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ITC Holdings Corp. (NYSE:ITC)

Q2 2009 Earnings Call Transcript

July 30, 2009 11:00 am ET

Executives

Pat Wenzel -- IR

Joseph Welch -- Chairman, President and CEO

Cameron Bready -- SVP, Treasurer and CFO

Analysts

Daniel Eggers -- Credit Suisse

Neil Kalton -- Wells Fargo

Leon Dubov -- Catapult

Rashi Bilowani [ph] -- Achofen [ph]

Renae Reno [ph] -- GGHC [ph]

Operator

Good day, everyone and welcome to the ITC Holdings Corp. second quarter 2009 conference call. Today's conference is being recorded. At this time I'd like to turn the conference over to Ms. Pat Wenzel. Please go ahead, ma'am.

Pat Wenzel

Good morning and thank you for joining us for ITC's 2009 second quarter earnings conference call. Joining me on today's call are Joseph Welch, Chairman, President and CEO of ITC; and Cameron Bready, our Senior Vice President, Treasurer and CFO. Last night, we issued a press release summarizing our results for the second quarter and the first six months of 2009. We expect to file our Form 10-Q with the Securities and Exchange Commission today.

Before we begin, I would like to remind everyone of the cautionary language contained in the following Safe Harbor statement. Certain statements made during today's call that are not historical facts, such as those regarding our future plans, objectives, and expected performance are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our outlook only as of today.

While we believe that these statements and their underlying assumptions are reasonable, investors should know that actual results may differ from our projections and expectations because they are based on current facts and are subject to risks and uncertainties. A discussion of the risks inherent in our business that could cause these differences may be found in certain documents filed with the SEC such as our Form 10-Q expected to be filed today; our other periodic reports filed on Forms 10-Q and 10-K as well as our other SEC filings. You should consider these risk factors when evaluating our forward-looking statements. We disclaim any obligations to update or alter our forward-looking statements except as required by law.

At this time, I’d like to turn the call over to Joe Welch.

Joseph Welch

Thanks, Pat. The second quarter of 2009, ITC experienced another period of strong operational and financial performance. Our earnings growth continues to be driven by our investments and our transmission system which provide significant benefits for our customers such as increased reliability, enabling the interconnection of new renewable resources, lower system losses and reduced congestion.

Our investment also supports our commitment in operational excellence which is demonstrated by the results of the 2009 SGC Statistical Services Transmission Reliability Benchmark Study that was released in May. ITCTransmission was the best overall system in sustained outages and overall momentary outages. This represents a considerable improvement over 2006, the first year that ITCTransmission participated in the study when it ranked #7 in both sustained and momentary outages.

In the 2009 study METC ranked in the top decile and was seventh in both sustained momentary outages. By comparison in the 2006 study which was also the year in which we acquired the METC system it ranked in the third quartile for sustained outages on its 345 kV system.

These outages improvements are significant are directly related to the investments we have made in our system and correlate closely with the length of time we have owned these systems. They also speak to ITC's capabilities as an operator and our commitment to developing robust and reliable transmission systems for the benefit of our customers. ITC Midwest system has a history of poor outage performance, third quartile worst.

As we continue to invest capital in the ITC Midwest system and make the improvements that we committed to when we acquire this system we expect it to become a top performing system consistent with our experiences at ITCTransmission and METC. However, as with those systems will take many years of sustained effort on our part.

In addition to significantly improving the performance of reliability of our systems, our investments also support the interconnection of new renewable resources. The ITC Midwest has made significant investments interconnecting wind and other renewable generators demonstrating our commitment to allowing all generative resources access to the transmission grid.

Last year ITC Midwest interconnected more than 800 Megawatts of wind capacity which helped Iowa surpass California as the state with the second greatest amount of installed wind capacity. ITC sole focus on transmission in our independence continue to provide substantial value for both our customers and shareholders.

As a result of our independence, our management team has been well positioned to take a leadership role in educating policy makers on the important transmission place in facilitating our nation's energy goal of enabling access to renewable resources, reducing carbon emissions lowering our dependence on foreign well, and ensuring energy security. In addition, ITC has also positioned itself for more diversified growth by shaping energy policy close to all.

In Michigan, we actively supported the legislation creating the onshore wind energy zone board whose purpose is to identify regions with the highest wind potential designating as wind energy zones and establish the optimal infrastructural requirement to facilitate their development.

As a complement to the onshore wind studies Governor Granholm issued an executive order to study the feasibility and potential of developing offshore wind and formed a Great Lakes Wind Council of which I am a member. Tom Vitez, our Vice President, Planning is a member of the Wind Energy Resource Zone Board.

The Board's preliminary report has identified potential wind capacity in the state of a minimum of 3,400 megawatts to over 6,000 megawatts. The final report will be issued by mid-October and ITC will have 45 days to submit its transmission plan for the board’s review.

The Michigan Public Service Commission will consider the findings in the board's final report, the transmission plan, and other information before designating one or more areas in this state as a wind energy resources zone.

As part of the broader debates surrounding energy policy there has been significant discussion about the need for new transmission investment, not just to replace and rebuild our existing infrastructure, but also to create a transmission backbone system capable of supporting our nation's developing energy policy goals and objectives.

No matter what element of energy policy is considered, whether it’s wind, solar, biofuels, electric cars, clean coal, mine-mouth coal, energy efficiency, demand response or energy independence to implement any or all of these a flexible robust and adapted transmission grid is the critical link. This is why ITC has been aggressively promoting its vision to form transmission policy.

These reforms follow to three primary categories. First, there should be a transparent mandatory independent planning process that makes use of existing regional planning entities and processes that roll up to FERC. FERC should have the authority to ramp the inconsistencies between the various regional plans and to make modifications is needed to ensure a workable and coherent interconnection wide plan that support energy policy goals to make the planning process independent and must be funded through a separate assessment and not rely on voluntary contributions from among the participants.

Second, there should be a common approach to cost allocation for regional transmission investment and cost should be recovered from the entire region served by independent regional planning authority via postage stamp rates.

And lastly, FERC should be given a more significant role in transmission side. It should at minimum be given a back stop authority to site transmission approved by the independent planning authority if the state fails to act within a certain amount of time or if the state denies or unreasonably conditions align.

Both the House of Representatives in the Senate continue to work on various versions of the Energy Bill that offer potential solutions to these issues. Although predicting the outcome of any legislative process is difficult we do believe that we will have energy legislation that includes a national renewable efficiency standard and hopefully the necessary transmission reforms to facilitate that policy objective.

I want to note that while energy legislation would be clearly helpful to us as we pursue our identified and future growth opportunities legislation is not a precondition for us to continue to advance our plans in Kansas, the Green Power Express project or other regional transmission projects. We have already made significant progress in our development efforts to-date without the benefit of a billing legislation and continue to see a path forward to completing these initiatives without it.

As you will recall nearly three years ago ITC endeavored on a strategy to diversify its growth by pursuing the development of new green field transmission projects. At that time we announced that we were initiating an effort to develop several transmission projects in Kansas.

We saw an opportunity for regional transmission investment to improve electric reliability and to access renewable energy in Kansas that resulted from the progressive planning for the transmission projects completed by the Southwest Power Pool.

While we are still working to get all the necessary regulatory approvals in place we have successfully advanced our efforts to appoint what I believe it is very likely that we will build a transmission company at ITC Great Plains with a grid base of more than $600 million, which is consistent with the expectations we laid out to you when we first announced our plans to build transmission in Kansas three years ago.

We expect to begin preconstruction activities by the end of the year on the KETA project, a $200 million, 345 kV transmission line from Spearville, Kansas to Axtell, Nebraska. In April, the SPP Board of Directors' approved the first balance portfolio of economic projects, which included the KETA project. This approval allows the project to qualify for regional cost allocation through the SPP tariff.

Earlier this month ITC Great Plains received Siting approval from the Kansas Corporation Commission, KCC to build the first phase of the KETA project. This first phase of the project involves a construction of an 89-mile transmission line between Spearville and Hays, Kansas.

We have made significant progress on the Kansas V-Plan project in the second quarter as well. In June, ITC Great Plains signed a settlement agreement with Prairie Wind Transmission to resolve pending regulatory proceedings about who should be authorized to build the 180-mile long transmission line project known as the Kansas V-Plan.

The agreement stipulates that ITC will construct two segments of the line including the first section of the line running from Spearville to Comanche County, Kansas and the second section from Comanche County to Madison Lodge, Kansas.

ITC Great Plains will also construct a new substation in Comanche County. We expect to invest approximately $400 million to construct our portion of the project assuming it is built at 765 kV. I am pleased to report that just last week the Kansas Corporation Commission approved the settlement agreement thus clearly the way for us to continue to advance this important project.

The next key steps in the development of the V-Plan project include working with SPP to evaluate and ultimately approve the project at 765 kV and approval of a regional cost allocation for the project. Last quarter we also mentioned a new project in Oklahoma called the Hugo to Valiant line. This project includes 19-miles of 345 kV transmission lines and the construction of a new substation with an estimated cost of $30 million.

We will be building this project as a result of an agreement we have reached with Western Farmers Cooperative whereby they agreed to sign to us their right to build this project. Importantly, FERC recently approved this Novation Agreement thereby establishing helpful precedent regarding all the responsibility to build under a notice to construct an SPP, can be transferred from one party to another.

Continuing on the topic of regional transmission projects as we have discussed during our first quarter call, ITC unveiled plans in February of this year for the Green Power Express project, a 3000-mile, 765kV, high-voltage backbone transmission network that would facilitate the movement of 12,000 megawatts of power from the wind-abundant areas in the Dakotas, Minnesota and Iowa to Midwest load center, such as, Chicago, Southeastern Wisconsin, Minneapolis, and other states that demand clean renewable energy.

In April, FERC approved Green Power Express request for favorable transmission investment incentives. It also authorized the establishment of a regulatory asset for the development of pre-construction costs. These approvals are a first step that will enable the partnership to pursue the development of its proposed multi-state Green Power Express project.

As we have discussed ITC is very committed to working collaboratively with other utilities to advance this project and we continue our efforts to identify partners. In July we announced an agreement with MDU Resources regarding its participation in the project. We expect that the eventual partnership with MDU will be the first of many as we continue to develop the Green Power Express.

Another important event that will help facilitate the development of the Green Power Express was our recent business alliance with Mitsubishi Electric whereby Mitsubishi will produce 765 kV transformers and circuit breakers that will support the advancement of our 765 kV project such as Green Power Express. Ultimately we believe that the access to manufacturing capacity for critical equipment and skilled resources is a crucial differentiating factor that will benefit ITC.

The Green Power Express project is currently being studied by the Midwest ISO and we expect Midwest ISO will conclude as our consultants did that the project has significant benefit. Study results are expected in the fall and will help shape our next step which will likely include beginning to work with FERC to develop a plan for regional cost allocation for the project.

All of these projects are components of the three-pronged pro strategy that we have previously discussed with you and we continue to aggressively pursue opportunities in each. First of all, by having purchase transmission assets to own and operate we have the opportunity to invest and upgrades to our existing system for the benefit of our customers. Our three operating companies have significant investment needs over the next ten years.

Additionally, we have opportunities to invest in transmission to support generator interconnects including renewable energy interconnection in both our base business and opportunities outside our current operating companies. And lastly, we continue to pursue opportunities to build new regional high-voltage transmission project. We have made such progress on this front with ITC Great Plains and Green Power Express and see significant additional opportunities that we hope to advance.

Financially, ITC also continues to look for opportunities to augment this development and initiatives by acquiring transmission systems or assets that complement our overall growth strategy. Given our business model and operational capabilities we continue to believe that M&A has the ability to create both customer and shareholder benefits. Because of our management teams targeted and focused efforts and their conservative approach we believe that we are well-positioned to continue to execute against this strategy. At this time I will turn the call over to Cameron.

Cameron Bready

Thanks, Joe and good morning. Turning now to our financial performance in the second quarter of 2009 ITC reported net income of $30.8 million or $0.61 per diluted share. This compares with net income of $28.7 million or $0.57 per diluted share in the second quarter of 2008. Net income for the six months ended June 30, 2009 was 59.5 million or $0.17 per diluted share compared to 54.2 million or $0.09 per diluted share for the same period last year.

The key elements that contributed to the increases in net income and earnings per share in the second quarter and year-to-date results compared to the corresponding period in 2008 include an increase in net income due to higher rate base at ITCTransmission, METC, and ITC Midwest, in both the quarter and year-to-date periods resulting from continued investment in our transmission systems.

These increases in net income were partially offset by higher non-recoverable G&A expenses including development expenses at ITC Great Plains, ITC Grid Development, and Green Power Express for both the quarter and six months ended June 30, 2009.

In addition, in the second quarter of 2009, the increases were also offset partially by higher interest expense resulting from higher borrowing levels to finance our capital expenditures.

I would like to remind you that effective January 30, 2009, ITC adopted Financial Accounting Standards Board's staff position number EITF 03-6-1, which modified the calculation of basic and diluted earnings per share including the treatment of restricted stock. The implementation is this new pronouncement reduced 2009 basic and diluted EPS by approximately $0.01 for the second quarter and reduced both basic and diluted EPS by $0.02 for the six months period ended June 30, 2009.

In addition although the required retroactive application did not resulted a change to either basic or diluted earnings per share for the second quarter of 2008 it did result in a decrease to basic earnings per share by $0.02 and diluted earnings per share by $0.01 for the six months ended June 30, 2008 as compared to the previously reported amounts for that period.

Please refer to our 10-Q, expected to be filed later today that contains the full disclosure of the effects of this new accounting pronouncement.

As Joe noted our investments and our transmission systems continue to drive our earnings in the EPS growth while at the same time benefiting our customers in the form of increased reliability and increased access to new renewable generating resources. For the six months ended June 30, 2009, ITCTransmission invested $42.1 million, METC invested $82.5 million and ITC Midwest invested $75.8 million in their respective transmission systems representing total investment of $200.4 million for the period.

We continue to consistently deliver solid financial results despite the difficult economic environment in which we are operating, particularly here in Michigan. The challenges face by Michigan have had and are expected to continue to have an impact on our business including a precipitous decline in our peak network loads.

Through June 2009, network loads for ITCTransmission has declined almost 5% from the same period last year. More importantly, through June 2009, loads for ITCTransmission and METC are approximately 6% lower than those use to forecast our transmission rates for 2009.

In addition, in July, Michigan has been the second coolest on record which will clearly result in lower load for this period relative to last year and our 2009 projected load. Given these attachment of rate making model, these lower than anticipated loads would result in lower than forecasted current revenues collected in cash and the creation of a true-up receivable to be recovered in 2011.

Notwithstanding the attachment of rate making structure in the true-up mechanism we believe it is important for us to strive to minimize the impacts of lower than forecasted loads as this will help to ensure that our earnings are quality earnings and that we are collecting cash in a manner that more closely corresponds with the revenues we are recording and non-deferring such collection of cash to later periods.

This in turn helps to ensure that we preserve the overall credit quality of the business and also benefits our customers by reducing the risk of future rate impacts associated with historical activities.

In order to minimize this attachment of true-up we continue to be actively engaged in cost mitigation efforts to reduce both operation and maintenance expenses and general and administrative expenses at ITC. As I cautioned you previously we are being very diligent with our cost mitigation efforts to ensure that we are continuing to meet our high standards for the safe and reliable operation of our system and are non-jeopardizing our ability to continue to pursue our growth initiatives.

As a result of these efforts we have been successful in offsetting a large portion of the impact in the reduction of load in Michigan. As of June 30, 2009, the amount of revenue accruals associated with 2009 is approximately $15.1 million. As in our mitigation efforts this would have been significantly higher. We expect these mitigation efforts to continue through remainder of the year in order to ensure the quality of our earnings and cash flow as well as to protect our balance sheet and our credit ratings.

While the unprecedented decrease in load in Michigan it is not expected to have an impact on our 2009 expenditure plans, it could have an impact on the timing and amounts of capital expenditures in future years especially at ITCTransmission. However, it is important to note that over the past six years during which we have owned ITCTransmission we have invested more than $700 million in the system to improve its viability and operational performance.

As Joe mentioned the recent benchmarking studies indicate that these investments have resulted in a top performing system. Consequently this reduction in load comes at a time when we have already completed much of our planned investment in this system and therefore we will have a much lower impact on our future expected capital requirements.

In addition, Michigan's activities to diversify its economy and its green initiatives including its efforts to develop on and offshore wind capacity will most likely create additional capital expenditure opportunities that made partially, fully or even more than offset the impact of the low degradation.

We are currently in the process of updating our ten-year capital expenditure plans and are assessing the potential impacts as well as those resulting from the likely need to invest in transmission to support the development of the wind energy resources (inaudible) Michigan. We expect to roll out our new 10-year capital expenditure plan on our Analyst Day which is currently scheduled for September 30th in New York.

Turning to our outlook for the remainder of the year, let me first address our capital expenditure plans for 2009. We are reaffirming our capital expenditure guidance for ITCTransmission and METC but are increasing our capital expenditure guidance for ITC Midwest primarily due to the acceleration of certain generator interconnection projects.

We continue to expect capital expenditures to be between approximately $70 million to $85 million at ITCTransmission and $110 million to $130 million at METC, and have increased the expected capital expenditure guidance at ITC Midwest from a range of approximately $90 million to $110 million to a range of $120 million to $130 million. The total range of the expected capital expenditures is now $300 million to $345 million for 2009.

Our previous earnings guidance for 2009 is $2.20 to $2.30 per diluted share has been increased to reflect the higher expected capital expenditures at ITC Midwest. The impact of the updated capital expenditure guidance resulted in an increase of approximately $0.03 to $0.04 per diluted share to our EPS range.

Additionally, we have increased our earnings guidance to reflect the recognition of $8.4 million of regulatory assets at ITC Great Plains in July of 2009, for start-up development and preconstruction costs which has the effect of reversing costs we previously expensed.

As a result of our continued progress with our development efforts in ITC Great Plains and specifically the KETA project, management determine in July that it is probable that these amounts will be recoverable and therefore recorded the regulatory assets.

The impact on diluted earnings per share guidance for 2009 resulting from the recognition of these assets includes an increase of $0.03 per diluted share for expenses that were or are expected to be incurred in 2009, and an increase of $0.08 per diluted share for expenses incurred prior to 2009, for a total of $0.11 per diluted share impact on our expected 2009 diluted EPS.

In addition, the adoption of Financial Accounting Standards Board's staff position number EITF 03-6-1 as I previously discussed has the impact of partially offsetting the increases in our diluted EPS guidance by approximately $0.02 to $0,03 per diluted share for the full year. Our prior earnings guidance for 2009 did not reflect this option in this new accounting pronouncement

As a result of these three factors we are today updating our 2009 earnings guidance to a range of $2.32 to $2.42 per diluted share. Please refer to our earnings press release issued last night for a reconciliation of our 2009 full year earnings guidance.

Lastly I would like to update you on our liquidity position and our ability to continue to finance our capital expenditures. ITC have revolving credit facilities that each of its operating companies and at ITC Holdings with total consolidated capacity of $340 million. As of June 30th we had underarm capacity of $198.4 million, $49.7 million of which is held by Lehman Brothers Bank.

We do not expect any future draws on the outstanding Lehman commitment which reduces our underarm capacity to $148.7 million. Additionally, as of June 30th we had $61.4 million of cash on hand, bringing our total liquidity position to approximately $210 million.

As previously disclosed on April 29, 2009 ITC Holdings entered into a term loan agreement with a two-year maturity. The term loan agreement establishes an un-guaranteed unsecured $100 million term facility, the proceeds of the term facility were used to pay down the ITC Holdings revolver and added a $100 million to ITC’s overall liquidity position.

Our strong and predictable cash flows resulting from our rate making model and our solid liquidity position underpin our confidence that we will continue to be able to fund our capital requirements efficiently and effectively going forward.

In addition we have demonstrated our capability to access the capital market even during the most difficult of these economic times to provide cost effective capital to our business.

Operating in this economic environment is challenging for all companies but due to ITC’s resilient business model and our discipline approach to operating our business we continue to enjoy success and achieve our operational and financial goals.

With that I would like to open the call for questions from the investment community. Lisa?

Question-and-Answer Session

Operator

Thank you sir. (Operator instructions). And we will take our first question from Daniel Eggers from Credit Suisse, please go ahead.

Daniel Eggers -- Credit Suisse

Hi, good morning.

Cameron Bready

Good morning Dan.

Daniel Eggers -- Credit Suisse

Just for clarity real quick on the reg asset with the moving cost to rate base adjustments, $0.08 of that number I would think of is non recurring in the future, I mean, I shouldn’t assume that, that benefit stays that was kind of an unique catch-up this year?

Cameron Bready

Correct.

Daniel Eggers -- Credit Suisse

Okay. But the $0.03 is kind of an ongoing cost that should be avoided in the future?

Cameron Bready

Well, let me be clear on the $0.03 stand, $0.02 of the $0.03 relates to cost that we have incurred already in 2009 and a penny relates to remaining cost in 2009 that we expect to book to this regulator asset. Now bearing in mind the regulatory asset only relates to cost that would have otherwise been expense. We had already assumed in our forecast for 2009 that by Q3 our rate for KETA would be effective or rate for ITC Great Plains would be effective and therefore we would be able to either expanse through our wait or capitalize preconstruction costs associated with the KETA project. So we only expect about another penny of benefit in 2009 for the regulatory asset because for the balance of 2009 we had already assumed that we will be capitalizing the cost associated with the KETA project.

Daniel Eggers -- Credit Suisse

Okay, so just to make sure the way I am thinking about is, the thing about 10 and 11 and beyond, $0.08 of this year’s earnings range is kind of a catch up from prior periods, right, so far anything about whether a baseline should be for next year you had net this down as by $0.08 starting point, is that fair?

Cameron Bready

Yes, I think that’s fair.

Daniel Eggers -- Credit Suisse

Okay. On the Michigan opportunity kind of with you the size of the wind resource they are talking about in the state any ballpark on how much CapEx you guys think you spend there and given the size as your great enthusiasm for this to be a larger project and maybe even want the state renewable targets were?

Joseph Welch

I don’t think at this time until the board meets and the Public Service Commission really rules on where we're at that we are in a position to give any guidance. The different wind zones in Michigan were dispersed through the state and depending on what they pick to develop first entirely develop it will really dictate the plan that our planning people have to submit. At this point its speculative I can tell you this that you know, the Governor of the State has been pretty forthright and aggressive on wanting to push for wind development in the state and that will continue and we have supported that and when we get clarity on this, consistent with our practices that we need to announce something and said expectations at a different level we would be out there and then tell you exactly what happens, but don’t expect anything until probably at the end of the third quarter.

Daniel Eggers -- Credit Suisse

And then I guess Joe just kind of you guys were fairly blunt in your views on (inaudible) since that has been past whatever in the conversations you had with Members of Congress and are you finding willingness or interest in the House to be more supportive of transmission or is going to have to be really a Senate led proposition?

Joseph Welch

Probably in all candid or probably have to be Senate led. The fact is that there was a big build up of momentum around the energy package and since we are now focused on healthcare its really kind of set on the backburner, we continue to stay vigilant and still hopeful that, one of the pieces that from my own standpoint that I would like to see past assure would be they are pleased to get the Federal Energy Regulatory Commission, the backstop siding authority that would probably be the one thing that streamlines things the most but we have stayed the course on all our projects and have shown that we can execute and with or without the legislation and so we view the legislation as an enabler to maybe expedite, but you know candidly, we are on target before we wanted to be day one.

Daniel Eggers -- Credit Suisse

Are you people thinking that ‘09 looks hard of it the optimistic for '10 or any views on how many you might see something get understood to make the whole process little easier?

Joseph Welch

I think our people were telling us that best case is going to be the fall.

Daniel Eggers -- Credit Suisse

Best case is fall?

Joseph Welch

Yes.

Daniel Eggers -- Credit Suisse

And then that the hog just one last question is with pulling forward some of the Iowa spending, is that more spending that you found that you didn’t anticipate or you guys just bringing up CapEx those expected to lease it out later?

Joseph Welch

Well basically what you have there is as we have laid out our and then I said in my discussions there we have our three-pronged growth strategy and the continual driver in Iowa for the increase is in the fact that we have these wind generators coming on that, we can plan the system, but we don’t plan wind generators, they plan themselves and so we knew that there was going to be a big element out there and this continued to be a big element. The system in and of itself out there of course is not a very good performing system and it needs a lot of work so the further you go on that system the more you find but the fundamental driver has been the wind.

Daniel Eggers -- Credit Suisse

So the answer is just as added as to what you thought the original plan?

Joseph Welch

Yes.

Cameron Bready

Dan, this is Cameron, I think we continue to see the opportunity to interconnect wind generating resources particularly in Iowa as being significant and obviously our goal is to be as responsive to their needs as we can be. And so to the extent that they are prepared to interconnect and want to move forward and have what they need to move forward we are obviously working diligently that to accommodate that and that's largely was driving the increase in capital spend in 2009.

Daniel Eggers -- Credit Suisse

Got it. Thank you guys.

Cameron Bready

Yes, thank you Dan.

Operator

Our next question comes from Neil Kalton with Wells Fargo, please go ahead.

Neil Kalton -- Wells Fargo

Hi, good morning everyone.

Joseph Welch

Good morning Neil.

Cameron Bready

Good morning Neil.

Neil Kalton -- Wells Fargo

Just a question on M&A, you mentioned in your comments that you are always looking to do that, have you seen any increased interest on the part of utilities to explore M&A given the current economic environment?

Joseph Welch

No, I think the fact is that these opportunities come up with different times, but we are not telegraphing that we have anything out there today, bluntly we don’t.

Neil Kalton -- Wells Fargo

Okay, and then the second question on Oklahoma, you're pushing forward that you had a valiant line. Also wonder if you can maybe comment on potential future opportunities there obviously you're moving forward with the V-Plan in Kansas there is that southern portion Oklahoma, maybe Texas, is there an opportunity for you to play a role in that build out as well?

Joseph Welch

Oh, absolutely I mean that's why we are there. ITC Great Plains is focused on the SPP build out and when we went and started ITC Great Plains three years ago the fact it was that the SPP or the Southwest Power Pool have started to do high voltage overlay planning and that is one of the fundamental criteria that you absolutely have to have the regional planning authority have got to have done some thing and SPP candidly they are the leaders in the United States of planning and so we were there, and all of these projects were going to come to fruition as they work themselves through their planning process so we look that as a very fertile ground for high voltage overlay work and we intend to be a player.

Neil Kalton -- Wells Fargo

Is it safe to assume that the talks are being sort of the SPP are there discussions with the utilities in Oklahoma as well going on would that be…?

Joseph Welch

Well, we are constantly in discussion with the SPP Utilities because we believe that the right way to do this is going to be through partnerships, this is got to be regionally coordinated and there is no way any one end you can do that.

Neil Kalton -- Wells Fargo

Okay, thanks a lot.

Operator

(Operator instructions). And our next question comes from Leon Dubov with Catapult.

Leon Dubov – Catapult

Yes, Hi, good morning?

Joseph Welch

Good morning Leon.

Cameron Bready

Good morning.

Leon Dubov – Catapult

I just wanted to double-check one thing how much have you guys spend so far in these costs so potentially be capitalized for the Green Power Express line?

Cameron Bready

As of June 30, Leon, its $2 million on Green Power Express.

Leon Dubov – Catapult

Is there any other development cost that are being spent that have not yet been capitalized in Kansas and outside of Green Power Express?

Cameron Bready

There are, we have a development initiative that looks at a variety of different opportunities, so there are dollars that we spend in both Kansas, pursuing ITC Great Plains activities in Oklahoma and other part of SPP as well as for Green Power Express as well as looking at other opportunities that we may pursue. Through June 30, 2009 we had spent I think $5.5 million on development activities and that’s across the board that’s everything.

Leon Dubov – Catapult

That $5.5 million includes the stuff you've capitalized in Kansas?

Cameron Bready

No, the $5.5 million was a June 30 number that includes everything we had spent in 2009.

Leon Dubov – Catapult

Well like I said that’s everything you spend that has not been capitalized?

Cameron Bready

Well nothing was capitalized to June 30, we didn’t book the regulatory asset until July.

Leon Dubov – Catapult

Oh I see.

Cameron Bready

So everything as of June 30 had been expense.

Leon Dubov – Catapult

Okay, and how about prior to 2009?

Cameron Bready

In terms of how much development dollars we have spent?

Leon Dubov – Catapult

Yes, how much total spent.

Cameron Bready

I don’t have that number in front of me.

Leon Dubov – Catapult

Okay, may we could circle back on that. Thank you.

Cameron Bready

Sure.

Operator

Our next question comes from Rashi Bilowani [ph] with Achofen [ph].

Rashi Bilowani – Achofen

Hey guys, how are you?

Cameron Bready

Just fine, good morning, Rashi.

Joseph Welch

How are you.

Rashi Bilowani – Achofen

Just a follow-up question for you on the development costs, in Kansas, will you be able to capitalize development cost this year with the V-Plan and some of the other projects or is it very sensitively out today all that you would be able to capitalize if you're following the…?

Cameron Bready

Yes, the V-Plan has a separate regulatory asset or would have a separate regulatory asset associated with it. We will make the same assessment with regards to V-Plan as we would and have with respect to KETA so as going forward when we reach a point where we believe that the asset would be recoverable we will record the asset for V-Plan until such time the development cost associated with V-Plan that otherwise would have been expense will continue to be expensed until we are comfortable in booking the reg asset.

Rashi Bilowani – Achofen

Okay, and in 2009, what do you expect the development cost for the V-Plan to be?

Cameron Bready

We haven't historically and not really in a position today to disclose forward-looking expectations around what our development dollars are. We are happy to share historical amounts as we have today, but we generally have shied away from trying to sensing those as to where we're spending our development dollars and how much we're spending and what our focus is.

Rashi Bilowani – Achofen

Okay, and then the year-to-date you have the number they approach to spend time the V-Plan?

Cameron Bready

Not, as I said, we spent $5.5 million year-to-date I don’t have the V-Plan as a specific component of that. But I can say that something we can circle back on.

Rashi Bilowani – Achofen

Okay, no worries. And second question in terms of the Green Power Express how should we think about the portion that ITC had self-fulfilled as you are adding partners for example you just added a partner, I mean, ITC will spend and repay flat or just your thoughts around there?

Joseph Welch

Well it was never anticipated that on the total projected cost for Green Power Express is $12 billion and we have never anticipated that we would be the sole funders of that. We've said that we wanted partners for several reasons, one it’s the only way that project of that scope is going to work, and two, candidly, to have the kind of financial diversity and give other people the opportunity to invest and earn on that project like ITC this has got to be built the partnership expanding seven states and multiple utilities and without that kind of going forward regional transmission just not going to work.

Rashi Bilowani – Achofen

Okay, so should I think of it is if ITC has six or seven partners that the pie would be split as many ways is that over too rough to way to think of it?

Cameron Bready

Impossible to forecast from this position, the fact is that, as the partnership develops and what we have done with the partners to-date is each one has kind of given as an indication of their capacity to invest when we get to the (inaudible) where we're at.

Rashi Bilowani – Achofen

Okay, so with the reason one was there a dollar amount discussed as far as how much they would put in or is it?

Cameron Bready

We just don’t disclose that stuff at this point.

Rashi Bilowani – Achofen

That’s fine. Okay, thank you, guys.

Operator

And our next question comes from Renae Reno [ph] with GGHC [ph], please go ahead.

Renae Reno – GGHC

Hi, good morning, this one is a follow-up on the prior question, can you address how you are going to structure with your partners so that you maintain independence or is there an indication that you will be able to give the ownership interest up to the particular percentage account as independent?

Joseph Welch

Well, we will have it structured to be independent I think that the only way of regional transmission facilities is going to work is for to be independent of market participant. I am sure that's the only way that each investor entity will be comfortable that no one is given preference over another and that's at the regional level where we would hope to have postage stamp allocation that other people are going to want to make sure that projects like Green Power Express or independent of market participants for operational reasons and for market reasons. So the structuring we haven't laid that out for people we're working with the partners to do that, but the ultimate goal is it will be independent and found to be independent by FERC.

Cameron Bready

Hi, Renae this is Cameron, part of the rationale behind the limited partnership structure was to create a vehicle by which general partner can be an independent entity that operates day to day activities of the business and was designed to preserve the independent model while still allowing us to accommodate bringing in partners in the transaction.

Renae Reno – GGHC

Okay. I think I understand that. And then can you just kind of touch on how you see a road to fruition for Green Power Express action broader federal legislation?

Joseph Welch

Well I think the first thing we have laid out is that we are still waiting for the Midwest independence system operator to evaluate the benefits of the project. Once those benefits are evaluated we will have to take their report because that would be the one that’s probably the most impacting evaluated and then we will make our next step moving forward but that will happen and ultimately it will result with filing with the Federal Energy Regulatory Commission to make their determination on it.

Renae Reno – GGHC

Okay. Thank you.

Operator

And there are no further questions. I would like to turn the conference back over to Ms. Wenzel for any closing or additional comment.

Pat Wenzel

This concludes the question and answer portion of our call. I would like to thank everyone for participating today. Anyone wishing to hear the conference call replay available through August 13th 2009, should dial toll free 888-203-1112 domestic or 719-457-0820 international. The pass code is 7604250. The webcast of this event will also be archived on the ITC Web site at http://investor.itc-holdings.com Good bye and have a great day.

Operator

And that concludes today's teleconference. Thank you for your participation.

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Source: ITC Holdings Corp. Q2 2009 Earnings Call Transcript
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