Great Plains Energy Incorporated Q3 2009 Earnings Call Transcript

Great Plains Energy Incorporated (GXP)

Q3 2009 Earnings Call Transcript

October 30, 2009 9:00 am ET

Executives

Michael Cline - VP, IR and Treasurer

Mike Chesser - Chairman and CEO

Bill Downey - President and COO

Terry Bassham - EVP, Finance & Strategic Development and CFO

Analysts

Michael Lapides - Goldman Sachs

Michael Goldenberg – Luminus Management

Dan Lifshitz – Fir Tree Partners

Waldo Matthews [ph] – CDP, U.S.

Timothy Yee – KeyBanc

Presentation

Operator

Good morning. My name is Amanda and I will be your conference operator today. At this I would like to welcome everyone to the Great Plains Energy third quarter 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. (Operator instructions). I would now like to turn the call over to Michael Cline, Vice President Investor Relations and Treasurer. Please go ahead sir.

Michael Cline

Thank you, Amanda and good morning, everyone. Welcome to Great Plains Energy's third quarter conference call. Joining me on the call this morning are Mike Chesser, Chairman and CEO of Great Plains Energy and Kansas City Power & Light, who will provide a strategic overview; Bill Downey, President and COO of Great Plains Energy and Kansas City Power & Light, who will discuss KCP&L Operations and Terry Bassham, Executive Vice President and CFO of Great Plains Energy, who will provide details on Great Plains Energy's third quarter 2009 financial results. Also joining us on the call today is John Marshall, Executive Vice President, Utility Operations, who will be available for questions.

Since some of our remarks will be forward-looking, I must remind you of the uncertainties inherent in such comments. The second slide included in this webcast and the disclosure in our SEC filings, contain a list of some of the factors that could cause future results to differ materially from our expectations.

Before I hand the call to Mike, I have three items to highlight for you. First, we filed our third quarter 10-Q after the market close yesterday. It is available along with supplemental financial information regarding the quarter in today's webcast slides on the main page of our website at www.greatplainsenergy.com.

Second, I want to again remind everyone that we closed the acquisition of Aquila, which we now refer to at GMO on July 14th, 2008. Therefore, there were two fewer weeks of GMO results in the 2008 quarterly period, compared to the 2009 third quarter and for the year-to-date period GMO is not reflected in the 2008 numbers until July 14th, 2008.

Third, as a reminder, Great Plains Energy provides the financial information in its earnings releases in accordance with GAAP. In prior years, the company also provided core earnings, a non-GAAP measure that excluded the effects of discontinued operations, certain unusual items and mark-to-market gains and losses on energy contracts.

The company believes that in prior periods, core earnings provided a meaningful indicator of results that was comparable among periods, because it excluded the effects of these items. Given that the majority of the financial statement impacts of Strategic Energy ceased at the end of last year, beginning in the first quarter of 2009, the company no longer provides core earnings.

I'd now like to introduce Mike Chesser, Chairman and CEO of Great Plains Energy and Kansas City Power & Light.

Mike Chesser

Thanks, Michael and good morning everyone. Thank you for joining us today. I know there is a lot of earnings activity in the run up to the EEI Conference next week, so we'll keep our comments brief this morning.

By now I'm sure you've read yesterday afternoon's press release announcing our third quarter earnings and the comparison of 2009 earnings guidance rate to $1.10 to $1.18 per share. Our third quarter results were a major contributor tour decision to lower the top end of the guidance range.

The story for us in the quarter revolved around much more core of a normal summer weather and continued energy consumption pressures from the recession. We estimate these factors reduced top line revenue by nearly $35 million compared to last year's quarter. These forces were definitely challenging and beyond our control in many ways.

We worked hard to mitigate some of their impact through process improvement, disciplined expense management. Our progress throughout the year gives us confident in keeping the low end of our guidance range intact. Terry will provide you the details on the numbers and his comments, however I did want to touch a couple overarching factors to help put the quarter and our outlook in context.

As this slide depicts, the foundation of Great Plains Energy is our core regulated electric utility business. We serve Kansas City and the surrounding area since the late 19th century and have core fundamentals that will endure and provide the platform for growth once market conditions begin to improve. So, when may that happen?

As Terry will discuss, the pace of overall energy consumption declined we experienced in the third quarter, exceeded what we were seeing earlier in the year. However, we are seeing some signs that the economy in our region is beginning to level off. As an example, we've seen an upward trend in building permits over the past few months.

Just yesterday, the Mid-America Regional Council reported that they expect to see the economy in the Kansas City region return to pre-recession levels somewhere between mid-2010 and mid-2011. But there are still a lot of unknowns and we are cautious about economic recovery in the near term

In this difficult economic environment, we are as I mentioned taking prudent and diligent measures to reduce costs and improve productivity in a sustainable way. At the same time, I want to assure you that the reliability of our network and the effective operation of our generation fleet remain key priorities. They are fundamental to our ability to provide our customers excellent service and to our growth overall going forward.

We also continue to reap the rewards of the GMO acquisition and are focused on continuing process and operation improvements in order to quickly capture the full synergy benefits for customers and shareholders.

Our solid foundation has been further strengthened by the comprehensive energy plan that we embarked on four years ago. Bill will provide an update on the progress of Iatan 2 in his section, but I wanted to show you a couple pictures of the Iatan site as we near completion of one of the largest construction projects in the company's history.

The CEP has been demanding undertaking for our company, simply given that our work over much of the last two years has been done at the same time of the GMO acquisition in the face of a deteriorating economy. With the completion of Iatan 2 now on the horizon, we're optimistic as we look ahead.

We face similar near term economic headwinds as others in our industry. However, once the environment improves, we're confident that the expansion of our rate base that we've achieved through the comprehensive energy plan will provide significant benefits for our shareholders, our customers, our employees and the entire region.

So in conclusion, while we are currently being challenged by factors outside of our control caused by the recession, we are prudently managing our business during the downturn and believe there are numerous opportunities ahead.

First, our sold vertically integrated regulatory utility platform position us to capitalize on future growth opportunities in our region. Second, we will explore alternatives and make smart infrastructure investments to address our customers and regions energy requirements in the face of rapidly changing legislation, technology, and political and public sentiment that we foresee in the coming years.

Third, we'll maintain a strong focus on effectively navigating our regulatory environment and building upon the positive outcomes for the regulatory process we've consistently been awarded. And finally, we'll look to strengthen our financial position and maintain our flexibility as we face the changing landscape of our industry and the infrastructure decisions that we need to make in the next few years. So with that, I'll hand the call to Bill for his comments.

Bill Downey

Thank you Mike, and good morning everyone. I'll briefly cover a couple of key operations related items. As you saw in the pictures Mike showed just a minute ago, we are making steady progress on Iatan 2 construction. We're in the final phase of construction and anticipate that physical construction will be essentially complete in January 2010. The next phase of the project will then be start up testing and commissioning.

We are targeting to fire the plant on oil by the end of January and on coal early in the second quarter. We would expect the unit to be sinked to the grid around that time as well. Following that, there'll be a series of months needed for online testing and commissioning leading us to a projected in service date late next summer.

A significant piece of our next rate cases will be the of course the addition of Iatan 2 to rate base. We get many questions of around the timing of our next round of filings. In Kansas we have negotiated flexibility in the rate case procedural schedule that would accommodate an unforeseen delay in the in service date of Iatan 2, following the filing of the rate case.

We are therefore planning to move forward in Kansas, sometime in December 2009. In Missouri we're exploring a mechanism that would provide similar schedule flexibility to what we have in Kansas. If we are unable to negotiate such a mechanism, then Iatan 2 will need to be online by no later than seven months from our rate case filing date in order to be captured in the rate base true-up.

A successful first fire of a plant on oil will be key to the in-service date we've targeted for the units So, we believe that the prudent approach is to wait until the milestone is achieved before considering moving forward with the Missouri filing.

In addition to Iatan 2, the upcoming rate case filings will also incorporate a prudency review of the cost of Iatan 1 and common facilities. Our recent settlements capped the potential disallowance at $45 million in Missouri and $7.5 million in Kansas. The staff in Missouri is required to file their assessment and recommendation with the commission by the end of December.

The third bullet point on this slide refers to the refueling outage at Wolf Creek that is currently in process. We expect the unit to be back online in the mid-November. I also wanted to provide a few comments on plant performance. For the combined KCP&L coal and nuclear fleet, equivalent availability in the third quarter was 87%, down from 94% in the third quarter of 2008 when Wolf Creek ran at 100%.

As many of you know, Wolf Creek was down in August when a storm caused the simple contains loss of all three main power lines into the plant. All safety back-up systems functioned as anticipated, but the unit was offline for evaluation for five days. The KCP&L coal fleets equivalent availability in the third quarter of 2009 was down from 92% level, seen in last year's quarter, but was still a solid 86%.

Availability at all plants was approximately 90% or better with the exception of LaCygne 1 and LaCygne 2. We believe capital modifications made in 2009 and planned for 2010 at the LaCygne units will address the issues we experienced during the quarter.

I also wanted to briefly mention the performance of Iatan 1. Which ran at equivalent availability of approximately 90% in the quarter. This was a very good performance in the unit's first full quarter of operation, following the completion of a major overhaul and installation of the new air quality control system or AQCS. The AQCS is a success story as well. And its performance to date has exceeded our expectations. This exceptional operation, plus the completion of the project earlier this year at an expected cost below our 2008, 10-K estimates this most recent example of our successful execution of the comprehensive energy plan.

Before I introduce Terry, I also want to point out that depicted on this chart is a widening of the gap between equivalent availability and capacity factors for our coal units in the 2009 quarter, compared to a year earlier.

Over the past few years, the low cost position of our units has generally led to a fairly small difference between availability and capacity. Broadly speaking, traditionally when our plants have run, if the power generated was not required to meet retail load, it was usually sold in the wholesale market. In the third quarter of 2009, however, we saw instances where our coal plants were available, but were not dispatched either because there was limited wholesale demand or they were displaced by lower cost natural gas generation.

As we mentioned in the press release, average natural gas prices during the quarter were the lowest since the third quarter of 2002. That concludes my comments. Next up is Terry who will take you through the financial discussion.

Terry Bassham

Thank you, Bill, good morning everyone. My comments this morning are focused on the results for the quarter and year-to-date as well as the impression [ph] of our 2009 guidance range.

I'll start with the results for the quarter. Before I do, that I want to remind you of Michael's comments at the beginning of the call. Because of the closing of the GMO acquisition in mid-July 2008, there are two more weeks of GMO results in the 2009 quarter than in 2008.

As you can see, earnings for the 2009 quarter were down 25%, compared to the same quarter last year. I will cover the operational drivers when I cover the segment earnings. But I want to highlight on this graphic that the average number of shares outstanding increased $21 million as a result of the shares issued related to the GMO acquisition. As well as new common shares issued in 2009. This diluted earnings $0.11 per share in the quarter.

For the first nine months of 2009, earnings were about 9% lower than the same period in 2008. I did want to note on this slide that one of the big GAAP earnings drivers is the discontinued operations of Strategic Energy, which contributed a $2.3 million loss in 2009 compared to earnings of $35 million during the same period in 2008.

Also earnings per share for the 2009 year-to-date period were diluted by $0.36 per share as a result of more outstanding shares as I described in the last slide.

Now I'll turn to details by segment. Earnings in the electric utility segment decreased $18.6 million in the third quarter, compared to the same period in 2008. I won't cover each of the bullets on this slide because they are covered in the press release. And on the 10-Q, but I'll touch on a few of the key earnings drivers.

Retail revenues increased about $22 million compared to the same period in 2008, driven by GMO's revenue for the full quarter and approximately $27 million from our recent rate cases. However, as Mike described, these positive factors were offset by an estimated $35 million decrease in retail revenues as a result of mild weather and lower customer energy consumption, driven by the recession.

On weather, cooling degree days in the quarter were 18% lower than 2008 and 32 % below normal. I'll talk more about consumption on a latter slide.

Wholesale revenues declined $28 million more than offsetting increase in retail revenues. The main driver was a 42% decrease in the average price per megawatt hour, as a result of lower natural gas prices. While lower natural gas prices hurt us on the wholesale revenue side, they also contributed to average purchase power process that were almost 70% below last year's quarter. Purchase power volumes were up, due to reduced plant availability Bill talked about, but the net impact was a $24 million decrease in purchase power expense.

Non-fuel operating expenses increased about $12 million but the main driver was a $7.5 million payment to terminate an agreement for the construction of a wind project. The rest of the increase was due to having GMO for additional two weeks in 2009 period. These results reflect that from a day-to-day operational standpoint, we are continuing to tightly manage expenses, and are seeing the synergy benefits of the GMO transaction.

Finally, interest expense also increased about $12 million mainly due to new long-term debt issued in March 2009, as well as inclusion of GMO for the full quarter in 2009. For the first nine months of 2009, earnings for the electric utilities segment increased by roughly $7 million over the equivalent period in 2008, which was attributable to having GMO for the full period in 2009.

The key operating drivers for KCP&L's last [ph] comparative earnings for the year-to-date period, were lower retail sales and higher depreciation and interest expense, partially offset by a higher equity component of allowance for funds used during construction or AFUDC. Low natural gas prices contribute to lower wholesale sales and reduced purchase power expense that essentially offset one another.

For the 2009 year-to-date period, income taxes also decreased about $21 million compared to 2008, when KCP&L deferred tax balance was increased by approximately $20 million due to an increase in the composite tax rate reflecting the sale of Strategic Energy.

This slide which we first used last quarter puts some numbers behind the continued difficult economic conditions in our service territory that Mike alluded to. This chart is electric utility segment customer energy consumption as measured by weather normalized megawatt hour sales period-on-period. The overall change in megawatt hour sales captures changes in both customer count and customer usage. As you can see, we are continuing to see a significant decline in industrial consumption with third quarter and year-to-date weather normalized sales down 8.2% and 9.1% respectively from the prior year periods.

Previously the falloff in industrial sales appeared to be due more to general scaling back of activity, rather than permanent declines due to facility closings and like. However, in the third quarter, we experienced decreases in both the number of customers and usage per customer. So, this is a trend we'll be watching very closely. As a reminder though, the consumption trend in the industrial segment has been negative, the impact on revenues is mitigated to a degree by two factors. First, industrial rates are designed with lower pricing and higher volumes. So, when sales are lower, they're made at higher prices.

Second, industrial is a relatively small part of our overall mix, making up only 14% of our retail megawatt hour sales for the third quarter. Also in the commercial sector, weather normalized megawatt hour sales declined 2.5% in the third quarter of 2009. Reversing the positive trend we'd seen in that sector in the first half of the year.

Economic challenges are confronting many of the key segments in the sector, including retail, municipalities, property management, education and health care, so again, we'll be monitoring developments here closely.

From a bad debt perspective, for the year-to-date KCP&L's bad debt expense as a percentage of revenue is down, compared to the same period in 2008. This is primarily due to increased energy assistance for our customers and our increased focus on collecting items more than 60 days past due.

In our other segment, which mainly includes unallocated corporate charges in GMO's non-utility operations, we reported a loss of $6 million for the quarter compared to earnings of $1.8 million for the same period in 2008. Lower results were due to a $4.6 million after tax impact of additional interest expense for the equity units that Great Plains Energy issued in May. Additionally, the 2008 period included positive earnings impact from the reversal of an after tax interest expense related to unrecognized tax benefits.

For the others segment, year-to-date, earnings were $1.5 million compared to a loss of $16.1 million for the same period in 2008. The main factor driving improvement in 2009 was a $16 million tax benefit in the first quarter due to the settlement of the 2003, 2004 GMO tax audit. The favorable GMO impact was partially offset by the additional interest expense for equity units mentioned previously. We like to always show this graphic to highlight our credit ratings, debt profile and capital structure.

We're in the process of working through our annual budgeting process and we share more about our financing plans for next year when we announced our 2010 earnings guidance in February.

Finally, I wanted to make a couple comments about the compression of our 2009 earnings guidance range. As we indicated in our press release, we're tightening our 2009 range of $1.10 to $1.40 per share to $1.10 to $1.18 per share. And doing so, we've evaluated potential impacts for the balance of the year from a number of factors including first, the economy and its influence on weather normalized retail sales. Second, natural gas prices and the impact on wholesale sales, wholesale volume and purchase power expense, and third, our continued focus on tightly managing OEM expense and capturing synergies.

That concludes my comments. I appreciate your time. Now I'd like to hand the call back over to Mike.

Mike Chesser

Thanks very much, Terry. At this point we'd be happy to take any questions that those of you on the phone may have.

Question-and-Answer Session.

Operator

(Operator instructions). Your first question is from Michael Lapides with a Goldman Sachs.

Michael Lapides – Goldman Sachs

Hey, guys. I want to touch on a handful of things. First of all, the schedule in Missouri regarding the rate case filing versus the in-service date by Iatan 2. I want to make sure I'm interpreting this correctly.

Are you guys hinting at there is a potential delay in the in-service date by Iatan 2, or is this just being done for regulatory flexibility in other mechanisms?

Mike Chesser

It's latter. We're not hinting that there's a potential delay.

Michael Lapides – Goldman Sachs

Okay. When is the first firing expected of Iatan 2 kind of the oil firing you mentioned?

Mike Chesser

That would be late in January, sort of about the third week in January, Mike.

Michael Lapides – Goldman Sachs

Got it. Second, credit ratings, when we look at that slide, you've been on negative watch at several of the agencies for a while. First of all, have these been updated since your financings from the May/June timeframe?

Mike Chesser

I'll let Michael Cline answer that.

Michael Cline

Michael, yes, those reflect the current views of both Moody’s and S&P.

Michael Lapides – Goldman Sachs

Right, but in that view has been, sometimes there can be extensive lag between when the agencies provide an updated view. That view has been updated since the equity financing.

Michael Cline

They publish, at least in S&P's case, a monthly update of the ranking of all the utilities in the industry from strongest to weakest and that's their opportunity to publish their updated view. It hasn't changed since the March timeframe.

Michael Lapides – Goldman Sachs

Got it. Are you facing pressure in terms of your capital structure from the agencies in order to keep your credit ratings? Or is there other mechanisms going on in terms, potentially they're just waiting to see the outcome of the next rate case?

Michael Cline

Well, I think at this point, they're evaluated a number of factors. If you read the most recent S&P summary on the GXP family, it references the very positive steps that we've taken with regard to credit quality this year including the financing that we completed in May. They perceive the dividend cut earlier this year as positive from a credit perspective. They noted that the plant operations have improved.

But they did mention that the economic situation in the region and the impact on energy consumption remains something they're keeping an eye on as well as the upcoming Iatan 2 rate case and regulatory treatment there.

Mike Chesser

I think that the latest mid-American Regional Council forecast that came out yesterday should help in that regard also.

Michael Lapides – Goldman Sachs

Okay, last item, when we had met previously over the last four or five months and talked about financing needs and the next couple of years, at a very, very high level, I think you guys did mentioned that you were not assuming equity financing in the near term, meaning 2010, potentially even 2011, timeframe. Does that still hold? Is there potential change to that? If so, what's the driver?

Mike Chesser

Of course it's always difficult to project the environment that we're going to be in, but given the current environment and where we think it's going to go, we expect to be able to fund our capital needs internally, and that's certainly our objective.

Michael Lapides – Goldman Sachs

Okay, thank you, guys. Much appreciated.

Operator

Your next question is from Phil Teumim with Luminus Management.

Michael Goldenberg – Luminus Management

Good morning, this is actually Michael Goldenberg.

Mike Chesser

Hi, Michael.

Michael Goldenberg – Luminus Management

Hi. I have a question, I saw -- district electric filed the rate case last night. Are you surprised by the timing? I was under the impression that you were planning to file first. Maybe partially because you had the larger share of Iatan. Do you have any comments as to the schedule of filings because (inaudible) at least in some way?

Bill Downey

Michael, no, we were not surprised. We were aware of their plans. They have multiple issues. I'm sure they covered them in their meeting yesterday. We would expect and I think everybody's in agreement that the prudence components of the case with regard to Iatan will be covered in our filings, in our cases is when they're there.

They have multiple facilities coming into service and they had not yet gotten unit one at Iatan into their rate base. So they had a variety of drivers that led them to the decision they made.

Michael Goldenberg – Luminus Management

Okay. And you are still on course for November filing or December?

Bill Downey

We indicated that we'd be filing definitely in December, in Kansas, because of the flexibility we've been able to negotiate, we would be looking probably well, we're in discussions right now with Missouri, so I would say that the timing on the Missouri filing will follow the conclusion of the discussions we're having with Missouri.

Michael Goldenberg – Luminus Management

But given the Missouri's tendency to take time with the decisions, any reason to not do it sooner rather than later?

Bill Downey

We could do it as late as January.

Michael Goldenberg – Luminus Management

Okay, got it. Please remind me once again, Iatan is scheduled to come online when, is that the late summer?

Bill Downey

Late summer, next year.

Michael Goldenberg – Luminus Management

Got it. Thank you.

Operator

Your next question is from Dan Lifshitz with Fir Tree Partners.

Dan Lifshitz – Fir Tree Partners

Hi, this is a question on the coal natural gas fuel switching you mentioned, is that something that you’d expect to continue to see going forward and what sort of gas price do you think you need in order to maintain your costs advantage position with the coal plants?

Mike Chesser

Actually the gas prices improved here over the last couple months. The real switching was occurring when it was down around $3. It's now up around $5 and the long-term forecast is for it to be beyond that. So we think in those and ranges we shouldn't see that kind of switching.

Dan Lifshitz – Fir Tree Partners

Got it. And do you have a sense for how big the impact was specifically of that factor on the wholesale sales and earnings?

Mike Chesser

Not really. That's a hard thing to interpolate.

Dan Lifshitz – Fir Tree Partners

Got it, okay, great, well thanks for the color in general.

Operator

(Operator instructions). Your next question is from Waldo Matthews [ph] with CDP, U.S.

Waldo Matthews – CDP, U.S.

Good morning.

Bill Downey

Morning.

Waldo Matthews – CDP, U.S.

I'm wondering given the -- your testing of Iatan 2 and it’s a service day, when do you for accounting purposes, stop capitalizing interest and AFDUC equity?

Bill Downey

It will depend on some decisions on construction accounting. We have construction accounting in Missouri, and the KCP&L jurisdiction. So we've got a work to do yet on how that all will play out.

Waldo Matthews – CDP, U.S.

Because what I'm kind of trying to get at here is depending on the timing of the regulatory decisions, should we be anticipating a mismatch in 2010 in terms of when, capitalized interest and AFDUC goes away versus when you’d received our cash to replace that?

Bill Downey

We have construction accounting in the KCP&L jurisdiction, which is where the bulk of the, that situation is. So we're fine there.

With regard to Kansas, part of the agreement we reached, which we view is very positive in addition to flexibility to sliding the schedule, they will put in to rate-base, the plant that, at the budgeted level, and we'll true that up subsequently, so we feel we've got a very positive settlement in that regard, in Kansas as well.

Mike Chesser

Yes and just a build on that a little bit, what I would say there shouldn't be a mismatch. We have a very specific agreement in KCP&L Missouri and we would expect and hope to get the same kind of thing for GMO’s piece. There shouldn’t be a mismatch.

Waldo Matthews – CDP, U.S.

Okay. So, no timing issues here than in terms of regulatory outcome versus in-service date and that type of things.

Mike Chesser

It shouldn't be.

Waldo Matthews – CDP, U.S.

Okay. And just wondering, how much at the budgeted -- at the current cost estimate, how much rate base, how much Iatan 2 needs to be put into rate base?

Mike Chesser

Well the entire plant would be in the case.

Waldo Matthews – CDP, U.S.

Okay, so I mean, your last case, I think you got like over, I think it was over a $200 million rate increase and obviously with the full plant now going in, if I, on that, guesstimate basis, it would appear that a rate request of like $300 million to $400 million should probably be somewhere in the ballpark in terms of in aggregate?

Mike Chesser

The key to that is we also would be a lot of that plant will be used for all system sales, wholesale sales and that will be a credit to the customers. So we won't be looking at something near that kind of magnitude.

Terry Bassham

Also remember that, amortization in this case will roll off. And so there is a combination effect that will ultimately determine what the ultimate ask for is and we are not…

Mike Chesser

About $200 million of amortization on the plant that will come off.

Waldo Matthews – CDP, U.S.

Okay. Thank you very much.

Mike Chesser

Okay.

Operator

Your next question is from Timothy Yee with KeyBanc.

Timothy Yee – KeyBanc

Hi. I just wanted to confirm that the hits on terminating the wind agreement, that was -- would traditionally be kind of a one-time expense, right?

Mike Chesser

That's exactly right.

Timothy Yee – KeyBanc

And how much was that in the quarter?

Mike Chesser

$7.5 million.

Timothy Yee – KeyBanc

Okay and, now what are your thoughts on wind going forward to satisfy the CEP?

Mike Chesser

Well we have an agreement with the Sierra Club that we will pursue 100 megawatts of wind by the end of 2010, and another 300 megawatts by the end of 2012. There is obviously two ways we could do that. One would be construction, the other would be PPA.

Obviously for 2010 with our current stock price, we’ll be leaning towards PPA, and we will have to see, what happens in 2012, whether there is an opportunity to invest or whether PPA would make more sense.

Timothy Yee – KeyBanc

And then, could you just remind us again, there is no statutory timelines to finish a rate case in Kansas or Missouri, right?

Mike Chesser

Well, the cycle is eight months in Kansas and 11 months in Missouri, which goes to the true up on the Missouri side comes seven months after the filing and then the commission has four months to deliberate.

Timothy Yee – KeyBanc

Okay. And then, just lastly, could you maybe comment on where your coal inventory stockpiles stand? I know you are talking about equivalent availability and capacity, I just want to get a sense of you are taking everything you are contracted for nowadays?

Mike Chesser

Well we are and we are in good shape. We have coal piles, and got the appropriate reserves. We are fully bought out for this year. We are about 90% bought out for 2010, 60% for 2011 and then out into the party, and out in the last two years of that. So, we are in good shape. The piles are in good shape, and the deliveries have been coming in as expected.

Timothy Yee – KeyBanc

Great, thank you.

Mike Chesser

Thank you.

Operator

At this time there are no further questions. So I would like to turn the call back over to Mike Chesser for further remarks.

Mike Chesser

Okay. Well, again, thank you all for joining us this morning. Just to recap, 2009 has been a challenging year, so far, and we expect the economy will continue to pose challenges for the balance of this year and into 2010. We will, however, continue to manage our business diligently through these near-term pressures, but at the same time, focus on laying the groundwork to capitalize on the attractive opportunities that I outlined that we see ahead of us, when the economy does improve and when we complete the Iatan 2 plant. So, we look forward to visiting with many of you in person at EI next week. Hope you all have a great weekend, and hope to see you in Florida. Thank you.

Operator

Thank you for participating in today's conference call. This concludes the conference call. You may now disconnect.

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