and particularly whether that’s recoverable or non-recoverable so is that a drag on results?

No, it’s more of a variance year-over-year. Most of those expenses are going to be recoverable expenses Jay, and it’s just in this days [ph] that we live in with the increased NERC compliance standards particularly around the CIP requirements, the Critical Infrastructure Protection, the amount of resources and time and effort we have to put into our information technology infrastructures continues to increase and that’s really the driver to be candid and those dollars are recoverable dollars as they’re supporting our regulated operating businesses. James Dobson – Wunderlich Securities: Good, that’s great. Thanks for the clarity, I appreciate it.

Absolutely, thanks.

Thank you. Our next question comes from Neil Kalton from Wells Fargo. Neil Kalton – Wells Fargo: Good morning everyone.

Hey good morning Neil. Neil Kalton – Wells Fargo: Just a question on SPP, there has been some major projects that you’ve been looking to do for sometime now then. So far in the processes there, they haven’t tested out I guess, I don’t think that’s the right word, but sort of any update on those projects to process an SPP what should we be looking at next?

Neil its Cameron. There are a number of projects larger scale projects that we do have on the drawing board in SPP that you’re referencing. Those projects were identified in the ITP 20 process and many of them were included in the ITP 20 plan that SPP advanced last year. When the ITP 10 plan was rolled out in the early part of this year, none of those projects, but for a smaller one, were included in the ITP 10 process at this point is given the way the planning was done and the needs of the system that materialized under the ITP 10 plan. So those projects still very much remain on the drawing board. We are still working very diligently to advance them. And there are still opportunities for us to be able to advance them through either the near-term plans or the next version of the longer term plan ultimately that will come out here over the course of time. So by no means are the projects I think off the drawing board, but certainly they weren’t included in the ITP 10 report that came out in the early part of this year, so the work in front of us is to ensure that we continue to promote them and then the need for those as part of the other planning mechanism that SPP have in place to advance projects either the near-term plan or again continuing to promote them through the longer term planning processes that that continue on a rotating basis. Neil Kalton – Wells Fargo: Just a follow-up then, in terms of the near-term planning process, when is the next update to that would that be more year-end of this year?

Yeah, I mean that’s the STEP plan comes out annually from SPP, still [indiscernible] MTAP plan comes from MISO and it’s focused on near-term reliability issues. Neil Kalton – Wells Fargo: Okay. Thank you.

Thanks Neil.

Thank you. Our next question comes from Kevin Cole from Credit Sussie. Kevin Cole – Credit Sussie: Question on the Entergy transaction, how are you messaging the upgrading performance under your ownership in direct comparison to you Entergy’s capabilities on an annual basis? And how has this been received?

The messaging has been just basically, we don’t really try to do our comparison with anyone. We just layout what our performance and our performance track record is. But generally, our performance record is well received across all venues. That they realize then we openly state that our objective is to be a best-in-class operator and we’ve demonstrated that in two of the three jurisdictions and have made vast improvements at ITC Midwest. So they see that and they see that are commitment to it and across the board I’ve been part of those conversations and across the board I can tell you its well received. Kevin Cole – Credit Sussie: Okay.

If I can just, I’m sorry Kevin. If I can just add, I think the one important aspect of that discussion as well as to demonstrate why that performance level is a value to customers. And certainly that is the region that has a lot of industrial load and a lot of industrial customers who care a great deal about reliability, power quality issues and certainly this type of messaging resonates very well with them.

Yeah, and I think the other thing that I would add is, when Cameron lays out, the value of the independence model, this is one of the major aspects of the value of the independent model because the partial focus is just transmission and is we tell people and I say to them that the reliabilities what goes with our name and that has to happen. And so and I think everyone after we talk to them absolutely understand that it’s a primarily important to us that we continue that reputation. Kevin Cole – Credit Sussie: Okay, thank you. And then how should we think about the, I guess, the state regulator’s acceptance that was joined in RTO in conjunction with your filings?

Well that’s again one of the reasons that there is probably more pre-time being spent on this and with a lot of other people from the outside but view is comfortable the regulators there have several transmission issues to address and they’re coming at them virtually simultaneously. And so they want to get through the RTO issue and then they can address the transfer of jurisdiction issue or the change of control issue. So there is a struggle going on and there’s a lot of things that those regulators have to understand and we’re – we want to make sure that they get a total picture of what the landscape is going to be like, in the future and then they have something to compare to because they know what it is today. Kevin Cole – Credit Sussie: Okay.

And Entergy is in the process in the retail jurisdictions they’ve made applications in, I think most of their retail jurisdictions perhaps not all at this point, but soon will in all of them have made the applications in MISO the procedural schedules are in process around those activities with their state regulators and certainly the timeframe and process is structured in a way that we clearly expect to have that answer well in advance of being in a position to close on the transaction since having all the regulatory approvals for them to join an expectable RTO is one of the closing conditions to our transaction. Kevin Cole – Credit Sussie: Okay, thank you. And then, I guess on KETA, it appears that’s going a little better than expected with bumping up Phase 2 to late 2012 from mid ‘13, so you view this as kind of like headroom 2012 guidance and how much CapEx we pulled forward into 2012 from ‘13?

I don’t really anticipate it being any incremental increase in 2012 capital. I think from a timing perspective, we do expect to be done with the second phase of KETA as early as the end of 2012, but I think again we’ve continued to have good fortune with that project in terms of its overall cost. And I don’t anticipate any sort of meaningful increase in 2012 capital as a result of being able and anticipate being complete with the project by the end of year early part of ‘13 at the outside. Kevin Cole – Credit Sussie: Okay. And then with the MVP project, I guess congrats with the Sunflower and Mid-Kansas partnerships. Have – has that CapEx made its way into the $600 million that you list on slide 10?

For the MVP project? Kevin Cole – Credit Sussie: Yeah, yeah.

The portion of the $600 million is in the five-year plan that we rolled out at the end of 2011 and in our year-end earnings call. Not all of the $600 million is in the five-year plan because some portion of that is expected to be invested in periods that fall outside or fall beyond 2016. Kevin Cole – Credit Sussie: So as the Sunflower, Mid-Kansas spending incremental to the guidance that you gave last quarter or is this…

No. If you recall that we actually announced that right on the heals of our year-end earnings call, so we certainly knew about that at that time we rolled out our 2012 or 2012 to 2016 plan. Many of the SPP projects or the south central projects that are in our development portfolio are obviously going to be associated with that partnership. Kevin Cole – Credit Sussie: Okay. And I guess my last question be I guess maybe the unanswerable question of, do you have a view on the past that the Northeast section 206 complaint. I guess the past resolution now that we’ve pretty much had a full paper hearing given all the back and forth of these and were passed the 180 days.

Well, number one far be it for me to predict the outcome of a regulatory preceding but I will say this that, I can start from the top to the bottom on this and give you a lot of reasons that I don’t think you’re going to see a lot of change in. And even if you do I don’t think that based on FERC Presidents it’s you always is what other people would call a broad reaching across the board indictment. I keep trying to get people to focus on take a look at where FERC is done in the gas pipeline business because it’s the best analogy that exist and where FERC is established a lot of their thought process. And FERC has allowed high ROE’s and FERC has allowed double leveraging and all of the things that we consistently get questions on. And from time-to-time FERC has gone in and reduced ROE on one of the pipelines but when you take a look at what they’ve done, it usually is pointed at some kind of operational issue that has taken place, their lack of continuing maintenance on the facility. In other words FERC is trying to create a competitive wholesale market and then in particular with this administration they are also trying to make sure that there is energy efficiency and renewable integrated in the grid and they realize that they need a robust grid. So I don’t think that any thing that they’re going to do is going to undermine their long-term vision and policy moving forward. I think that what they’re going to probably get more focused on is making sure that they’re getting the [inaudible].

Thank you. I’m showing no further questions at this time.

This concludes the question-and-answer portion of our call. Anyone wishing to hear the conference call, replay available through Monday April 30th should dial toll free 855-859-2056 or 404-537-3406, the pass code is 69082300. The webcast of this event will also be archived on the ITC website at itc-holdings.com. Thanks everyone and have a great day.

Ladies and gentlemen thank you for participating in today’s conference. This concludes our program. You may all disconnect and have a wonderful day.