Sempra Energy Management Discusses Q1 2013 Results - Earnings Call Transcript

May. 2.13 | About: Sempra Energy (SRE)

Sempra Energy (NYSE:SRE)

Q1 2013 Earnings Call

May 02, 2013 1:00 pm ET

Executives

Richard A. Vaccari - Vice President of Investor Relations and Treasurer

Debra L. Reed - Chairman, Chief Executive Officer and Chairman of Executive Committee

Joseph A. Householder - Chief Financial Officer and Executive Vice President

Mark A. Snell - President

Trevor I. Mihalik - Chief Accounting Officer and Controller

Analysts

Faisel Khan - Citigroup Inc, Research Division

Steven I. Fleishman - Wolfe Research, LLC

Stephen Byrd - Morgan Stanley, Research Division

Greg Gordon - ISI Group Inc., Research Division

Neel Mitra - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Leslie Rich - J.P. Morgan Asset Management, Inc.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Paul Patterson - Glenrock Associates LLC

Maura A. Shaughnessy - MFS Investment Management, Inc.

Santiago Perez Perez Teuffer - Crédit Suisse AG, Research Division

Michael Goldenberg - Luminus Management, LLC

Vanessa Quiroga - Crédit Suisse AG, Research Division

Ashar Khan

Vedula Murti

Operator

Good day, everyone, and welcome to the Sempra Energy First Quarter Earnings Results Conference Call. Today's conference is being recorded. At this time, I am pleased to turn the conference over to Mr. Rick Vaccari. Please go ahead, sir.

Richard A. Vaccari

Good morning, and thank you for joining us. I'm Rick Vaccari, Vice President of Investor Relations.

This morning, we'll be discussing Sempra Energy's First Quarter 2013 Financial Results. A live webcast of this teleconference and slide presentation is available on our website under the Investors section. With us today in San Diego are several members of our management team: Debbie Reed, Chairman and Chief Executive Officer; Mark Snell, President; Joe Householder, Executive Vice President and CFO; and Trevor Mihalik, Controller and Chief Accounting Officer.

Before starting, I would like to remind everyone that we will be discussing forward-looking statements on this call within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those discussed today. The factors that could cause our actual result to differ materially are discussed in the company's reports filed with the SEC.

It is important to note that all of the earnings per share amounts in our presentation are shown on a diluted basis. I'd also like to note that the forward-looking statements contained in this presentation speak only as of today, May 2, 2013, and the company does not assume any obligation to update or revise any of these forward-looking statements in the future.

With that, please turn to Slide 3, and let me hand it over to Debbie.

Debra L. Reed

Thanks, Rick, and thanks to all of you for joining us today. During the first quarter, we completed 2 significant transactions that further our strategy.

First, we closed the sale of 1 block of the Mesquite Power Plant for about $600 per kilowatt, which further reduces our exposure to merchant generation consistent with our plan. Second, we completed an extremely successful initial public offering of equity in our Mexican subsidiary, which was preceded by an issuance of over $400 million of local debt. This is consistent with our strategy to create capital structures in our international businesses that allow them to grow with local debt and equity. The success of our Mexican transactions recognizes the value that we are creating in our Mexican business. In fact, the increase in the IEnova stock price places our 81% stake at roughly equal to the total equity market cap based on the IPO price. The stock performance since the offering clearly demonstrates the high value that investors place on this business and allows our investors to use this as a reference to determine what our Mexican segment is worth.

This quarter, we also received a long-awaited proposed decision in the General Rate Case at our California utilities and a final decision on this case should be voted out soon. And finally, we continue to make progress during the quarter on our key projects, including Cameron Liquefaction, where we received a definitive schedule from FERC on their approval process.

We will now go through each of these items in more detail after we discuss the financials. But before doing so, I would like to turn to Slide 4.

There was a lot going on in our reported earnings this quarter, and I want to share with you some of the issues that are included in earnings that caused us not -- to not meet your quarterly expectations. Slide 4 lists a number of items from the first quarter, all of which are either onetime in nature or will turn around before year-end. This list includes: the gain on the sale of 1 block of the Mesquite Power Plant; a deferred tax charge related to the IEnova IPO; an impairment on our holdings in Argentina in anticipation of the sale by year-end; a reduction in our renewable grant receivable due to the federal budget sequestration; mark-to-market losses due to higher gas prices, which should reverse by the end of the year; and adjustment to our consolidation tax expense, which is expected to reverse by year-end; and natural gas transition integrity costs in excess of amounts currently recovered in way that will be balanced under the proposed decision in our GRC.

Of course, one of the most significant issues impacting our performance is the continued delay in a final decision in our 2012 General Rate Case at SDG&E and SoCalGas. And as I mentioned, we will discuss this in more detail a little later. We hope this table helps you reconcile our reported earnings to your projections.

And now let me hand things over to Joe to further discuss our financial performance during the first quarter, beginning with Slide 5.

Joseph A. Householder

Thanks, Debbie. Earlier this morning, we reported first quarter earnings of $178 million or $0.72 per share. This compares to earnings of $236 million or $0.97 per share in the same quarter last year.

As Debbie just mentioned, this quarter's earnings were impacted by a number of issues, including the continued delay in the final decision of our General Rate Case and a onetime $63 million deferred tax charge incurred as part of our initial public offering of our Mexican operations.

As a result of recording the tax related to the IEnova IPO in the first quarter, we will be able to now quickly distribute to the U.S. parent about $200 million due to the taxable income associated with the IEnova transaction. Since we can bring this cash back earlier than originally forecasted in this year, we have decided to defer any further repatriation until 2014 when we will continue with our planned repatriation of approximately $300 million per year.

While we did receive a proposed decision in our utility General Rate Case in the first quarter, we will not update our guidance for 2013 until we receive a final decision. The draft decision is on the CPUC's agenda for May 9, and assuming it is voted out on that day, we intend to provide an update to our guidance at our Analyst Conference on May 23.

We would expect to see some changes in the PD based upon the process Commissioner Ferron has put into place, and Debbie will discuss the key issues a little later on the call. However, if the current PD is adopted as written, we would expect to be at the low end of our 2013 guidance range of $4.30 to $4.80 per share.

Now let's go through the results for each of our segments in detail, beginning with our 2 California utilities on Slide 6. At San Diego Gas & Electric, earnings for the first quarter of 2013 were $91 million, down from earnings of $105 million in the first quarter of 2012. Southern California Gas first quarter 2013 earnings were $46 million compared to earnings of $66 million last year. Earnings were lower at both California utilities, primarily due to higher operating expenses, including depreciation with no increase in authorized revenue due to the delay in our 2012 GRC decision. We have now operated since 2011 with no increase in our revenue requirement as we await the final decision in the GRC.

The first quarter results at SoCalGas were adversely impacted by $4 million related to the after-tax effect of natural gas transmission pipeline system integrity program cost, which exceed the amount currently being recovered in rates. Once the GRC decision is final, the excess cost for this program incurred since the beginning of 2012, will be balanced and all cost will be recovered in rates.

Additionally, as a result of the cost to capital decision, our revenue was reduced to reflect our actual embedded cost of long-term debt, which is lower than what was previously being recovered in rates. This true-up negatively impacted earnings by approximately $5 million at SDG&E and $3 million at SoCalGas in the first quarter of 2013, and we expect a similar impact throughout the remainder of the year.

Finally, SDG&E's first quarter earnings were positively impacted by higher transmission earnings, while SoCalGas earnings in the first quarter of last year included $4 million related to incentive awards associated with the Gas Cost Incentive Mechanism. We anticipate a similar GCIM award to be recorded by SoCalGas later this year once it is approved by the CPUC.

I am cautiously optimistic that this is the last quarter I have to say this, but please keep in mind that until we receive a final decision on our General Rate Case, we continue to record revenues based upon 2011 authorized levels, plus an adjustment for recovery of incremental wildfire insurance premiums at SDG&E based on recent CPUC decisions for recovery of prior years' increased premiums. In the quarter the General Rate Case is decided, which we now expect will be the second quarter of this year, we will record the cumulative impact of the decision from January 1, 2012.

Now please move to Slide 7. At our South American Utilities, earnings were $37 million in the first quarter of 2013 compared to earnings of $40 million in the same period of 2012. We recorded higher earnings from operations at our businesses in Chile and Peru, but this was more than offset by a $7 million impairment charge related to our investment in 2 Argentine natural gas utility holding companies. We continue to actively pursue the sale of these investments, and we expect to dispose of them by the end of the year.

First quarter 2013 earnings for the Sempra Mexico segment were $31 million versus earnings of $33 million in the first quarter of last year. The small decrease is due primarily to a minority interest from the IEnova IPO.

Now please turn to Slide 8. Moving on to Sempra U.S. Gas & Power, the Natural Gas segment earned $53 million in the first quarter of 2013 compared to $1 million in the year ago period. This quarter's earnings include the $44 million gain net of related expenses from the sale of 1 of the 2 blocks of our Mesquite Power Plant. The increase in earnings for the quarter was also due to $9 million of higher earnings from our U.S. LNG business due to the timing of cargo marketing operations. These increases were offset by $10 million of higher mark-to-market losses related to movement in gas prices.

In the first quarter of 2013, mark-to-market losses were $12 million, which we expect to reverse by the end of the year.

The Renewables segment generated earnings of $4 million in the first quarter of 2013, down from earnings of $10 million in the first quarter of 2012. The decrease is primarily driven by 2 factors. First, due to the federal government sequestration, there's been a reduction of 8.7% in the amount of cash grant awards to be paid by the U.S. Treasury. This resulted in a $23 million decrease in our cash grant receivable and a reduction in earnings of $5 million this quarter. Second, there were tax benefits related to the completion of solar assets placed in service in 2012. The decrease in earnings was partially offset by higher levels of production tax credits from our wind assets, many of which were placed into service in late 2012.

Now let me hand the call back to Debbie.

Debra L. Reed

Thanks, Joe. We have talked about our intent to optimize our capital structure in our international business unit, and I am pleased that we took a big step in that direction last quarter through extremely successful debt and equity offering at our Mexican subsidiary. That subsidiary, previously called Sempra Mexico, now IEnova, raised nearly $1 billion of external capital during the first quarter.

In February, we had 2 successful debt issuances at IEnova that raised a total about $400 million at very attractive terms. In addition to raising capital, the debt offering helped educate investors about our Mexican operations. And the strength of the balance sheet at IEnova allows for further leverage as we continue to grow.

Then in March, IEnova sold almost 19% of its equity at a value of around 10x to 11x 2013 expected EBITDA under IFRS. The demand for this offering was tremendous. IEnova is the second-largest energy company in Mexico and the first energy company to be listed on the Mexican Stock Exchange. The strong demand allowed us to create a shareholder base, which is comprised of a broad group of Mexican and international investors, with the majority coming from Mexico, further bolstering IEnova's position in that market.

Please turn to Slide 10. Even with pricing at the top of the published valuation range for the offering, the market has shown continued enthusiasm for IEnova as the stock is up 22% since the IPO. When we launched the IPO, the implied valuation for IEnova was around $3 billion. And today, that is about $4 billion. As you can see from the chart on the left, our 81% holding in IEnova is worth nearly double today what our book value in those assets was at the end of 2012. This is great for Sempra shareholders as it provides transparency into the value the market ascribes to our Mexican subsidiary and allows IEnova to continue growing without the need for additional Sempra capital.

Both the debt and equity transactions in Mexico represent an important step in optimizing our international capital structure. And since all 3 of our international businesses have substantial ability to increase leverage to fund growth projects, we will continue to look for future opportunities.

Let's go on to Slide 11. In March, we received a proposed decision in the General Rate Case for our 2 California utilities. The proposed decision authorizes a revenue requirement for 2012 of $1,749,000,000 and $1,952,000,000 for SDG&E and SoCalGas, respectively. This represents respective growth of 8% and 6% over currently authorized levels. The decision also establishes a 4-year GRC period through 2015, subsequent escalation of the adoptive revenue requirements for 2013 through 2015 using the Consumer Price Index and the continuation of the Z-factor mechanism for qualifying cost recovery.

While there were some positives in the proposed decision such as the capital requirement level that are generally in line with our request, we filed a comment on the proposed decision last month requesting a few significant changes. First, these changes aim to address certain inconsistencies between our PD and prior CPUC General Rate Case decisions. We strongly believe that all California utilities should be treated equally from a policy perspective on routine issues such as attrition mechanism and employee compensation.

The most significant inconsistency between the Edison decision that was voted out unanimously just 4 months ago and our proposed decision relates to the attrition mechanism, which calls for the use of the CPI-Urban index. This index does not reflect the true escalation in costs that a California utility faces, and based on historical trends will provide SDG&E and SoCalGas annual revenue increases that are about 1% lower than what the commission adopted in all recent rate case decisions.

Another major inconsistency relates to the proposed amount of ratepayer funding of our employee compensation plan. Our PD calls for ratepayer funding of only 50% of our performance-based compensation, while there have been recent CPUC decisions approving 90% of the same. Given the CPUC's own employee compensation study affirm that our total compensation, which includes performance-based compensation, is at market level, we don't believe it makes sense for our ratepayer funding to be reduced as the record in the rate case clearly support full funding.

We also recommended changes that help to ensure both SoCalGas and SDG&E have sufficient funds to maintain safe and reliable operations and continue providing the level of service our customers expect and deserve. The need for changes in the PD is most acute at SoCalGas where the proposed decision reduced funding for critical operations that are required for that company to do basic work, such as leak detection and locate and mark services. We think it is highly unusual, given its focus on safety, that the commission would choose to reduce funding in these core services. We have made our concerns known, and we expect that with a better understanding of the fact, most, if not all, of this funding will be reinstated in the final decision.

Commissioner Ferron has acknowledged that some errors were made in the PD. He has put in place a transparent process to allow parties to address their concerns for the proposed decision and we have made our case for improvements. We expect him to do the right thing and make the appropriate changes.

We anticipate that a final decision will be reached on the GRC in the second quarter, and as Joe noted earlier, we hope to be able to provide an update to our financial guidance that reflects the outcome at our Analyst Conference on May 23.

Let's now go on to Slide 12. Turning to our efforts to develop liquefaction at our Cameron facility, last month, FERC issued a notice of its schedule for the environmental review of the project. Cameron is the first and only proposed LNG export application currently pending before FERC to have reached this milestone in the permitting process. Based on the published schedule, the final environmental impact statement will be released in November 2013 and the final application should be approved by early 2014. The DOE non-FTA permit is, of course, the other major outstanding permit we require and we continue to expect to receive it in 2013.

FERC's decision to release the schedule shows the relative strength of our project, and we continue to believe that Cameron is well positioned to be among the first applications that DOE reviews and approves. With the timing of these regulatory approvals in mind, the project remains on schedule to start construction next year and begin operations in the second half of 2017.

On the commercial front, we are nearing completion of the tolling and JV agreements with Mitsubishi, Mitsui and GDF SUEZ. We expect that those agreements will be signed later this month, and I expect we will have much more to say on this at our Analyst Conference.

Now please turn to Slide 13. In summary, we took a number of key steps forward during the first quarter in achieving our long-term goals. We look forward to seeing many of you at our Analyst Conference on May 23 in New York where we will discuss our goals and overall strategy in significantly more detail.

With that, I'll stop and open up the call to take any of your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we'll take our first question from Faisel Khan with Citi.

Faisel Khan - Citigroup Inc, Research Division

Faisel from Citi. On IEnova, just wondering if you could elaborate a little bit more on what your plans are kind of going forward for your participation in the entity. Meaning that you have roughly 80% right now and if the company raises more equity in the future to grow the business, will you maintain your 80% stake or will you let that kind of float down?

Debra L. Reed

I would say, first off, we really like this business and the reason that we wanted to do the IPO was so that we could grow the business. And so I think, at this point, we're very -- we like what we have in both Mexico now and Peru with an 80% ownership, that we feel that that's a good share balance with having local ownership and local debt plus our 80% ownership. And we haven't really thought of anything beyond keeping that kind of structure. I'm going to Mark and Joe, because they were part of the road tour on this, to add any comment.

Mark A. Snell

Yes, Faisel, this is Mark. We don't have any current plans to reduce our ownership below where our current -- where it is. And I think if you look at what we've done in Peru over the years, it mimics the ownership structure that we have down there. And I think we're pretty satisfied where it is. We have a lot of great projects on the horizon for IEnova. But the good news is, is that we still have quite a bit of debt capacity. So it is -- into the foreseeable future, we don't really see it changing.

Joseph A. Householder

Faisel, this is Joe. I'll just add on to that, and I know there are probably people on the call that participated in the road show and I know many of the names I saw. What I said when I was asked this question many times is, just as Debbie and Mark said, that we don't have any plans to sell down. We probably would never sell any of our shares. And as Mark said, we have plenty of debt capacity. But the growth there is tremendous. And if they continue to grow at this pace and they need to raise more equity, I think we would let them though that. We would have to determine at that time whether we want to participate or allow ourselves to be diluted a little bit. But as Debbie said, we really like the business and our stay in it. On the other hand, we've always said we like the size of our international business, around 30%, 1/3 of Sempra's overall structure. So as we continue to grow our U.S. business, we get Cameron in, we can have more international earnings. But if IEnova can grow -- I mean, somebody asked me on the road show, can IEnova be bigger than Sempra? I said, I hope so. So we'll see.

Mark A. Snell

I would say this. I don't think that we would see -- we would expect that our earnings share from IEnova over the years will grow. No matter what our ownership percentage is, our share of earnings will grow.

Joseph A. Householder

Absolutely.

Faisel Khan - Citigroup Inc, Research Division

Okay. It makes sense. And then, Debbie, can you give us an update on the ROE case filed for the power -- electric transmission assets?

Debra L. Reed

Sure. We made our filing at FERC and we'd used the FERC-prescribed methodology, contrary to some of the other cases that had been in the news. We used the FERC-prescribed methodology, which takes the median of your peer group of electric utilities. And we did that under 4 different methodologies that we filed at FERC. That came out with a 10.3% as kind of your base ROE. And then we added to that the allowance of 50 basis points for being part of an ISO and 50 basis points for our utility's specific risk. And, as you know, in California, we have things like the debt equivalency for the power contract and things like that, that FERC has looked at as being -- had a utility-specific risk to consider. So we made a filing off 11.3, the rate should go into effect on September 1. And we'll wait and see what the outcome, but we do feel we followed their methodology.

Faisel Khan - Citigroup Inc, Research Division

When do you expect an outcome from the FERC?

Debra L. Reed

September 1.

Faisel Khan - Citigroup Inc, Research Division

September 1. Okay, got you. Yes, last question from me. Where are you right now on the FEED for the Cameron facility?

Debra L. Reed

Well, we have the engineering work underway. We actually are in the process of selecting between -- there's 2 parties, 2 contracting groups that are bidding for the EPC. And we that have a pretty well-developed FEED that they can bid on. And then we'll do all the detailed engineering after that. We would expect to select our contractor by the end of this year. And would again, expect to begin construction next year. Mark, you want to?

Mark A. Snell

No, I think you hit all the points. We have a well-developed FEED and it'll get enhanced. But it's out for bid now. So we'll have EPC contracts at the end of the year.

Operator

And next we'll hear from Steven Fleishman with Wolfe Research.

Steven I. Fleishman - Wolfe Research, LLC

I had a couple questions. Just on that transmission issue. I thought FERC recently, or at least staff [ph] has been pushing single utilities to use a midpoint, not a median, and then if you're in an ISO or RPO, you can get a median?

Debra L. Reed

No. Well, we are in an ISO, and the FERC rules for an ISO is you use the median. And where there have been some issues is when utilities have not followed what the rules are for what their structure. We're an ISO. We're supposed to use the median of the peer group. And then we do 4 different studies using different economic modeling mechanisms of what the ROE comes up under those studies, and that's what we submitted to FERC.

Steven I. Fleishman - Wolfe Research, LLC

Okay. Switching gears to the -- just a clarification, the tax expense on the IEnova transaction, you're keeping that in -- that's part of your ongoing guidance for this year, the $0.25?

Debra L. Reed

Yes.

Steven I. Fleishman - Wolfe Research, LLC

But then you're not going to be repatriating the other -- the annual money that was typically about $0.30 hit every year?

Debra L. Reed

Well, we will repatriate starting next year. But because we had the -- already paid taxes on this and we can bring the $200 million back in the very near future, then we didn't see a need to bring back -- if you look at our cash balances, our cash flow statement, it's very, very strong. And so it just didn't seem to make a lot of sense for us to do additional repatriation this year.

Joseph A. Householder

And I'd just add on to that, Steven. She said we already paid tax. Actually, we're not going to pay the tax for 4 or 5 years because of the NOL, but we incurred the expense on the books.

Steven I. Fleishman - Wolfe Research, LLC

Okay. And then just at the year end, when you reported you had that slide with the kind of growth rates off of the base, et cetera. I mean, is all that slide all still relevant in terms of the different growth rates?

Debra L. Reed

Well -- yes. I mean there's nothing in terms of our projects and the fact that we have all these projects that we have underway that the majority of them already contracted or part of the utility, that would change in that slide. What we will do is if we can get a final decision in the rate case and enough time to analyze before the Analyst Meeting, then we will give you an update to that at that time. And we'll give you new guidance numbers and new ranges. Without having a final rate case decision, we sure wish we were not in this situation either. It's gone on a long time, and we'd like to be able to give you more than that. But hopefully, by the time of the Analyst Meeting, as I said, that this is on the agenda for a vote of our final rate case on May 9 and so if it comes out then, we should be able to give you all of that at the Analyst Meeting in a few weeks.

Steven I. Fleishman - Wolfe Research, LLC

Okay, and just -- but, in theory, the -- to some degree, the GRC just also just sets the base and then the growth rate?

Debra L. Reed

Yes. And that's what -- the growth rate that we showed you, I mean, I don't see anything substantively different in the growth rates that we showed you. But we want to give you better guidance on the range for this year that begins the growth rate and then what that ends up being at the end of the period of time. And we're just not able to do that absent a rate case. I wouldn't ignore all what we gave a before. I just think we would like to further refine that for you at the Analyst Meeting.

Steven I. Fleishman - Wolfe Research, LLC

Okay, and one more question, different topic. The DOE non-FTA approvals, what's your sense on the order, essentially the order of the queue at this point and when you think they'll rule on you, on Cameron?

Debra L. Reed

Well, a couple of things. I'm not so sure that there's going to be a queue where 1 project is going to come right after another. It may be very well that the decision is to take a group of projects that have -- are under the level that was in the study that was done last year. And that, that study, I think, went up to 10 Bcf of export and so we think that we are in good place in the queue. We're the only facility that is in the FERC process and that usually tends to be -- that tends to be the critical path is getting that FERC approval. And so we have some dates. [indiscernible] went out with come forward [ph]. But I don't know that the queue is going to come out one by one. If you did that, I think we're #4 or #5 in that queue. But we also think that there's a possibility that they may approve a number of projects all at one time.

Mark A. Snell

I was just going to say, I think when we talk about the queuing order, let's just remind ourselves that that's the queuing order in which the applications were filed. And while they've indicated that, that will place some bearing on it, it isn't necessarily so that that's going to be the order. We don't know that. But I do think that all of the feedback that we're getting out of Washington, all of the things that we're hearing that we believe our project and the other brownfield projects are likely to be approved.

Debra L. Reed

This year.

Mark A. Snell

This year and we continue to believe that. We haven't heard anything contrary to that. And I will say that there is nothing on the record at the DOE that would indicate that they shouldn't approve these projects. I think that's an important point to remember. There's been no real record made of any reason not to approve them. So I suspect that they will get approved. And we're confident that it's going to happen.

Debra L. Reed

Yes, I would add to what Mark just said too. Monis [ph] who is in the confirmation to head up the agency, made very clear that as the Natural Gas Policy Act stands today, you really have to make a case as to why they shouldn't be approved. The burden of proof is on the other party. So the relevance of what Mark is saying is that someone has to come in and make the case as to why these projects are not in the public good. Everything that's come out has shown that these projects are in the public good and Monis [ph] commented on that during his confirmation period.

Operator

And now, we'll take a question from Stephen Byrd with Morgan Stanley.

Stephen Byrd - Morgan Stanley, Research Division

I just thought I'd check in on the overall commercial arrangements. You mentioned fairly soon you'll have tolling and JV agreements in place in Cameron. And I just wanted to check to make -- to see if there's any evolution of your thinking on the commercial terms or the nature of the partnership that you're seeking to form in terms of capital commitment, in terms of degree of risk you're willing to bear, just in general without going into too much specifics.

Debra L. Reed

Well, I would say what we told you is the way that it's absolutely heading, which is that we would be committing our existing facility as our equity contribution. And that ourselves and our partners would then form a joint venture and that the joint venture would finance about 70% of the project. And each of the partners would then put in additional equity. And then depending on what the project costs, there may be some additional requirements for equity, but we would anticipate that to be funded largely via the income from the trains as they each come on. So I mean, that's the structure. There's nothing that we're seeing that would change in that structure. Mark, you want to...

Mark A. Snell

Yes, the only thing I would say is the sort of the broad parameters that we laid out last year at our Analyst Conference, those are all still roughly the same and we've marched along to that. There isn't anything that's coming up in the JV structure, the tolling structure that's significantly different than what we anticipated. And then we'll give you an update at the Analyst Conference, but I don't expect that anybody will be surprised by anything.

Stephen Byrd - Morgan Stanley, Research Division

Okay, that's helpful. And so it sounds like there's nothing in relation to that, that would prohibit you from, for example, pursuing an MLP structure down the road, if that was something you wanted to do with this business?

Mark A. Snell

No, that's a great question. I'm glad you brought it up. We specifically designed the JV agreements and the tolling arrangements to allow for an MLP structure if that's the best available capital at any given point in time. And so that's -- it's definitely still in our plans.

Stephen Byrd - Morgan Stanley, Research Division

Great. And just a very quick small question on the Argentina business. Should be thinking about in terms of any material proceeds or further accounting adjustments there going forward?

Debra L. Reed

Joe -- I'm going to have Joe discuss that.

Joseph A. Householder

Yes, Stephen, the value of the assets, it's been reported in our previous SEC report, it was written down to about $30 million previous to this quarter. So there's no significant proceeds there. But what's important is because of the impairment that we took many years ago, we still have a large tax basis. So we're expecting, as soon as the sale takes place, to file a quick carryback claim and get about $80 million of tax back on this.

Stephen Byrd - Morgan Stanley, Research Division

Okay. And that tax benefit, help me understand how would that -- I sometimes get confused as to how that translates back up to the mothership, as it were?

Joseph A. Householder

Yes, we'll get the cash here. It's U.S. tax. It'll come to us and there won't be an earnings effect of it. The earnings effect was booked long ago. But we'll actually get the proceeds from the sale plus this $80 million of cash.

Operator

We'll take a question from Greg Gordon with the ISI Group.

Greg Gordon - ISI Group Inc., Research Division

Most of my questions have been answered and I think you pretty much answered the 1 remaining in your script, but I just want to be clear. Did you say that if the attrition mechanism was not put in consistent with precedent, that, that was worth about 1% to revenue annually. Is that right?

Debra L. Reed

What I said is if you look at the difference between what was granted and our proposed decision, which we would hope to get changed and the utility-specific index, which has been used in virtually all General Rate Cases of recent, that, that is about a 1% difference on an annual basis in the attrition.

Greg Gordon - ISI Group Inc., Research Division

Right. And so, I'm with you. It does sound like they ought to be consistent in its application, but if they decided to change that and stick with the proposed decision, it would be sort of 1% less revenue in each of the years of the rate period?

Debra L. Reed

That would be the case, but if that were the case, we would obviously have to manage our business to that. And that's what we've made clear is that in -- with the focus that is on the commission right now with their own consultant raising concerns about the order of priority that they place on safety in terms of things, we would find it odd that they would look at doing this type of thing now for our companies when our performance has been so stellar over several years. And so we think that this is something that should be adjusted in the final decision. We've made our case very clear that the basket of bananas and eggs and things like that is not reflective of the cost of utility operation. And so we gave them some pretty specific information on this. There is a lot of support on the record in the case that would justify that this should be changed.

Operator

We'll move to a question from Neel Mitra with Tudor, Pickering.

Neel Mitra - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

A question on Chile. Now that you've sold down about 20% in Peru and Mexico, on the last call, you said you'd consider selling down some of the interest there. What are your thoughts on that? Has anything changed in your thinking?

Debra L. Reed

Yes, I mean we're looking at it. The issue with Chile is that there's an incremental pact that occurs in Chile on -- that we would have to pay for repatriated dollars. And so the benefit of that there and doing the equity issuances there and then looking at that as any kind of repatriation source doesn't -- is not as attractive to us as Peru and Mexico. The other thing with Chile is that we have a lot of cash there for investments. We have the ability to leverage. We're under leveraged there, and so we're looking at all of that in the context of what we want to do. We like the model of the 80% ownership, but we're only going to do that if it really makes sense and it would do that at a time when it would make sense. We're trying to -- we the transmission projects we're doing in Chile right now. We're bidding on some additional transmission projects there. If we start looking at having all this growth that we hope to see there over the next few years, that would probably be a better time for us to look at doing it.

Neel Mitra - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Got it. And then second question, now that we're seeing some liquefaction projects, whether yours or others coming online in the Gulf Coast, how is that affecting the value of your storage assets, and maybe some of the actions you're taking with the midstream network, like reversing the Cameron pipeline? Are you taking any incremental action now that we're getting a little bit closer with the midstream assets?

Debra L. Reed

Absolutely. And this is something we're very excited about when we look at how the value -- what we think the value of the storage assets will be as all of those LNG facilities start coming on. And you look at where they are, and other than -- all the brownfield, other than Dominion, are located in that whole Gulf area. So let me have Mark talk about some of the things we've been working on.

Mark A. Snell

Yes, I think that it actually is pretty exciting. We are -- we've done our engineering on turning the flow around at Cameron. We're looking at other -- we're looking at other pipeline developments in the region to allow us to more freely move gas around. And our Louisiana storage, which is the closest developable storage to our facility and to the Cheniere and Freeport facilities, that storage will become increasingly more important as these plants start operating. So we're actually pretty excited about some of the opportunities down there and the ability for us to really become sort of gas managers or being able to help people facilitate the operation of these facilities to make sure that they can run most efficiently, which is continuously all the time and without interruption. And so having readily available gas storage is going to be a real plus. And we're very well positioned to do that.

Operator

And now, we'll take a question from Leslie Rich with JPMorgan.

Leslie Rich - J.P. Morgan Asset Management, Inc.

Just had a question on the solar grant and the delay due to budget sequestration. Is that the kind of thing that you would expect to happen every quarter? Or I guess, that depends on if congress can...

Debra L. Reed

Yes. No, we would not expect that. We -- the $5 million that we have for this quarter, we would expect that would be it. And then, that there will be a little bit more on depreciation expense down the line, but it's insignificant in future years, very insignificant. So this really takes care of the sequestration issue.

Leslie Rich - J.P. Morgan Asset Management, Inc.

So if sequestration ends and the company [indiscernible] as usual, would that reverse?

Debra L. Reed

Yes, if we don't -- it's an interesting issue because if sequestration ends and then we haven't gotten the grant, then the grant will not be sequestered. And so it's a funny thing. But so they -- I'll ask Joe to -- or Trevor to talk about the accounting of it. Because right now, we don't know what -- when we get our money back and that will depend on -- what happens will depend on what the timing of the money coming back.

Trevor I. Mihalik

Yes, Leslie, when we finished those projects at the of last year, we booked a receivable for the grants that we were going to get, and these are the only grants that we can get the grant programs over, really. So we booked those grants. And then Treasury came out and said, "These are going to be sequestered and if you get cash back from the government between March and the end of September, you're going to have this cutback." So we had to book the cutback. And that's why we took the $5 million earnings. But as Debbie said, if we actually don't get the money until October, we'll get more money. We think we will get it between this time, but who knows. We filed for the grants.

Mark A. Snell

I think the important thing is we booked the -- it's onetime deal, we booked a negative effect. I mean, there are some of us sitting around this table wondering how this can be, how you could do this, why this is legal? And -- but at the end of the day, we may end up getting it back someday but right now, the negative effects are all taken care of.

Operator

Next, we'll hear from Michael Lapides with Goldman Sachs.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

I want to turn to U.S. business, the utilities, can you just refresh us a little bit? What was the rate base, I guess, the last known or last authorized rate base going all the way back to 2011? What is kind of your recommended rate base for '12 versus kind of where the ALJ proposed decision came in?

Debra L. Reed

Yes, I don't -- I have what our actual rate base is, but I don't have the answer to your question for back to 2011. What I can say is what we requested and what the decision granted. And what we requested was about $4.3 billion at SDG&E, and the proposed decision granted $4.1 billion. The key area of difference there is for some smart grid investment, and what the proposed decision did is that it disallowed that in this case, but set another case down the line where you could try to recover it. I think that there are a lot of parties that would like to have us go ahead and move forward with some level of expenditure on smart grids, so it's very possible that something can be reinstated there now. And then on the SoCalGas gas side, we requested $3.6 billion and received $3.5 billion. Much of the rejection there was in gas operations. And as I already said in my comments, that I think that the focus on gas operation, I would expect us to get reinstatement of a lot of the O&M and the capital because these are basically core business functions.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Got it. And if the proposed decision is largely upheld, maybe not entirely but the -- some of the key components of it are upheld, could this put your utilities in a very unusual situation, one they probably haven't faced in 15 or 20 years, which is being -- struggling to actually earn their authorized rate of return?

Debra L. Reed

We've managed to -- every kind of outcome we've gotten in rate cases and it -- first of all, I would say, I would not expect this to be the final decision. I do believe that we will see changes made. We've had all-party meeting that I would -- give Commissioner Ferron credit. He had an open process to listen to comments on that. There was an all-party meeting where we discussed our issues. I think the people that were at that all-party meeting felt that we had pretty compelling reasons to see changes in here. So we would expect to see some changes, but we also -- I think we're going to live with what we get, and I don't think that that's a good solution for our customers, nor a good solution for our state, after the clear focus that the CPUC needs to be placing on safety now to look at some of the kinds of reductions that have been here, are really penny-wise and pound-foolish in our mind. And so I think that we will see some changes.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Got it. Last question, cash balances at the end of the quarter, large, large number bill 4, bill 5. Can you just talk to me about thoughts around the allocation of that capital?

Debra L. Reed

Yes, I'm going to have Joe talk about that.

Joseph A. Householder

Yes, that really comes from a couple of things, which was we had the proceeds from the IPO coming in right before the end of the quarter, of close to $600 million. And we also did the bond offering in Mexico in February and a lot of that -- a lot of those funds actually repaid intercompany debt back up into one of the Sempra International holding companies. We also received the proceeds from the sale of Mesquite and with that, we mostly paid off commercial paper. But now we have these funds, close to $1 billion of that is from Mexico. And a substantial part of the Mexican IPO funding will be used this year to fund the Sonora pipeline project, and the remainder of those funds used next year together with probably some additional borrowings down there. But that's what this is about. The big increase was mostly things that happened right toward the end of the quarter.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Got it. In other words, a large chunk of that cash, almost $1 billion of that cash, is not sitting at the holding company. It's actually sitting down at the Mexico sub?

Joseph A. Householder

That's absolutely right.

Operator

And now we'll hear from Paul Patterson with Glenrock Associates.

Paul Patterson - Glenrock Associates LLC

I don't want to like keep going over this, but I just want to make sure I understand it. This attrition mechanism and the compensation issue, you guys mentioned in our press release that you'd be at the bottom end of guidance if this were to -- if the proposed decision wasn't changed. And I guess what I'm wondering is I think of the attrition thing as being more of a -- and I guess compensation, but certainly -- but I think the attrition thing, and particularly of it being more the long-range kind of EPS impact and I'm just wondering if this were to change, I mean, would that -- you said that you'd work within the -- with what you get, but would that not mean that there'd be an impact on long-term growth rate?

Debra L. Reed

Well, I don't tie this to growth rate. First of all, we'll manage with what we get. But the attrition mechanism would affect 2013 because, as you know, it's taken us 1.5 years to get a rate case decision. So we are basically operating on 2011 revenue requirement. We didn't get an increase in 2012, and then we should have gotten attrition increase to the 2012 level for 2013. So we're basically 2 years behind in terms of having revenues to operate our company. That -- we don't think that what is in the proposed decision is what should be voted out by the commission. We made the case on that. We made a very strong case on this attrition because it's not consistent with prior regulatory decisions. They have just voted out 4 months ago the Edison decision and gave them what is an appropriate utility index attrition mechanism. And so we do expect to get it changed. If it is not changed, then the mechanism here has historically been about 1% a year less in attrition increase than what the utility specific. But if that's what we get, we'll have to find a way to manage through it. But it's not to the benefit of our customers to have that.

Paul Patterson - Glenrock Associates LLC

I know you guys aren't going to give guidance until we get until we get the final decision, but should we be thinking about any potential change in long-term growth rate?

Debra L. Reed

No. No, I mean, I think I -- at least I tried to articulate that the long-term growth rate would be consistent with what we had showed you before in February, but that what we will do is that if we get a decision, we will give you more definitive information on that and the numbers for 2013 and narrow the range, as we talked to you that we would do, and then give you more detail on that growth rate.

Joseph A. Householder

Yes. Paul, this is Joe. When I showed you guys that chart, I mean, it's been our stated objective to be at 6% to 8%, but as I said, we're working on a lot of new areas of development, new projects, which is going to drive it above that. So our expectation right now is that these growth rates will be the same. And we'll talk more about it when we get to the conference, assuming we get the PD -- or finalized.

Paul Patterson - Glenrock Associates LLC

That's excellent. I think that's great. And I guess what I wanted to just finally touch base with you on is, there was this IRS ruling that came out, or letter, what have you, on April 15 regarding the construction date for like ITC, PTC. And I was wondering you guys have probably had a chance to look of this, and what have you. Do you think that, that provides some additional opportunity for some renewable stuff for you guys? Or, I mean, is that sort of -- just any thoughts you guys have on what they came up with, the sort of the language that they use in terms of the construction date and stuff?

Debra L. Reed

Well, we think it's constructive and we are pursuing some additional opportunities to see if we can get under construction by next year as required under those guidelines. So we're moving forward to seek some additional opportunities in the wind space.

Operator

And now we'll hear from Maura Shaughnessy with MFS Investment Management.

Maura A. Shaughnessy - MFS Investment Management, Inc.

Most of my questions have been answered, but I -- 2 quick ones. First, have you actually announced the sale of Argentina? Or are you just hoping that it's done by the end of the year? And the second point on the attrition issue and the compensation issue, were these kind of totally out of the blue? I can't recall these mechanisms ever coming up in California before, with the CPI linkage and sort of random employee compensation? Well, I don't why I would say that, but anyway, yes, those 2 questions, please?

Debra L. Reed

Yes, I'll have Mark hit the Argentina sale and where we are on that.

Mark A. Snell

Hi. With respect to Argentina, no, we do expect to close by year-end. We're in active negotiations to sell our interest and we have been for some time and we're working out the details. But it's -- we're not -- it's not like we're just starting the marketing now.

Debra L. Reed

And then in terms of your other question on the mechanism, let me just say that have a brand-new commissioner. This is his first rate case that he's dealing with. And that the -- you haven't heard about attrition mechanisms or compensation generally because usually in every rate case, the utility-specific attrition mechanism's been adopted and the incentive comp, if it's found is be at market by the commission's own compensation study, is put in rate. I mean, that is really the requirement to allow the utility to recover reasonable costs. And if your compensation is reasonable, you should be able to get that. And if the attrition is based upon utility-specific industry, you should be able to get that. This is our -- a new commissioner with a first rate case decision that he is writing, and I give him credit. He's listening to some of the other commissioners. He had an all-party meeting where parties could make their thoughts known and I'm hoping that what we will see is changes in this based upon him listening to some of the experienced commissioners that have dealt with this issue historically.

Operator

We'll move to a question from Santiago Perez Teuffer with Crédit Suisse.

Santiago Perez Perez Teuffer - Crédit Suisse AG, Research Division

I just wondered coming from you, there is a lot of expectation on how is the Mexican energy industry shaping out. I mean, your IPO is a clear example of the expectations the market has and the value that's rising on it. I wanted to ask if you could please share your expectations in Mexico going forward and any kind expectations you have in new bidding processes?

Debra L. Reed

I'm going to turn it to Mark.

Mark A. Snell

Santiago, we had a little bit of trouble hearing you, but we think, if your question was what is our expectations in Mexico and the growth going forward. Is that your question?

Santiago Perez Perez Teuffer - Crédit Suisse AG, Research Division

Yes, exactly. I mean, do you have any kind expectations on new bidding processes?

Mark A. Snell

Yes, good. Look, we're really excited about what -- our opportunities in Mexico. The ones, the projects that we mentioned on the roadshow and the pipeline projects and also the wind project that we have, ESJ, both of those are slated to go here in the near term. Long-term prospects, obviously, the Mexican infrastructure needs and Mexico's desire to wean itself, at least for electrical production off of oil and on to natural gas, is going to allow for a lot of infrastructure development projects in central Mexico and throughout those regions. And so we're pretty excited about it. We've got the right vehicle in place to assist Mexico in making those infrastructure developments. And that's why we're so excited about this company and why we think its growth prospects are so good.

Santiago Perez Perez Teuffer - Crédit Suisse AG, Research Division

Do you have any time frames like when will new bids come up in your perspective? I mean, about probably the second phase of Los Ramones or any other project do you believe it's interesting?

Mark A. Snell

Well, we don't have any specific timing, but we -- recognizing that some of these -- the ultimate plants and things and chemical treatment facilities that are going to use the natural gas is being transported or their products that were being transported back to market. Obviously, as those the other phases of these projects all have to come in fairly swift order, otherwise they're kind of pipelines to nowhere. And all of that's happening and so I think -- I don't think any of this is super long term. I mean we're, probably in the next 5 years, we're going to see a lot of development in Mexico.

Operator

We'll take a question from Michael Goldenberg with Luminus Management.

Michael Goldenberg - Luminus Management, LLC

I wanted to understand something that Paul Patterson, I think, asked about the growth rate there that I want to get a better understanding. So the guidance for 2013 changed a little based on some items. Does that mean we should be taking the same growth rate off of a new number? Or should we be adjusting the growth rate per future numbers, whatever we were extrapolating earlier?

Debra L. Reed

Well, I'm not going to say how to do the calculation but I will tell you is that what we've said with our growth rate, was what Joe showed in February. If you take the 2013 earnings and then you subtract from that the retroactive piece of the rate case, and then from that is where you would grow. And that we were looking at a 6% to 8% growth rate and we're looking at that same range.

Michael Goldenberg - Luminus Management, LLC

So it doesn't change even though -- so even though the base number may have changed, the growth thing doesn't?

Debra L. Reed

The growth rate is still the same, yes.

Operator

We'll take a question from Vanessa Quiroga with Crédit Suisse.

Vanessa Quiroga - Crédit Suisse AG, Research Division

It's actually regarding IEnova again and in the specifics about your leverage in that entity. Right now it's very low but we would assumed that with more growth, new projects, you would be willing to increase your leverage. But what is the maximum level that you would be comfortable with at the IEnova level?

Debra L. Reed

I'm going -- I would just say that this is exactly why we did this is, in response to your question, is so that we can lever up and that we can grow that business because we think it's a terrific business. And so I'll have Joe talk about how much leverage we could put on that business.

Joseph A. Householder

Yes, on the roadshow, what we talked about was the fact that we would issue some more debt likely next year as we use the IPO proceeds for the construction of the Sonora pipelines. And that when we got the AAA credit rating there, we talked to the rating agencies and they said they'd be comfortable with that credit rating as long we stayed below 3x debt to EBITDA. And what I spoke about was at the Sempra level, we have roughly a 50-50 debt-equity ratio and I need to manage that across the whole portfolio. So as we start to reach those levels, then we'll have to consider where we are. But no more than 3x debt to EBITDA or 50-50. But as they continue to grow their EBITDA, there's going to be a lot of capacity there.

Vanessa Quiroga - Crédit Suisse AG, Research Division

Okay, yes. I agree. I mean, this 3x debt to EBITDA, when you talk about the EBITDA, you don't mean pro forma for -- or assuming when the new projects start generating EBITDA already, right? You would be talking about the current year debt to EBITDA?

Joseph A. Householder

I think if you focused sort of the 50-50 debt-to-equity ratio and the -- hold on one second. I think at that rate, and we're probably looking at the current run rate of EBITDA. But as I said, it's growing fast because these projects are coming on quickly.

Operator

We'll take a question from Ashar Khan with Visium.

Ashar Khan

Debbie, if -- I don't want to go like too deep in it. So how should we follow the proceeding next week if they do adhere to the schedule and -- on the rate case and they do come out with a decision? Will they discuss this in their meeting? Or will we have to wait for a final order to find out whether they made the changes to what we like or didn't make the changes? Can you just tell us how we can monitor it on our end?

Debra L. Reed

Yes, the typical way this would go is that changes would be published before the meeting. And then the commission would vote on the decision with those changes at the meeting. So it's on the agenda for next week. What would typically happen is those changes would come out later this week or early next week. And then all of the commission officers would have the opportunity to review those changes and then the commissioners would then vote on it. If the commissioner had a concern about what was in there after those changes were made, the commissioner could hold it at that meeting and could make an election to write an alternate decision or go back the assigned commissioner to suggest further changes. So that's kind of how the process unfolds.

Ashar Khan

Okay, so that would show up. So that any changes would show up in the docket of the case, right? That's where I should be looking at?

Debra L. Reed

Yes, that's what should happen. And then, of course, we will provide as much information as we can once we get the final decisions out. It does take a while to analyze these decisions, and one of the reasons that we want to be sure when we give you new guidance is that we have the full time to analyze the decisions. Because just looking at the revenue requirement does not necessarily yield what the outcome is going to be. So it will take us a little while to analyze.

Ashar Khan

Okay. And the second question is, I don't it's a new company and all that and I know -- I apologize, there were too many earnings today. Is IEnova going to have an earnings call? Or can you give us any sense of what their earnings were exactly year-over-year?

Debra L. Reed

Yes, we're not going to do subsegment information in our call that -- the plan is in the future, IEnova will have its own earnings call, and we'll provide that information to its investors. And I don't know, Mark or Joe, do you want to add anything to that?

Mark A. Snell

I think that's right. We'll -- they're going to do their own. We will only comment on them to the extent that it affects Sempra and we'll give you that data on our call.

Joseph A. Householder

Yes. I'll just add, the one thing to remember is in Mexico, they're reported under IFRS so the numbers are going to be slightly different. And we don't give, as Debbie said, we don't give subsegment information. So we give you guidance at the Sempra International level, but I think you all could listen in to their calls and, I think, starting next quarter probably is when they'll get set up to start doing it.

Debra L. Reed

And I just was reminded that their release is on our website, too. So you can go to our website and can see their release. But I do believe next quarter, they're going to start the call.

Ashar Khan

Okay, so they do have their own release, which is on your website?

Mark A. Snell

Right.

Debra L. Reed

Yes.

Operator

We'll now hear from Steven Fleishman with Wolfe Research.

Steven I. Fleishman - Wolfe Research, LLC

One just follow-up question. I'm sure you heard the commentary from Edison the other day on San Onofre. Could you just -- any color to add there? And just in the event that the plant does need to be shut down, what are your recourse actions to take?

Debra L. Reed

The thing I would say is that, that I read the Edison transcript and what they say about kind of their decision point. We are not -- we're a minority owner. We own 20% of the plant. We've never operated the plant. We didn't decide on what kind of steam generators went in. We didn't do any of that. And so we have to kind of look at our own position in this case, and that we are waiting for the NRC to act and we're going to see what they do. And that we're hopeful that we will get something out by early summer from the NRC. And then we're going to make our decisions on our options based upon what's best for our customers. And that's what we'll be looking at. And we may not be on the same time line as Edison is precisely. But we will look at our options as what's best for our customers as a minority owner of that plant. And I can't really add anything. Edison went through, on their call, of the details about the 2 applications, the license amendment and the confirmatory action letter, and they're better to handle those kinds of questions because they're the ones that are dealing with the agencies and operating the facility.

Operator

Our final question will come from Vedula Murti with CDP Capital.

Vedula Murti

A couple of things. One, in your earlier remarks in answer to questions when the question of incremental renewable came up, I think you indicated you were focusing -- you'd be focusing in wind arena. And I think that was all based on production tax credit. What's -- do you have a point of view as to, one, some prospects for the renewable and multi-legislation that's pending? And based on your analysis, I'm wondering whether, if that were to occur, whether that's basically something for things prospectively or given stimulation [ph] of tax credits having been utilized in whatever in the past that historic existing assets would be unlikely to fit into such structure. And I have a separate question after that.

Debra L. Reed

Okay. Well, let me just say that the focus of my answer on wind was specific to that extension in the legislation, but we are developing solar projects. And we have a 250-megawatt project that's going into construction. We have a project that we're working on to be in the queue on the solar side. So I don't want to give any impression that our focus is just on wind, because we are very actively pursuing other projects. But we love your question about the MLP. And actually when I have my meeting with the President earlier this year, that was one of the things we talked about would be very beneficial to the industry is to have some type of a REIT or MLP structure for renewables. But Mark was just involved in this about a week ago. So let me turn it to Mark.

Mark A. Snell

Yes, look, I think we are kind of excited about the prospect for renewables to be put in the MLPs and be given parity with other energy projects in the country. So we think it's a good development. I will tell you it's one of the very few things that has -- seems to have relatively broad bipartisan support. I think the thing that's holding it up from being approved is that it's a -- well, it has sort of bipartisan support. It's not really big deal to the people on the hill. And so at the end, it will probably be attached to some other larger tax bill or something that goes through. There is -- we have questions about how it's going to work for existing projects and I don't think that's been fully fleshed out. There has to be some other -- besides just making MLP-able because the MLPs have these tax credits, how that will do or if that will be a replacement for the tax credit. Nobody really knows how those things will come to be, but we do think it's exciting. We think it's something that makes a lot of sense, and we'd be well-positioned to put some of our assets and add it to our midstream MLP or create a separate one on its own, whichever kind of investors sort of look to want to do. So we think both of those things they are -- we thing they're exciting and it is something that does look like it has good support right now.

Vedula Murti

Okay. And secondarily, Debbie, you mentioned your meeting with the President. I was going to ask you, based on all your commentary around your positive view from the news, head of DOE and terms of nat gas exports and all the various export facilities, did that come up in your conversation? And do you feel like that that's the view -- that view there is similar as to the view at DOE?

Debra L. Reed

Yes, I mean, I was asked specifically not to share what occurred in the meetings. But I would say that the attendees of the meeting, universally, were quite favorable to the ability to export gas if there were appropriate provisions put in place to deal with all -- environmental issues associated with the frac-ing. And so, I think that's the direction it's heading. I didn't sense anything at all that would run counter to that direction in the discussions I had.

Vedula Murti

Yes. The one last thing, in terms of the approve [ph] status of free trade versus non-free-trade export, my recollection was that earlier this year, there was talk about trying to perhaps give an exemption or something like that to Japan and maybe western Europe since they're kind of allies or whatever. Is there anything going on, on that side at all?

Debra L. Reed

It seems like that has kind of died down a bit. And I think where the focus is now, I mean, we really do hear a number of things that at least -- and you never get definitive answers of when something is going to be approved. But we have heard a number of comments that would lead us to believe that the approvals are forthcoming and the approvals are forthcoming sometime in the near future. And that is not going to be that type of a structure with limited approval. So and you start hearing more, too, I think with the situation in North Korea, that you start hearing more, the concerns about what do we do to help support, generally, our allies? What do we do to have the U.S. be a contributor into the energy marketplace that would help deal with some of these political issues. And so it seems the -- at least the dialogue has gone more in that direction recently, which would say you're probably not going to just get a Japanese exemption or a Europe exemption.

Operator

I was just going to turn it back over to Ms. Debbie Reed for closing remarks.

Debra L. Reed

Okay. I was going just take it. So, thank you, all, very much for joining us. As always, we have Rick and Victor and Diane there to answer any of your follow-up questions from the call. And we look forward to seeing you in New York on May 23.

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