PPL Corporation (PPL) Q1 2012 Earnings Report, Transcript and Summary

Joe Bergstein - William H. Spence - Chairman, Chief Executive Officer, President and Chairman of Executive Committee Paul A. Farr - Chief Financial Officer and Executive Vice President Gregory N. Dudkin - President of The Pennsylvania Delivery Operation David G. DeCampli - President and President of PPL Energy Supply LLC Rick L. Klingensmith - President and Vice President of Finance

Dan Eggers - Crédit Suisse AG, Research Division Kit Konolige - Konolige Research, LLC Justin C. McCann - S&P Equity Research Paul Patterson - Glenrock Associates LLC Anthony C. Crowdell - Jefferies & Company, Inc., Research Division Julien Dumoulin-Smith - UBS Investment Bank, Research Division Andrew Bischof - Morningstar Inc., Research Division Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division Steven I. Fleishman - BofA Merrill Lynch, Research Division Raymond M. Leung - Goldman Sachs Group Inc., Research Division Brian Chin - Citigroup Inc, Research Division Ashar Khan

Good morning. My name is Matthew and I will be your conference operator today. At this time, I'd like to welcome everyone to the PPL Corporation First Quarter Conference Call. [Operator Instructions] Joe Bergstein, Director of Investor Relations. You may begin your conference.

Good morning, everyone, and thank you for joining the PPL conference call on first quarter results and our general business outlook. We are providing slides of this presentation on our website at www.pplweb.com. Any statements made in this presentation, about future operating results or other future events, are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from such forward-looking statements. A discussion of factors that could cause actual results or events to vary is contained in the appendix to this presentation and in the company's SEC filings. At this time, I'd like to turn the call over to Bill Spence, PPL Chairman, President and CEO.

Thanks, Joe and good morning, everyone. Thanks for joining us on the call today. We appreciate your continued interest in PPL, and as always, we look forward to answering your questions. To facilitate more interaction on these calls, we're going to be condensing our prepared remarks today and we also have all 4 business unit presidents with us for the Q&A. Joining us today are Vic Staffieri, President and Chief Executive Officer of LG&E and KU, which is our Kentucky Regulated segment; Rick Klingensmith, President of PPL Global, who has responsibility for our United Kingdom Regulated segment and our Energy Services business; Greg Dudkin, President of PPL Electric Utilities, our Pennsylvania Regulated segment; and Dave DeCampli, President of our Competitive Market Supply segment; and of course, Paul Farr is joining us, our CFO. First I'll kick off the call with an overview of our first quarter results and operational highlights for the first 3 months of the year, then Paul will provide more details on our segment performance for the quarter. Following his remarks, we'll turn to your questions. With that, let's go ahead and get started. Today we announced reported first quarter earnings of $0.93 per share, up from $0.82 in the first quarter of 2011. Earnings from ongoing operations for the quarter were $0.70 per share compared with $0.84 a share in the same period last year. Our first quarter earnings from ongoing operations reflect $0.14 per share of dilution from our April 2011 common stock issuance to finance our acquisition of the Midlands utilities in the U.K. As you can see in our segment results for the quarter, we had very strong performance in the U.K., including the successful integration of the Midlands operations. These quarterly results demonstrate the value of our expansion and into diversified regulatory…

Thanks, Bill, and good morning, everyone. Before I provide details of the earnings drivers for the first quarter, I first want to discuss the equity financing that we completed in early April through a forward transaction. This offering, combined with our existing DRIP and management comp programs, fulfills the $350 million of equity need for the year that we have consistently communicated. We decided to issue the stock through the use of a forward contract in order to de-risk the equity exposure we had and accomplish that without affecting the expectations we set regarding share count and EPS for the year. In fact, the EPS impact is actually pushed out slightly beyond the late 2012 timeframe that we recently communicated to you. As part of our internal comprehensive risk management program and for the same reasons we had generation, output, fuel, interest rates, our currency for known exposures, we used this forward transaction to mitigate risk around our equity need. Beyond the de-risking benefit we also wanted to alleviate a potential overhang on the stock which several of you have recently voiced as a concern. Given the current state of commodity markets there has been concern that we may need additional equity beyond the $350 million previously communicated. We do not. The regulated acquisitions we completed, combined with modest amounts of equity to fund rate base growth, provide credit stability that will help us endure prolonged weak commodity markets. With that, let's move to Slide 8 to review our first quarter financial results. PPL's first quarter earnings from ongoing operations are down from a year ago, driven by $0.14 per share of dilution associated with the April issuance, last year, of common stock to finance the Midlands acquisition; lower energy margins at the Supply segment; and lower electricity sales due…

Okay, operator, I believe we're ready to start the call -- or the questions rather.

[Operator Instructions] Your first question comes from the line of Dan Eggers with Credit Suisse. Dan Eggers - Crédit Suisse AG, Research Division: You're certainly messaging a pretty constructive or more constructive than market view on 2014 power markets. How long do you guys feel comfortable not getting more active in the hedging program as you look out that far? I guess, is question number one.

Sure. Well, as I mentioned in my opening remarks, we are thinking that, at least at this point, the MATS and CSAPR impacts are not appropriately reflected. I think we'll probably learn a lot, Dan, potentially, from the capacity auction when the results come out and see what units are actually going to be retired. But beyond that, there is a point at which we're going to begin to hedge in. We won't leave it completely open until we get to 2014. So I think, as we've done in the past, we have a fairly disciplined hedging program. We have plenty of time, at the moment, to make those decisions and pick our spots when we hedge in. And I think, in the past, we've done a really great job of picking those times to hedge in. So I think we're going to have an opportunity, and if it gets too late in the process, we'll begin to selectively hedge in. Dan Eggers - Crédit Suisse AG, Research Division: Okay. And I guess, in Pennsylvania with the rate case, can you just remind on thought process? Not necessarily for this case, but for next cases as far as when you're going to file again since you're not going to get the mechanism this time through. Does it mean that there's going to be another case shortly thereafter so you can get the DSIC in place after this case gets done?

Yes, Dan, we would expect that once this case is completed we would file for the DSIC and then, probably in future rate cases, we would use a future test period. Dan Eggers - Crédit Suisse AG, Research Division: And you're going to file that in '13, at some point in time then?

For the DSIC, yes. I think for the rate case itself, that's yet to be determined. Dan Eggers - Crédit Suisse AG, Research Division: I got it. Just, comprehensively, on weather for the quarter. How much was the overall drag, Paul, if you were to add up all the pieces between supply and U.S. utilities?

If I took the $0.03 in Kentucky plus the extra $0.01 of all systems sales, which also -- there was just outright demand destruction across many systems, it was about $0.04 in Kentucky and then $0.02 in EU, so a total of $0.06.

Your next question comes from the line of Kit Konolige with Konolige Research.

So on the question of equity, Paul, you were pretty clear that you're not going to need additional equity related to I'd say a cash shortfall that might be arising from low commodity prices. What's the outlook over the next several years? You have a significant structural free cash flow deficit. What's the schedule for funding that with equity and how should we view it overall on how equity fits into your cash needs over the next few years?

Okay. I'd really break it into 2 component pieces, Kit. We will be getting incremental cash of roughly $2 billion over the next 2 years from the conversion of the converts. So that equity will provide a meaningful de-levering of supply and results in incremental cash to the company. On top of that, we think we'll still need the roughly $350 million per year, for the next several years, as we make our way, especially through the large rate-based build in Kentucky. And after that program is complete, the cash flows are relatively robust there. The CapEx programs, I would look at, kind of projecting forward, the levels of spend that we got in both EU and in WPD. There are strong opportunities and needs to put capital to work there, but the big build in Kentucky does have some finite into it. So I think we've got plenty of equity opportunity just given how we finance the 2 acquisitions, and then later in that $350 million per year that we've talked about, at least for the next several years.

So we should think, in terms of some time in '13, you would logically be raising equity again in an offering similar to this one?

Yes, that's correct and I would be looking late in the year like we were this year.

Very good. Okay, one other question on the Pennsylvania segment. What's the kind of run rate of your actual return on equity at this point?

Yes, Kit. I'll ask Greg Dudkin, the President of our electric utilities to answer that.

Kit, we're running about mid-single-digits on our ROE for our distribution at this point.

Your next question comes from the line of Justin McCann with S&P Capital IQ. Justin C. McCann - S&P Equity Research: I have 2 questions, one for Paul and one for Bill. Paul, just a follow-up from Kit's question. What do you expect the average diluted shares to be for '12, '13 and '14?

Just one second, I'll pull those numbers for you. So for '12 it's right around 585 million shares. For '13, around 615 million and for 2014, 670 million, roughly. Justin C. McCann - S&P Equity Research: Okay. And, Bill, at the reception in New York last month, and basically this [indiscernible], you mentioned the [indiscernible] of the gas prices for power prices. If you could elaborate on that.

Sure. I think what I'm really referring there to is the correlation between gas and power which had been historically in the last decade or so, very strong, is already beginning to break down. So you're seeing improved heat rates, particularly on gas units, of course. And what we're seeing there is the fundamentals of the power side beginning to take over just the strict correlation of the marginal fuel in PJM. So as more units are being retired and supply and demand come in to closer balance, we're really seeing the fundamentals of the power market driving power prices not just fuel input such as natural gas.

Your next question comes from the line of Paul Patterson with Glenrock Associates.

I wanted to touch base with you on the tax rate. It looked like it was a little bit lower and I guess that was coming from supply. I'm not completely clear. Could you tell us what happened there?

Yes, we come from a combination of supply, which I referenced. And that was just a couple of cents of share from the lower effective state tax rate. The bigger driver, year-on-year, is going to come from the change in the business mix of the company. The U.K. effective tax rate for that segment is only 25% versus the other segment that run closer to 35% to 37%. So just the change in the business mix is going to drive a lower effective tax rate.

Okay, great. And then secondly, the coal burn. You mentioned that some it is going to be pushed into next year. How should we be thin about that from an earnings perspective? I mean in other words, are you deferring higher cost coal into next year's burn, so to speak?

I would say, Paul, it's probably not meaningful or material from a coal burn and coal cost input side. There is delaying or pushing out of coal into next year because we're not burning it this year. I'll ask Dave DeCampli to provide anymore color on that. If you would Dave?

Yes, Paul. We're working very hard with our suppliers on a number of fronts, deferrals, altering the mix and consumption schedule for the balance of 2012 and making some adjustments. So we're calling it not material at this point because we're relatively in good shape for 2012's inventories.

Okay, great. And then just finally, the mark-to-market gain that you guys are going to be realizing into 2012. That's going to be going into operating earnings, is that correct? It's being excluded from operating earnings. I guess it would've been a positive. And how is it going to impact 2012 and does it go just in 2012? Does it go beyond that?

No, it'll go beyond that, Paul. Primarily, rates relates to some correlation breakdown in our Eastern hedges. From a FAS 133 perspective, there's still very good hedges from an economic and risk perspective and so we'll match those periods as those contracts deliver, and it's 2012 and 2013 primarily.

Your next question comes from the line of Anthony Kordell with Jefferies. Anthony C. Crowdell - Jefferies & Company, Inc., Research Division: I want to focus on Susquehanna nuclear plant and how you think -- you have Unit 2 down for inspection and if you guys -- if you do see the cracks, will you guys put blades in or will it be a de-rate of the unit?

First, we would absolutely replace the blades. We would probably not do a de-rate but I'll ask Dave DeCampli to talk about the timing of the Unit 2 outage.

Yes, Anthony. The Unit 2 outage is scheduled later this month and we expect it to be somewhere around 20 days and that will be dependent upon what we find in the turbine. We do have the blades available on standby to replace. We've gotten rather efficient at the inspection process at this point. So we're thinking it will be somewhere about 20 days, depending on what we find once we get in the turbine. Anthony C. Crowdell - Jefferies & Company, Inc., Research Division: Does the 20-day outage include if you had to replace the blades or 20 days of inspection and blade replacement will be incremental?

Call the inspection process the first 10 days, once the unit cools down and we gain access to it. And then the replacement will be very dependent upon whether we have to pull the turbine out of its saddle or not. And we'll have to do with the number of blades that we find cracked. So on the short end, it would be 20 days.

Your next question comes from the line of Julien Dumoulin-Smith with UBS.

So first question, just kind of bouncing off what Public Service said the other day, are you guys anticipating higher Rose than the Susquehanna CapEx here, just given what's happened of late, first? I didn't really see any kind of material change too much.

No, I'm sorry. No, we don't expect too much material change in the Susquehanna Roseland CapEx.

Great. And then secondly, with regards to coal prices this year. It seems as if it just went up a slight hair there, $1 a ton. Is that basically, call it, payments for taking delivery at a later point in time?

It is. It's primarily a timing issue, yes.

Excellent. And broadly speaking, what are you seeing on the coal side, in terms of the capacity factors for the balance of the year? You would think, intuitively, call it the gas switching would somewhat alleviate in the summer months. Just kind of what kind of capacity factors are you seeing on your baseload units?

Yes, correct. I think for the summer months we're going to see the coal units return to their traditional baseload operation. I think, in the fall, of course it's all going to be dependent upon natural gas prices, as well as coal prices. But I would expect that we would see -- hopefully, if you see normal weather, you'd see more run time than we signed the first quarter. But with the current natural gas price to coal price relationship, I would expect that the capacity factors in the fall are going to be less than what we've historically seen. But probably not as bad as the first quarter.

Interesting. And you guys have commented a little bit about O&M hit this year. Just curious, to the extent to which you run your coal plants less. How much of an O&M benefit could we potentially see there? We heard some other companies discuss that.

Yes, there is an O&M benefit when you're off-line and there's also a margin benefit when we are highly hedged, as we are. We're essentially able to buy power cheaper than we can produce it at those coal facilities. So there's a dual effect there, if you will, that did help us in the first quarter and could help us in the fall as well if we see similar conditions. As far as an exact number on the O&M. I don't know that it would be that material, that I could say that -- that would be measured in pennies, probably not nickels and dimes.

Right. And then just the last question, sort of a small detail. The Montana contract rejection. What kind of an impact are you guys seeing there just annually?

Well, of course, it's all dependent on where we can place the power that otherwise was contracted for by southern Montana. But having said that, I would say, it's again, it's one of those things that's not extremely material. And as we mentioned we're maintaining, and are comfortable, with the midpoint of our earnings.

Your next question comes from the line of Andy Bischof with MorningStar.

Just 2 quick questions for you this morning. On the Midlands integration, you mentioned you were trading above your initial synergy savings. Are you willing to provide a new range or any clarity on that?

I'll let Rick Klingensmith, the President of our global operation, answer that.

As you saw on the earnings release, the news release that came out, we have increased our forecast for this year up to $1.07 a share. And that incorporates the additional benefits we're seeing from the integration of the Midlands operation. And that's pretty much where we're heading out, thus far, for this year in our forecast.

Okay, great. And I have a question to the capacity factors. Your net gas plants, you mentioned about 90% factor at that one plant. Is this a dramatic case or is it safe to assume that these are kind of factors across all your plants?

Well, on the natural gas plant side?

Yes.

I would say -- I mentioned, also, that Ironwood was out on an outage for some period of time. That still saw about a 76% capacity factor during the quarter. So I would expect, with similar conditions, that we would be at a 90% type capacity factor.

Your next question comes from the line of Paul Ridzon with KeyBanc.

Paul, when you gave those forward-looking share counts, did that contemplate new equity or is that kind of as we sit today?

Yes, contemplated new equity. So it would be impacted by the converts converting as well as some amount of the incremental equity, for that, on an annual basis, as I mentioned.

And your CapEx forecast, does that include generation in Kentucky gas-fired generation?

Yes, it does. For both the combined cycle, gas unit that can't run, as well as the ELS power acquisition.

I guess, a follow-up on Susquehanna. You said minimal impact, but is that as we sit today and if it does require a teardown and take the turbines out, could it be more than immaterial?

At this point, I don't anticipate that, no. Could it be? Yes, of course I can't say it couldn't be. But based on what we found on Unit 1 and the fact that the Unit 2 blades are relatively new, having been replaced last summer, I wouldn't anticipate that we're going to get into a situation that's significantly different from Unit 1, where we essentially replaced one row of blades. So that would be, in my view kind of the expectation would be if we get in there and find some damage. We'd be looking at replacing one row of blades.

Is this warranty work?

The blades are under warranty and until we determine the final root cause, we'll continue to work with the vendor and work those details out.

Are there any LDs on lost opportunity?

No.

Your next question comes from the line of Steve Fleishman with Bank of America.

Just might be, first a couple of follow-ups. The hedge and effectiveness gain that you pulled out as a one-timer. When it does effectively come back, isn't it effectively kind of a loss then?

No. Until the correlations would come back in, they couldn't be redesignated but the mark-to-market would start from the beginning of the period where the effectiveness reoccurred if we elected to put them under 133. Again, which we're not necessarily going to do. So in similar ways, to where we've had smaller amounts of ineffectiveness in the past, we've seen special items debits and credits up and down, this was larger than maybe some of those historical movements have been and that's why we called it out for you so you understood what was happening. It would match...

Well, just my thought is that if you have a favorable hedge like this and you ended up, for accounting, having to book the benefit upfront when we see the hedge flow-through in '12 and '13, is the hedge effectively kind of gone? Could you book that benefit upfront?

Well, I mean ultimately all these contracts will go to delivery. We fully expect them to and we'll settle at the contracted prices, so the intervening mark-to-market up and down, which would normally be in the balance sheet, only that hits the P&L, we've carved it out. So you won't see the loss in the future either, if you will, in the same way that the benefit has been carved out, so would the movement back to contracted price.

Okay, okay. So that might also get booked as one-time in these next 2 years? Or...

I would expect the mark-to-market on these to continue through contract delivery on these contracts. Correct.

It's a good question, and just to be clear, we don't expected it to, from an ongoing earnings perspective, have any impact on our business plan.

Okay. Secondly, what are you seeing in your region regarding basis, both in the quarter but also kind of forward? Are you still kind of at flat basis to peak in West or any update there?

Steve, we saw in the first quarter about a negative $2 basis. Obviously, there's the weather and natural gas prices and West Hub prices had a significant impact on that number. I guess, the drivers that I have mentioned on previous calls, that move the basis around, natural gas prices, transmission outages, new lines coming in, et cetera, all are still in play. And there is an awful lot of transmission work being done in the region, throughout the region. So I think our expectation is to still see some pressure on basis in the upcoming months and through the rest of this year. We'll have to reassess after the summer where we think basis is going to travel, but for now, we think that negative $2 is what delivered in the first quarter and it's going to continue to have some pressure. Now the good news, Steve, is that we've had some very effective hedges in place that have helped offset that for us. So from a impact to PPL, it was really neutral during the quarter even though -- had we been unhedged it would have been a negative $2.

Okay, and then just finally a follow-up on coal. Just how do your -- maybe a little more color on where your coal inventories stand in the various regions.

Sure. I mean, like a lot of folks, we have built up quite a bit of inventory but we still have room to go at our stations so it's not a pressing issue for us at this moment and many of our units are back online as we speak. So we're going to be bringing the coal power, probably down again, a little bit. But we've been pretty effective at, I think, deferring some deliveries. We worked very closely with our coal suppliers to really manage the inventories during this time. And then I think, in the West coal strip, it's a mine mouth plant so we don't have the same issues out there, in terms of inventory, as we do in the East.

Your next question comes from the line of Raymond Leung with Goldman Sachs.

I think Paul mentioned that proceeds from the converts, that $2 billion, and you also mentioned about de-leveraging supply. Can you sort of give us some context of what you think is a right leverage metrics for supply? And then also staying on supply. As you sort of look at your business, obviously, you transformed into more regulated. How should we think about longer-term degeneration business as part of the overall family?

Okay, let me tackle the credit one and Bill can comment on the more strategic perspective of generation. From a credit perspective, as I indicated, we've got $1.15 billion that's converting in mid-'13 we've got $950 million converting in April of '14 related to the equity converts that we did as part of both deals. Effectively, what will happen is that equity happens at core, if you will, and will get injected into supply allowing supply to de-lever. The 2 rating agencies -- well I'll talk about the 3, but S&P -- I'll talk about 2 in the 3. S&P looks at PPL on a consolidated credit basis and so they look at consolidated FFO and consolidated debt. That movement down to supply would be, effectively, inconsequential to them, which is effectively taking debt that's at Supply and moving it up the core. And in all this, we're trying to maintain investment grade credit ratings, obviously for Supply, which enables us to get the liquidity at reasonable prices to do the hedging. For Moody's, they [indiscernible] for us on an entity by entity basis and I think -- I won't speak for them, but if we can maintain 20%-ish FFO at the debt metrics, I think we can maintain investment grade. We'd like to be more robust and I think, by the time we get out a couple of years, we'll see some of the fundamental benefits that Bill talked about in terms of power prices, in terms of tighter capacity margins and that will clearly provide opportunity for the fleet. So on a year by year basis, you could can look at things and they may look a little tight, but I think you can put it in a reasonable enough time horizon, and with the amount of incremental small equity needs that I talked about, year-on-year, we can manage through this.

On your question on the competitive generation fleet. As I think about it, scale we have that; the mix of generation is very good; we're in a very good market here in PJM; very visible prices; and of course, a very good capacity market. And you have to keep in mind, even if we were not looking at the competitive generation, we still have 8,000 megawatts, over 8,000 regulated generation in Kentucky. So we have a sizable fleet with around 20,000 megawatts. So we do have the scale in good markets. And I think, as Paul mentioned earlier, we have the ability to weather the down cycles, now, in the commodity cycle because of the robustness of the Regulated businesses. So overall, I feel like it's a fit for the company, continues to be a fit for the company and a potential upside as we go into the future. And just a final note, from an environmental perspective, I think you're aware that on a competitive fleet side, we're very well equipped to deal with the MATS and the CSAPR. So we're not looking at any major new incremental investments on the environmental side.

Okay, great. Just one follow-up question for Paul. Would you look at -- if you were to reduce debt at Supply, would it be more just as they mature or would you do something a little more proactively there?

We'd probably look as things mature and as we're closing out the construction programs in the next 12 months or so, around both Rainbow and Holtwood, so that growth CapEx, if you will, kind of goes away. And our teams are looking very hard. I think we've talked about in the past the cutting of, roughly over the 5-year plan, around $500 million of CapEx from that segment. We're continuing, as power prices have come down, to continue to look at O&M and CapEx there to try to help alleviate some of the stress as well. The markets aren't viewing the value of the plants quite as highly and we'll have CapEx in line to make sure that they're available, but prudently available if these challenging markets -- as we make our way through that market cycle.

Your next question comes from the line of Brian Chin with Citigroup.

Could you just walk through the rationale on your earlier comment about filing for the DSIC sometime in '13 and I'm looking at the forward test, your mechanism, a little bit at some point in the future beyond that. Why split those up as opposed to doing it together?

Well, I think we've got the rate case we just filed. We would expect the outcome January 1, rates to be in effect January 1. So I think we have to balance the company's needs with customer reaction to rate cases just one after another after another. So I think we have to keep that in mind and in consideration. Greg, I don't know if you have any other comments you want to make other than -- maybe you can comment on the DSIC and how we would approach the DSIC.

Yes. So to supplement those comments, so the rate case that we're filing or that we filed in March will become effective January 1, and that's based on our 2012 capital and O&M projection. So the DSIC, the reason why we're filing the DSIC next year is so that we can get timely recovery of ongoing distribution investment for '13 and beyond. So that's the rationale. And then should we need another base rate increase in the future year, we'd look to most likely, utilize the fully future test year as the way to do that.

Yes. Remember, Brian, under the new law, if you will, entities can't file for the DSIC until 1/1/13 and they need to have an adjudicated ROE to be able to make that filing. So the general rate case that we filed this year gets that piece of it done and then, from a timing perspective, we can file beginning 1/1/13 and we'd be looking to do that.

And I think, Brian, what we would do is -- we'll look at -- when we get into next year, we'll look at the outcome from the current rate case. We'll look at the impact that the DSIC have on a timely recovery of our CapEx and where we project our ROE and then we'll make a decision at that time. So I'm not ruling out the possibility that we might not file another one but we just have to be mindful of the impact on customers and so forth.

Got it. And then one other question. Roughly, ballpark, hedging on '14. Where is the company at?

Sure, we're in the same -- essentially, the same position we were at year end -- or on the year end call, about 10% to 20% hedged for 2014.

If the view is that gas may decouple from power because of retirements, does it make sense to use forward gas sales to maintain your heat rate upside as opposed to just throwing naked long on power? Are there any considerations on that front?

Yes, there are some considerations of that front. We have done some of that in the past and we'll continue to look at that as an opportunity.

Your next question comes from the line of Ashar Khan with Visium Asset Management.

Can you just talk to us a little bit regarding the U.K. regulatory process, in terms of the fast track, and could you just give us a bit of a timeline?

I'm going to ask Rick Klingensmith to take that one.

Regarding the regulatory process in the U.K., the real process that Ofgem has established is in full speed ahead with the transmission and the gas distribution and gas transmission sectors. For the electricity distribution sector we're in the very early stages and those stages are really around policy development right now, stakeholder engagement. We will see a strategy document and consultation likely issued in the fall, issued by Ofgem, and then a decision documented perhaps the first quarter of 2013. We will start preparing our business plans for submittal in the May, June '13 timeframe and then Ofgem will decide further, in late '13, as to do any of that electric distribution business plans that have been submitted. Will they be eligible? Are they complete and robust enough to be fast tracked through the process? And you'll see some publications of that probably in late '13 and a final decision on electricity distribution fast tracks in early '14. And again, our rates will be effective in 1st of April 2015. You have seen, just recently, Ofgem and the transmission rate case price control reviews, they have fast tracked 2 of the Scottish transmission companies. And so we view that very positively and that the process is working. It allows those business plans to move forward and save about a year in the regulatory cycle for the price control review.

Well, I think that wraps up the call for today. Really appreciate everyone dialing in and look forward to talking to you on the next quarterly call.

This concludes today's conference call. You may now disconnect.