Fortis Inc. (FTS) Q3 2014 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, today’s program is being recorded. I would now like to introduce your host for today’s program, Gretchen Holloway, Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us for ITC’s 2014 third quarter earnings conference call. Joining me on today’s call is Joseph Welch, Chairman, President and CEO of ITC and Rejji Hayes, our Senior Vice President, CFO and Treasurer. This morning, we issued a press release summarizing our results for the third quarter. We expect to file our Form 10-Q with the Securities and Exchange Commission today. Before we begin, I would like to remind everyone aware 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 reflects forward-looking statements under federal securities laws. 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-K and 10-Q 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. A reconciliation of the non-GAAP financial measures discussed on today’s call is available on the Investor Relations page of our website. I will now turn the call over to Joe Welch.

Thank you, Gretchen, and good morning, everyone. I’m very pleased to report out another impressive quarter which should set the stage for another solid year overall performance. Before reviewing our performance I want to briefly touch on succession planning actions in the third quarter. In August ITC formally appointed Rejji Hayes as our new Senior Vice President, CFO and Treasurer. As I indicated on our last call we were on the custom of appointing a permanent CFO and we are seeking board approval to effectuate that appointment. We are very pleased to have Rejji filled the role and expect his appointment will continue to support ITC’s strategic objectives and keep us on track with respect to meeting our financial goals. Turning first to our operations, our system continues to perform well for the remainder of the summer with little impact from storms in Michigan in July. Our Michigan systems are on track once again for a top desk outperformance level in 2014 and ITC Midwest posted the lowest number of RTC in July and August since 2010. Our larger capital investment projects also remain on track. And while Rejji will provide a more detailed update on the various key projects, I want to comment on a couple of important projects specific milestones that have occurred recently and are expected to occur in the near term. First, last week we’ve received all state approvals from the Minnesota Public Utilities Commission for ITC’s Minnesota portion of the MV project number 3. After receiving the written order we will begin design and easement acquisition activities for that segment of the project. We anticipate beginning construction on the Minnesota portion of the project in late 2015. In addition the Kansas V-Plan project is set to be placed into service at the end of this year, on schedule and roughly in line with our initial cost estimates. This achievement will mark the conclusion of the planning, siding and construction phase of the V-plan. Once online the project will improve reliability throughout the region and offer power producers’ broader access to the grid thereby enhancing competitive markets in Kansas and the entire SPP region. Needless to say we believe our efforts on the project serve as a testament ITC’s ability to champion and construct regional infrastructure on time and on budget. Moving onto our existing systems, we continue to see potential for additional transmission infrastructure improvements associated with the implementation of EPA rule 111D which seeks significant carbon emission reductions nationwide from the 2005 levels. Drawing from prior experience increased EPA regulations will likely need the increased transmission investment requirements due to plant retirement, the connection of new replacement generation and increased deployment of renewable resources. Further these regulations also have the potential to create capacity issues across the region driving a broader need for transmission solutions. These new regulations are just beginning to be proposed with compliance period starting in 2020 as such we continue to monitor this process and determine the potential implications to ITC Systems. On the regulatory front, FERC issued its order on the MISO complaint on October 16, which set the MISO transmissions orders based are we for hearing and denied all other aspects of the compliant. Finding the complaints and failed to show that the use of actual or FERC approved capital structures that include more than 50% equity is unjust and unreasonable. FERC also denied the complaints request to terminate ITC transmission in METCs ROE incentive errors. It is also worth noting that FERC ruled and that the determination of the ROE should be guided by their decisions within the ISO New England ROE order and more specifically by the two step DCF methodology. Among other guidelines established in opinion 531 as it pertains to the hearing procedures and timing around the regional base ROE, a settlement judge was appointed last week and settlement discussions will begin in the coming weeks. If settlement discussions are unsuccessful a hearing would commence in mid to late 2015 with the final order issued by late 2016. For reference, determination of the MISO base ROE will require new DCF calculations using the most current data available at the time of the hearing if the settlement discussions are unsuccessful. Given these developments we are not in a position to estimate what the outcome will be around the final regional base ROE number. However, we believe that FERC will continue to support its existing policies around promoting transmission investments. Overall, from our perspective, FERC's actions were consistent with our expectations even though the decision regarding the base ROE may remain outstanding for some time. The FERC order reaffirms the value of our independent business model and the importance of continued participation in the regional transmission organization. Turing to our development initiatives, we remain focused on order 1000 and continue to mobilize resources to strengthen our competitive positioning in anticipation of the commencement of the bidding process in MISO, in SPP in the first half of 2015. For example, we submitted numerous detailed project proposals into the SPP planning process in June and July as highlighted in the past, we continue to prioritize MISO and SPP given our familiarity with these RTOs an inherent competitive advantage as incumbent. As we look to order 1000 related opportunities in 2015 we currently expect our tier one RTOs to have a modest amount of opportunities in the near term given SPP's desire to plan around a business as usual future scenario and the fact that the majority of the projects subject to competitive solicitation in MISO will be limited to a smaller market efficiency projects. While we are disappointed with the pace and the degree to which order 1000 is being implemented we recognize and precedent the challenges facing the RTOs which may explain their cautious approach and the wide range of methodologies utilized to meet FERC's guidelines. That said we continue to believe the MISO and SPP will have a large volume of opportunities overtime given the significant need for regional transmission planning and development in these regions. Moreover, our expectations are supported by the current dynamics within SPP and MISO planning processes. SPP’s recent change to its planning process will now accommodate successive ITP 10 planning cycles the first of which will conclude in 2015 and the subsequent cycle which is scheduled to conclude in 2016 which will effectively expedite the pace which projects will be approved for construction in SPP. In MISO there is increase speculation around a new slate of multi-value projects to be proposed in the coming years given the numerous benefits associated with the existing NVPs. As for our second tier RTOs, we continue to evaluate select opportunities in California ISO or KISO and PJM. The KISO annual planning in bidding process will continue in 2015 and we will continue to assist potential projects in that region both through potential partners, ships and possibly independently. In contrast to KISO, MISO and SPP, PJMs competitive solicitation process is more episodic with bidding windows opening on an ad hoc basis. We participated in the last window in July in 2014 and expected to compete in the current bidding process which commenced in mid October. We believe that our ongoing monitoring and participation in the PJM in KISO competitive process offers several benefits; one a potential expansion for our existing footprint. Two, diversification of our development pipeline. Three, broadens our portfolio for perspective partners for economies of learning all of which move us closer to achieving our financial and strategic objectives. Posing out develop to further supplement and diversify our development of pipeline, we continue to pursue non-traditional projects that are strategically compelling, offer meaningful scale and/or attractive economies. Two examples of such projects are the network transmission facilities connecting the new covert plant to PJM and the lake area connector, a cross border 1000 megawatt submarine HDVC cable. The new covert project is a bilateral agreement which ITC will construct on and operate network transmission facilities from the new covert power plant to PJM for sustained period at economically attractive terms. From a strategic perspective, this project represents our first 4A into PJM and offers a framework and foundation for similar opportunities in which generators outsource transmission construction and maintain responsibilities to ITC to focus on their core competencies and minimize exposure to NERC’s requirements. We believe that there will be additional opportunities on this front especially in light of the EPAs regulations effecting cold generating resources and are well positioned to partner with new or existing generators to support their transmission needs. The proposed lake area connector project is a 60 mile by directional HVDC line which will originate in Ontario Canada, and end in Ire County Pennsylvania providing the first direct connection for power to flow between Ontario and PGM. Though we are still in the early stages of development, we are excited about the potential economic and operational benefits associated with the project. In September ITC was granted negotiated rate authority from FERC which is the first of several regulatory approvals required to complete the project. The negotiated rate authority includes the ability to undertake an open solicitation and capacity allocation process for the project. FERC’s approval enables us to comment the open solicitation process with perspective shippers in the next few months. As such as expect to have good visibility regarding the financial viability to the project in the first half of 2015. If successful, we believe the project could be constructed in two or three years resulting in possibly in service date in late 2018 or early 2019. This concludes our development update for the third quarter. As I close out my prepared remarks, I want to reiterate that we remain committed to our five year plan of approximately $4.5 billion of capital investment for 2014 through 2018 timeframe along with the associated operating EPS compound annual growth rate of 11% to 13% over that time period. As most investors know this plan is supported by three areas of investment opportunities which are base capital, regional infrastructure projects and development projects, as highlighted we believe there is increasing potential for incremental base capital investment largely driven by the new EPA regulations which may supplement our existing plan. For the regional infrastructure projects included in the plan, these projects remain on track and on budget. And as highlighted in great detail, we are very excited about our development portfolio which consists of order 1000 related opportunities across numerous RTOs and non-traditional projects such as the new covert and Lake Ire connector. Though the evolving transmission landscape offers some challenges and uncertainty, it also presents new opportunities and the ability for ITC to diversify our growth prospects with new regions and new project. I will turn the call over to Rejji for the financial update.

Thank you Joe and good morning everyone. For the third quarter of 2014, ITC reported net income of $73.9 million or $0.47 per diluted share as compared to reported net income of $59 million or $0.37 per diluted share for the third quarter of 2013. Reported net income for the nine months ended September 30, 2014 was $197.3 million or $1.25 per diluted share compared to $156.6 million or $0.99 per diluted share for the same period last year. Operating earnings for the third quarter of 2014 were $73.7 million or $0.47 per diluted share compared to $66.5 million or $0.42 per diluted share for the third quarter of 2013. Operating earnings for the nine months ended September 30, 2014 was $216.1 million or $1.36 per diluted share compared to $188.6 million or $1.19 per diluted share for the same period last year. Operating earnings are reported on a basis consistent with how we have provided our guidance for the year and exclude the following items. First, they exclude lingering transactions charges from the entity transactions including our credit of $0.1 million for the third quarter of 2014 and expenses of $7.5 million or $0.05 per share for the third quarter of 2013. These expenses totaled $0.6 million and $31.9 million or $0.20 per share for the year-to-date period September 30, 2014 and 2013 respectively. They also exclude expense associated with certain acquisition accounting adjustments for ITC Midwest, ITC transmission and METC that resulted from the FERC audit order on ITC Midwest in May, 2012. The impact of this item totaled approximately $0.1 million for third quarter 2013 and approximately $0.1 million and $0.2 million for the year-to-date period September 30, 2014 and 2013 respectively. Lastly, operating earnings exclude expenses associated with the cash tender offer and consent solicitation transaction for select bonds at ITC Holdings that we completed in the second quarter. The impact of this item totaled a credit of $0.1 million for the third quarter of 2014 and $18 million or $0.11 per share for the year-to-date period ended September 30, 2014. Capital investments for the nine months ended September 30, 2014 are much on track to meet our totaled budget for the year and totaled $598.9 million. This amount includes $190.9 million the ITC transmission $94.3 million at METC $195.2 million at ITC Midwest and $118.5 million at ITC Great Plains. Moving on to discussion of our financial liquidity initiatives, in short we continue to be on track with our financing plan for 2014. In September our ITC Great Plains plan operating subsidiary received a senior unsecured credit ratings upgrade from BAA1 to 83 Moody's subsequently on October 8, ITC Great Plains received credit ratings of A1 and A from Moody's and S&P respectively in anticipation of $115 million -- first mortgage bond issuance. The credit ratings for ITC Great Plains now align with those of MISO based operating companies and this upgrade is yet another confirmation of the clear direct benefits of FERC’s supportive rate constructs which help ensure a strong credit profile to the benefit of customers and investors. As alluded to earlier and subsequent to the quarter end, ITC Great Plains are priced $150 million of first mortgage bonds in late October at a coupon rate of 4.16%. This is the first such issuance for Great Plains. The financing is expected to close in November and the proceeds will be used to repay $100 million borrowed under the ITC Great Plains term loan and for general corporate purposes including the repayment of borrowings under the ITC Great Plains revolving credit agreement. Lastly on the financing front in late August, ITC transmission close on a remaining $25 million of 4.27% first mortgage bonds which are due in June of 2044. These financings that we have executed meet our capital requirements strengthen our overall liquidity, help to maintain our strong overall credit quality. With respect to other balance sheet related activities you may recall that in June we commenced an accelerated share repurchase of up to $115 million which was the first such usage of $215 million board authorized share repurchase program. The program is intended to help optimize investor returns through the utilization of access funding capacity generated by our five-year plan. As of September 30, the plan remains unchanged with 2.9 million shares delivered thus far. The program calls for minimum repurchase of $130 million of shares and up to a maximum of $115 million of shares at the agents discretion. The overall effective share price of the repurchase will be determined by the volume weighted average share price of ITC stock during the term of the transaction which is expected to be completed by year end. On liquidity front, as of September 30, 2014 we held about $11.6 million of cash on hand and approximately $650.5 million of net undrawn revolver capacity bringing our total liquidity position to approximately $662.1 million. The nine months ended September 30, 2014 we reported operating cash of approximately $361 million which represented an increase of approximately $69 million year-over-year. This increase is primarily due to increase in cash received from operating revenue which is partially offset by higher interest payments and income taxes. I would now like to turn to our outlook for the remainder of 2014, we are once again reaffirming our 2014 operating earnings guidance in a range of $1.83 to $1.90 per share. We are also narrowing our capital investment guidance range for the year of $785 million to $835 million in the previously range of $730 million to $840 million. This revised range includes $255 million to $265 million for ITC transmission, $130 million to $145 million for METC, $280 million to $295 million for ITC Midwest and $120 million to $130 million for ITC Great Plains. Lastly I would like to take a moment to provide some update on key projects that support our five-year plan. Construction continues on both the Thumb Loop project and the Kansas V-Plan project and those projects remain on time and roughly on budget. We also continue our efforts around ITC's portion of the four MVP projects which are also largely in track. With respect to projects three and four, we have made good progress through the regulatory approval processes and two segments are positioned to begin construction. As Joe mentioned, for MVP project number three, last week the Minnesota public utilities commission approved both the certificate of need and route permit for approximately 80 mile length of the project that resides within Minnesota. In Iowa, the remainder of MVP project number three is in the final stages of Easement acquisition and is progressing through the regulatory process. We expect the decision from the Iowa utilities board in the second half of 2015 and assuming a favorable decision ITC expects to complete both the Minnesota and Iowa portions of the project by mid 2017. For MVP project number four, following regulatory approvals this year, construction activities to build both – to both two 12 mile segments with 2015 and service dates for both segments. We are also in the process of advancing the regulatory approvals necessary to begin construction for the remaining segments of the project and assuming favorable IEB decisions expect additional segments of the project to be placed into service from 2015 through 2018. For MVP project number five and seven we continue to discussions with other owners and pre-application activities for our portions of the projects for MVP project number five, ITC will be constructing half to the line from Dubuque, Iowa to Madison Wisconsin in coordination with ATC. Earlier this month, the two companies hosted land owner, open house to introduce the project to the public. For MVP project number seven which is located in Iowa and Missouri we continue to work with our neighboring utilities around ownership specifics. Anticipated in service dates for both MVP projects number five and seven is 2020. In closing we are very pleased with our performance for the quarter and are well-positioned to execute on our commitments to the year as the five-year period covered by our plan. Both our near-term and longer term efforts are promised and providing benefits to our customers providing factorships returns to our investors. At this time I would like to open up the call to answers from – the question and answers from the investment community.

[Operator Instructions] Our first question comes from the line of Michael Weinstein from UBS. Your question please. Michael Weinstein – UBS Securities LLC: Hi guys.

Hi! Good morning. Michael Weinstein – UBS Securities LLC: Couple of questions. First one is can you explain where there is enough settlements of the share repurchase program in Q3 and also what is the plan for the rest of the year regarding that?

Yes. So with respect to the share repurchase agreement if you look at the volume weighted average price since we commenced the share repurchase on June 20, based on our math it's slightly higher than the price when we initially commenced it at $35.80 a share so the agent has full discretion to execute the settlement and I think based on the view app relative to the stock price, when we commenced is probably slightly higher. So I think the agent has chosen not to execute additional share repurchases over the past couple of months. That said the agent is obligated to execute on the full minimum of $130 million of share by the end of the year. So we expect more settlements obviously in Q4. Michael Weinstein – UBS Securities LLC: Right. And also can you just talk a little bit more about the SPP process what do you guys think about it and what kinds of – how have you bid into it and what projects maybe thinking about?

Well, the SPP project process has been basically laid out that you submit projects and if you understand transmission planning, which I probably guess most people don't, that we submitted a large number of volume of projects in the whole process I think there was over 1200 projects submitted which pretty much left SPP in a position to evaluate these projects almost I would say overwhelmed. And so they have turned out a relative few numbers of project to this date and I anticipate since they said that they are going to have another go around at this in the near future that they are in the process of trying to get all these projects evaluated. In the transmission planning process, normally the planner plans the process or plans the transmission and then turns them out to the world and says this is what needs to be built but we kind of did it backwards and I think it's really starting to cause all the RTOs have chosen this process at the (inaudible) what they are going to do but I think SPP given the fact that also that with the EPA announcement I think SPP and MISO both will be effective by this since I think they are going to have to start to look hard at this to try to figure out how they are going to get their region in a good position because I think that they are going to have to start to think about whether they want to continue this process or modify it going forward because if the EPA rules take effect in 2020 we are going to have to get something taking care of before 2020 otherwise we are going to have some reliability issues out there.

Michael this is Rejji. The only thing I would add to that is I think one of your questions is as well as whether we have bid into any SPP solicitations and the way it works is it's our understanding that the RP process in the form of competitive solicitation will not begin until Q1 of 2015 so we obviously plan to participate when the time comes but it has not commenced yet. Michael Weinstein – UBS Securities LLC: Let me just ask that with the wrong, I think did you guys propose any projects into the -- considering?

Oh yes. I think correct me Rejji if I am wrong, I think we have proposed like some 600 projects.

Slightly less than that. So over 300 and as Joe highlighted over 1200, Joe highlighted over 1200 projects submitted by RTOs and SPP and we submitted roughly a quarter of those so we certainly participated in the full manner and needless to say as we highlighted before we are committing a lot of time in resources to these effort look forward to us seeing what happens in the process commences. Michael Weinstein – UBS Securities LLC: And despite the fact that it's unwieldy do you think there is still on track for January to come out with I guess the short list of the presentation?

I would think that just realistically I – they are going to come out with something but I don't think it's going to be a full review of everything because I think again like I said I think they got overwhelmed. I didn’t think that they planned on that many projects coming in. And so I think there will be a short list but I don't know how false on that list will be. Michael Weinstein – UBS Securities LLC: Okay. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Charles Fishman from Morningstar. Your question please. Charles Fishman – Morningstar: Thank you. I guess my first questions for Rejji on the capital expenditure guidance for this year you brought up the bottom of the range significantly. I just want to make sure is that – is there any acceleration of projects from 2015 and 2014 or should we go back to the our reaffirming also your 2015 guidance that I realize is a little dated now going back to the Analyst Meeting of 803, is that how we should look at it?

I will answer your last question first. So we will provide guidance on 2015 later in the year as we always have and so it's too premature to highlight where 2015 is going but with respect to 2014, we are still on track to meet the numbers if you highlight before we brought the bottom end up of the range because we have made very good progress in our existing projects and I think there was also generator inner connection that was unforeseen that was realized in 2014. So it's a variety of cats and dogs but I wouldn't specifically say we have brought projects forward from 2015. Charles Fishman – Morningstar: Okay and then I guess my second question is for Joe on the MISO the fourth quarter on MISO one of the positive was to dismiss the incentive complaints. Is there anything still out there challenging that or has that been put to bed for a few years until this next decision comes around or can we count on those incentive in MISO for quite some time?

Well, I think that FERC in the New England order basically said that they first, they gave your DCF model and then they said the incentive can fill in what they think is that difference between where they came out which is they targeted the 75% of that DCF and the incentive. So I believe that yes, you can say that the incentives are going to be staying in place. I think it's fair to question whether they will be as robust going forward as they have been in the past. But that is still yet to be seen. I have been of the position but nobody has asked me that incentives were never to be used – the DCF model was never to be used as a cap because the instructions from congress to FERC was to put rules in place, the construction building the transmission and FERC chose the capital I think that came from pressure because of the state regulators wanting to see some limits on incentives but the short answer is that the incentives will stay in place I don't see them being as robust as they once were once all the dust settles, but it could be. Charles Fishman – Morningstar: Okay. But I mean for this pending complaint I mean, they have been dismissed right?

It's been put to rest as well as the capital structure for the third or fourth time. Charles Fishman – Morningstar: I got it. Thank you very much.

Thank you. [Operator Instructions] And our next question comes from the line of (inaudible). Your question please.

Hey guys.

Hey good morning.

The two projects that you discussed the lake Ire connector and the one other project are those included in your current CapEx guidance?

The quick answer is no. when we prepared our capital guidance and basically our five year capital plans from 2014 to 2018, the development portion of that the $1 billion didn’t pre-suppose those projects.

Okay. So there would be other projects in the development in that they don't account. Okay got you. And then do you have any estimates on the size of these projects from the CapEx perspective?

Yes, I think what we can say at this point is with respect the lake Ire project, the merchant line which is clearly the bigger of the two, it's probably too premature to speculate as to how big that project is. There is a lot of work that needs to be done with respect to siding and the overall evaluation of the project and needless to say because it's submarine, it's going to be quite costly as I see it will be significant percentage of our overall rate base, if – rate base is the wrong word but overall capital spending plan get out of relative basis. With the respect to new covert project that’s relatively small. Again as I mentioned this is so the – it's just the network facility that was put in place with a bilateral agreement with the generator. So relatively small compared to the standard projects we do but as we see and as Joe highlighted we view that as really a framework for future trades with generators who really don't want to deal with the hassle compliant with no requirements and so I think most generators want to focus on how they do best which is building power plants and they want to essentially outsource the transmission function responsibility to ITC and so well it's small project we really view it as sort of the bedrock for future things to come.

Got you. All right. But you are not – for the lake Ire with the significant percentage of overall CapEx is the most data you are ready to give it at this point?

It's quite large. I will just put it to that way.

Okay. All right. Thanks for the time guys.

Thank you.

Thank you. Our next question comes from the line of Rajeev Lalwani from Morgan Stanley. Your question please. Rajeev Lalwani – Morgan Stanley: Hi, good morning. Just sort of quick one as it relates to the development projects that are in your five-year capital plan and what plan would you be comfortable saying that number is as good to go, meaning say mid-15 when a lot of these are piece are down, would you be able to provide an update and say that a five-year outlook is good or may be just some color around when investors can get comfort with that plan.

Well, I think the thing is that as the landscape in development really continues to evolve. It's going to be hard for us to ever give you what I call the comfort that everyone wants because until we have a project locked, you are in a process that as a competitive process. So as in any other competitive process the game is in overkill, the game is over and so what we have done, always we very diligently, strategically weighted the projects and we've valuated them along the way to see how we are doing. And the RTO function is still really embryonic as far as this goes. So it is going to be hard to give you the kind of definition you want but what we have done for you is to try to give you some projects and the Lake Erie connectors, one of them and the Covert project is another that are in that. And so we try to fill that out with other projects that we can give you comfort on and try to give you clarity on and will give you as much clarity as each one comes to fruition. And then lastly, we this time added a slide for you so that you can take a look at the role going forward and also we have laid out for your capital allocation process one more time so that you can get comfort around, the kind of growth that we are really committing to and we have said we are going to be a double digit growth company over that timeframe. And so we try to give you as much clarity as we can and as much assurance is where the down side is but the upside on it works really hard because while Rejji was trying to explain that the Lake Erie connectors are really large but there is really a lot of things you have to do before you can get clarity on it. And so we try to hedge you the downside to show you what the downside is, the upside is going to be as aggressive as we can make it.

The only thing I would add to that is as you think about the portfolio of opportunities in order 1000 I think the real key variables here is they are essentially 31 (ph) perfect information of the volume of opportunities within each RTO, that's again an uncertainty. We can speculate as to what we think the size is but the actual volume remains to be same, I think two. The methodologies by which each RTO will evaluate the winners and losers, I think still the work is in process, we have good visibility at this point as to where they stand but again it’s still as we see it highly variable. And lastly, once bidding processes commence in the first half the next year, we have no visibility and is really competitive behavior and so that’s obviously going to dictate how successful we are when the time comes. So at this point to answer your question, it’s really tough to determine when we can say that the billion one is good but like I said I think, as Joe highlighted we have a lot of opportunities in the development portfolio and we feel very good about making our numbers, as we always have. Rajeev Lalwani – Morgan Stanley: Okay, if I could couple of other quick questions. In terms of the Lake Erie project, can you talk about the extent to which you had conversations with shippers and how that's been going?

We have not commenced the formal competitive solicitation for nonbinding bids from prospective shippers that will start in the very near term. As Joe highlighted in his opening remarks, we received negotiated rate authority in the FERC in September and so we are preparing the advertisements so that we can commence the shipping outside also basically the solicitation of prospective shippers over the course of Q4 and early Q1 of ’15. So I think we will have pretty good visibilities to where we stand at that point but I would also say as we shouldn’t rule out the fact that in addition to commencing was the equivalent of an option for capacity in the line we will also entertain bilateral agreements and so we are really very focused on making sure that we can bid out as much of the capacity online as possible, to diverse the project. Rajeev Lalwani – Morgan Stanley: All right and just one last question if I can, Joe I guess it’s a question for you assuming that we get also lot of time is what your longer term plans are I mean you finalized the CFO role but we’d love to hear more on, just given the (inaudible) what your plans are if you are comfortable answering that.

But you will have to rephrase it again for me because when you said CFO, I kind of checked out for a second. So what’s the question again? Rajeev Lalwani – Morgan Stanley: Sure, I guess your longer term plans at ITC, you had a great run so far and you have finalized to use the CFO but I guess this question is on your role longer term it comes up all the time with investors and (inaudible).

I see, so I’ll try to figure out when you guys ask me these questions are you try to push me out or you asking me to stay, we have started on very informal basis to talk about my future here at ITC, I make no bones about it I mean I am 66 years old and the fact of the matter is that we are really working hard on getting a very deliberate succession planning process but I will be honest with you that every day I come into work and especially when we start to talk about the development side of the business I get more excited about that and it actually makes me feel like I am a lot younger than I am. So I haven't made any commitments on it. I have been committed to seeing this company have a great growth profile and in my terms I want make sure that the pipeline is full and that everybody is in place and everybody is really well adjusted to their positions and so until that's done, I don't have any plans. Rajeev Lalwani – Morgan Stanley: All right, thanks for answering that.

Thank you. Our next question comes in the line of Neil Kalton from Wells Fargo Securities, your question please. Neil Kalton – Wells Fargo Securities: Good morning everybody.

Good morning.

Good morning, Neil. Neil Kalton – Wells Fargo Securities: Lake Erie, a couple of more on this project, so my understanding is that this is a project that has been sort of out there for few years but it hasn’t move forward, I was wondering if you could have explain what have been the stumbling block thus far and are there changed circumstances in the market that give you a feeling that it is going to have more chance of success going forward. And then second citing that project, I am not familiar with, so underwater citing are there issues there that we should be aware of.

First of all, there is a lot of people take a look at merchant projects and of course the way these things are developed is that there is a group of people out there and they go around and they try to pick point A and B where there is really economic differences and an opportunity, and then they start to develop it, that’s how this project came to pass. This wasn't developed by us but by other people. Then they start to find some people where they are seem to be interest and so they again come to people like us and because we are really good owner/operators and we probably get a couple of these every year. And we have a very tight filter that we used to evaluate these projects on and this is one that went through the filter. Now from that point, we start the process that you're talking about on the development side to say okay what are the regulatory restrictions, what are deciding restrictions actually the underwater cable is, I don’t want to say straightforward because it is complicated but it is a process that is well-documented in there is a process you have to go through and we have did it. So then it comes out on land and we have to get it moved both in Canada and United States. We have evaluated that and again don't see any showstoppers. The next piece of the puzzle is their interest in the line and of course we are starting that solicitation process right now but before even get there, you're going to see if there is appear to be on a very sustainable basis an ongoing proposition where this line is going to be good and we saw that. The last piece of the puzzle on a going forward basis is that there's nothing that I see now on the horizon especially with the EPA rules being the way they are, that's going to diminish the long-term viability of this cable. As a matter of fact, every party should be looking into the future and looking at the volatility that we are seeing around all fuel sources and have seen in the history to make sure that we have a network where we can move power from multiple regions, move power from multiple fuel sources, move power from different types of generators for whole host of reasons and if this project fits all of those filters for so. I would also add that even though there's no formal solicitation I am encouraged because those people interested in already talking to us about it. So I think the project has got some more hurdles to make but we will stay cautious with it but it is probably where a lot of future growth for companies like ITC will be because the RTO process is not stabilized at this point, to the point where you can see clear runways out there right now. Neil Kalton – Wells Fargo Securities: Thanks for that, that's very helpful.

Thank you. Our next question comes from the line of Dan Eggers from Credit Suisse. Your question please.

That was a tough question.

You might have your mute button on? Daniel Eggers – Credit Suisse: My questions have been asked and answered. Thank you.

Okay.

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Gretchen Holloway.

Thank you. Anyone wishing to hear the conference call replay available through November 04 can access the call by dialing 855-859-2056 toll free or 404-537-3406 with the passcode of 207-05-064. The webcast of this event will also be archived on the ITC website at itc-holdings.com. Thanks, everyone, and have a great day.