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Executives

Jan Watson - Secretary & Treasurer

Bill Gipson - President & Chief Executive Officer

Greg Knapp - Vice President & Chief Financial Officer

Analysts

Michael Goldenberg - Luminus Management

Anthony Crowdell - Jeffries

Nancy Doyle - MetLife

Phyllis Gray - Dwight Asset Management

Anthony Crowdell - Jeffries

Julian Demulan Smith - UBS

The Empire District Electric Company (EDE) Q4 2009 Earnings Call February 5, 2010 1:00 PM ET

Operator

Welcome to The Empire District Electric fourth quarter and 12 months ended 2009 earnings conference call. During today’s presentation all parties will be in a listen-only mode and following the presentation the conference will be open for questions. (Operator Instructions)

I would now like to turn the conference over to Ms. Jan Watson. Please go ahead, ma’am.

Jan Watson

Thank you, and good afternoon. Thank you for joining us for The Empire District Electric Company’s teleconference to discuss the company’s operations and review the financial results for the fourth quarter and 12 months ended December 31, 2009. A live webcast of this call is available on the Empire website at www.empiredistrict.com. Giving our presentation this afternoon will be Bill Gipson, President and CEO, and Greg Knapp, Vice President and CFO. A Q-and-A session will follow the presentation.

Our press release announcing fourth quarter earnings was issued yesterday afternoon. The press release maybe accessed on our website or a copy can be emailed or faxed you by calling 417-625-6142. A telephonic replay of the call will be available for two weeks by dialing 800-406-7325 and entering pass code 4205928 #. The webcast will also be available for replay on our website.

As always, certain matters discussed in this call are forward-looking statements intended to qualify for the Safe Harbor for liability established by the Private Securities Litigation Reform Act of 1995. Such statements address future plans, objectives, expectations and events or conditions concerning various matters.

Actual results can differ materially from those currently anticipated by reason of the factors noted in our filings with the SEC, including our most recent Form 10-K and Form 10-Q. The earnings per share impact of revenue and expense items are all discussed on an after tax basis and compare the period referred to as the same period of the prior year.

The estimated earnings per share impact of individual items is a non-GAAP presentation and the economic substance behind our non-GAAP earnings per share measure is to present the after tax impact of significant items and components of the statement of operations on a per share basis before the impact of additional stock issuances.

We believe this presentation is useful to investors because the statement of operations does not readily show the earnings per share impact of the various components including the affect of new stock issuances, which could limit the reader’s understanding of the reasons for the earnings per share change from previous years.

This information is useful to management and we think to and investors to better understand the reasons for the fluctuation in earnings per share between the prior and current year on a per share basis.

I’d now like to introduce Bill Gipson, President and CEO.

Bill Gipson

Thanks, Jan; good afternoon, everyone, and welcome. We ended 2009 with the snow that came in just in time for a White Christmas and brought a wintry blast of cold temperatures that continued into the New Year. As a result on Monday, January 4, when most returned to work after the New Year holiday.

Our natural gas customers established an all time gas usage peak when the temperature dipped two minus seven degrees; three days later on Thursday this peak was toppled when the thermometer read minus three and the usage reached about 73.3 million cubic feet.

On the electric side Friday, January 8 was the day for records. With a temperature of minus three customers established an all-time electric demand of 1,199 megawatts with a new record setting 25,970 megawatt hours of energy that were put into the system in a 24 hour period.

Unfortunately, however this type of weather was not with this during 2009, when we experienced a mild winter and a summer that was the coolest in 30 years. As a result of the mild weather and, to a lesser degree, the general economic slowdown our consolidated earnings were $41.3 million, or $1.18 per share for 2009. This compares against 2008 earnings of $39.7 million, or $1.17 a share.

Our consolidated fourth quarter earnings were $7.9 million, or $0.22 a share compared to the same period in ‘08 when we earned $7.7 million, or $0.23 a share. At yesterday’s Board Meeting, the directors declared a quarterly dividend of $0.32 per share payable March 15 for shareholders of record as of March 1, 2010. This represents 7.1% yield against yesterday’s closing price of $18.04.

I’ll now turn our presentation over to Greg, who’ll cover the financials in detail.

Greg Knapp

Thanks, Bill. As Bill stated, we reported 2009 year end earnings of $41.3 million or earnings per share of $1.18, compared to 2008 earnings of $39.7 million or earnings per share of $1.17. I’ll get to the details in a moment, but as is customary for us, I’d like to begin by providing non-GAAP basic earnings per share reconciliation for the year on a consolidated basis.

For those of you that read our press release or have it in front of you, that will be the earnings per share reconciliation I’ll follow. I should remind you again, that those earnings per share figures throughout the call are provided on an after-tax estimated basis.

Beginning with the earnings per share from last year, December 31, ‘08, of $1.17, changes in revenues on the Electric segment would have been a negative or decreased of about $0.26 per share; on the Gas segment the negative would have been about $0.16 per share; and on the other segment it was a positive of about $0.01.

On the expense side of things, the electric fuel and purchased power costs were down and that contributed to the comparison of $0.43; cost of natural gas sold and transported would have been a positive or contribution of $0.14; electric segment operating expenses would be a negative of $0.02; the Gas segment and other segment operating costs would have been neutral between the period; maintenance and repair expenses would have been about a negative $0.09.

Depreciation and amortization would have been an increase to that comparison by $0.04; other taxes would have been a negative $0.01; other income and deductions also a negative $0.01; interest charges a negative $0.07; AFUDC a positive $0.03; and the dilutive effect of additional shares a negative $0.02. If all the positives and negatives are taken into account, that would move you from $1.17 last year to the $1.18 from this year.

Now, I’ll review the annual results by category in more detail starting with the electric segment of our business. As we noted in yesterday’s press release, our electric segment revenues decreased in 2009 due to several factors. The weather in our region for much of the year was very mild with the exception of the last couple of weeks, which Bill referred to.

Just to provide some statistics that we use to help us estimate the effect of weather, heating degree days were 4% lower compared to last year and cooling degree days were significantly lower, in fact more than 12% lower when compared to 2008. When we attempt to relate this to the impact on revenues, we estimate weather decreased electric revenues by about $20.3 million.

All system sales revenues were lower by approximately $15.4 million, which is somewhat a result of weather as well since regional demand was lower. As you may recall, the majority of our off-system margin flows through our fuel adjustment clause, so this reduction has very little impact on our bottom line.

We had a couple of items that partially offset the weather, such as rate increases which increased revenues approximately $21.9 million. Most of this increase relates to the Missouri rate case, which was effective August 2008, and we recognized a full year of those rates in 2009.

Growth has slowed during the last year or so, which we believe is largely due to the economy as we’ve seen reduced demand from our industrial class of customers. However, we’re still seeing some customer growth overall in our electric service territory and we estimate this added about $0.6 million of revenue in 2009, compared to 2008. Overall our Electric segment revenues were lower in 2009 by about $13.4 million, which is about a 3% decrease compared to 2008 and this lowers the earnings per share by approximately $0.26.

Fuel and purchased power expenses for 2009 also decreased by $22 million, which decreased earnings per share on a comparative basis by approximately $0.43. Significant decrease here was the natural gas costs, which are $18.6 million lower compared to 2008. Our costs related to natural gas volumes were lower by $23.1 million and we did experience a slight increase in natural gas costs related to prices we paid based on our hedge position.

Purchased power costs were also down $6.8 million. Again, we believe this is largely due to lower demand in the region causing prices to be significantly lower compared to 2008. Our overall coal costs increased $3.2 million in 2009 over 2008. Our coal volumes didn’t materially change.

If you remember, we did experience an outage at our Asbury unit back in 2008 during the first several weeks of the year, but we also had an outage at Iatan I during the first quarter of 2009. We did see some price increases related to our coal contracts compared to 2008. The effect of fuel adjustment clauses in 2009 increased our recorded fuel expense by $0.5 million compared to the adjustments in 2008.

I’ll continue now with our operating expenses, which increased a modest $1 million and lowered earnings per share by about $0.02. Increases related to power operations and professional services were the most significant when comparing the two periods.

Our operations were up about $1.3 million and we had increased costs at our Asbury Plant for running the SCR for the entire year and we’ve also seen increased operating costs at Iatan Unit I related to the environmental improvements that were added early in 2009.

As we noted in yesterday’s press release and previous calls, our agreement with the Missouri Public Service Commission allowed us to defer certain costs related to the Iatan I environmental additions which started with its in service date and will continue until we’re able to start recovering costs and rates.

These costs deferred generally in three areas of our financial statements. The operating cost section we are speaking of here, depreciation and carrying charges which defer some interest costs. We deferred $0.6 million during 2009 for Iatan I operating costs. Professional service costs were higher by $1.5 million, but we also had a couple of operating expense categories, which were significantly lower in 2009 compared to 2008.

Our healthcare costs were lower by about $1.3 million and claims, such as workers compensation, injuries and damages, were also lower by $1.1 million. Moving on to maintenance expenses, those increased $4.5 million during 2009 compared to 2008 and lowered earnings per share by about $0.09. The major component of this increase relates to the 2007 ice storms.

If you recall, portions of the expense we incurred from these ice storms are deferred for regulatory treatment. Missouri PSC approved that treatment in our 2008 case and we began amortization of these costs in August 2008. We of course amortized a full year of these costs in 2009 resulting in additional amortization of about $2.5 million when comparing 2009 to 2008.

We did experience slight increases in our production and distribution maintenance costs which accounts for much of the remaining increase. Depreciation and amortization decreased about $2.3 million which increased earnings per share by approximately $4.50. While plant in service did increase, the depreciation for that was offset by a reduction of $3.7 million related to the regulatory amortization being recorded for our Missouri jurisdiction.

If you recall how the Missouri regulatory amortization works, it really has no affect on earnings because the regulatory amortization is built into our Missouri rate structure as well, so the revenues and depreciation being recorded are designed to offset each other and have no impact on the bottom line.

We also deferred roughly $8.8 million of depreciation related to the Iatan I environment upgrades based on our agreement with the MPSC. Other taxes such as property and franchise taxes also showed a slight increase of $0.8 million which equates to about a $1.5 reduction to earnings per share.

In summary, on an earnings per share basis, the electric segment contributed $1.12 per share during 2009 compared to $1.11 during 2008. Now I’ll briefly go over the gas segment. 2009 gas segment revenues and fuel were both lower 2009 compared to 2008 and the overall margin decreased about $1.1 million, which lowered earnings per share by about $0.02.

Decrease in revenues and ultimately the margin is mostly attributable to milder weather compared to last year. Heating degree days in our gas service territory were lower by almost 10% which we believe is the major factor causing residential and commercial customers to decrease their usage.

Gas segment operating and maintenance costs increased by only $0.2 million in total, which reduced earnings per share by approximately $0.005, depreciation and other taxes for the gas segment, were relatively flat for the comparative periods, on an earnings per share basis the gas segment earned approximately $0.03 per share during 2009 compared to $0.05 during 2008.

From a consolidated perspective let me first discuss AFUDC. We recorded $1.6 million of additional AFUDC in 2009 compared to 2008, which added to earnings per share by about $0.03. Those figures include both the debt and equity components of AFUDC. Interest expense for 2009 increased approximately $3.5 million compared to 2008 lowering earnings per share by about $0.07.

Long term debt interest increased $6 million primarily because of the 7%, $75 million first mortgage bond offering we completed in March of 2009. This increase is partially offset with lower short term debt interest of $0.7 million. Other interest charges further reduced total interest costs because of the deferred carrying charges related to Iatan I, which I referred to earlier. This deferral lowered interest cost by $1.3 million.

Other income and deductions were flat when comparing 2009 and 2008, although we did experience lower interest income in this category, but it was partially offset by a gain we recorded for a land sale in 2009. Since we’ve come to another year end, let me give you a little detail about our effective tax rate. Rates for 2009 and 2008 were essentially the same at 32.5%. Over the last several years AFUDC from our large construction cycle and tax benefits of Medicare D subsidies have significantly lowered our effective tax rate.

I’ll briefly go over the fourth quarter results now. As Bill mentioned, we are reporting $7.9 million of income or $0.22 per share for the 2009 period compared to the 2008 quarter earnings of $7.7 million or $0.23 per share. Electric segment revenues for the 2009 fourth quarter decreased by about $4.1 million compared to 2008 which reduced earnings per share by approximately $0.08 per share.

Our estimate of the impact of weather appears to have lowered revenue by about $4 million and off system revenues were lower by about $2 million when compared to the 2008 fourth quarter. The only significant increase for revenues during the 2009 fourth quarter was due to jurisdictional rate increases mostly attributable to fuel clause revenue adjustments which added about $1.6 million over the fourth quarter of 2008.

Total electric fuel and purchased power expenses decreased $3.1 million for the 2009 fourth quarter adding to earnings per share by about $0.06. Similar to the annual results, our natural gas costs were lower and decreased fuel cost by about $7.2 million compared to the 2008 fourth quarter. Lower volumes in natural gas were the primary cause for this decrease and are largely due to an outage at our state line combined stock plant.

Coal volumes caused an overall increase in coal costs of about $1.8 million. This increase is partially the result of Iatan Unit I being online in the fourth quarter of 2009 as opposed to 2008 when the unit was off line during part of the quarter to tie in the environmental upgrades Purchased power costs for the 2009 fourth-quarter compared to 2008 were higher by $2.1 million as well.

The effect of our fuel adjustment clause in the 2009 fourth quarter increased our recorded fuel expense by $0.5 million compared to the adjustments made in the 2008 fourth quarter. Other operating expenses increased $0.6 million but were offset by maintenance expenses, which decreased $0.9 million.

These two areas net out to a positive impact on earnings per share of only $0.05. The production maintenance was the largest item which decreased cost about $0.6 million when comparing the quarters and was mostly due to the timing and significance of outages.

Depreciation and amortization expense increased by $0.3 million decreasing earnings per share by approximately $0.005, also property and other local taxes were flat in the 2009quarter compared to 2008. In total, the Electric segment income for the 2009 fourth quarter was $6.7 million, or approximately $0.18 per share compared to earnings in the 2008 fourth quarter of $6.8 million or $0.20 a share.

Switching over to the gas operations again, 2009 fourth quarter Gas segment revenues in fuel were both lower for 2009, compared to 2008 and the overall margin decreased about $0.3 million lowering earnings per share by only $0.005. Other operating and maintenance costs for the Gas segment during the 2009 fourth quarter were higher only very slightly than last year and had almost no impact on earnings per share.

Depreciation was flat when comparing the two quarters and other taxes were slightly lower by $0.2 million for the comparative periods. The gas segment net income for the fourth quarter of 2009 was $0.9 million versus $1.1 million for 2008, and contributed $0.02 overall to earnings per share for the 2009 fourth quarter as opposed to $0.03 in the same 2008 quarter.

On a consolidated basis, we recorded an additional $0.2 million of AFUDC income in the 2009 fourth quarter, compared to 2008, which had less than a $0.005 impact on earnings per share. Interest costs were flat when comparing the 2009 and 2008 fourth quarters. Long term interest increased about $1.1 million that was offset by lower short term debt interest and deferral of Iatan I carrying charges.

That concludes the earnings information I want to provide, but I’d like to update you on a few things including our current hedge position with data as of February 1. Approximately, 75% of our anticipated volume of natural gas usage for our electric operations for the remainder of 2010 is hedged at an average price of $6.32 per dekatherm.

For 2011, we’re about 71% hedged or we have about 5.1 million dekatherms hedged at an average price of about $5.84. 2012 we’re about 40% hedged or about 3 million dekatherms hedged at an average price of $7.02. For 2013, we’re hedged at about 17%, which equates to 1.2 million dekatherms at a price of about $7.30.

For our gas operations, we have 81% of the expected need price protected for the remaining winter season, which runs through the end of March including 0.8 million dekatherms in storage on the three pipelines that serve our customers; this represents 40% of our storage capacity.

I also want to update you on a few items including our progress in regard to the equity distribution program. At the end of December, we had sold roughly $69 million of the $120 million available on this program. We expect to continue this program in 2010. We also recently extended our unsecured $150 million line of credit for an additional three years with our syndicate banks.

Terms and covenants are unchanged; however, the pricing relative to fees and interest rates in the new agreement reflects current market. Our balances outstanding related to short term debt and commercial paper at year end was $50.5 million with cash on hand of $5.6 million.

Lastly, we are currently working with KCPL to enter into an agreement with the IRS to receive our share of the $125 million in advanced coal investment tax credits granted Iatan No. 2. Our share amounts to approximately $17.7 million. We cannot predict the timing of the receipt of the credit; however, it will have no significant income statement impact as the credit, which will reduce our tax payments, will flow to our customers over the life of the plant.

I’ll now turn the presentation back to Bill.

Bill Gipson

Thanks, Greg. We filed for new electric rates in our Missouri and Kansas Jurisdictions in the fourth quarter. In October, we filed a request for new rates with the Missouri Public Service Commission and we’re seeking an annual revenue increase of approximately $68 million, or 19.6%. The new rates requested are designed to begin recovery of costs associated with the major investments we’ve made on our system, including the environmental upgrades at Iatan Unit I and new generating units at Plum Point and Iatan No. 2, plus the annual cost associated with these units.

An announcement by KCP&L, the operator and construction manager for Iatan No. 2 came on January 13, just this last month. In the announcement Kansas City stated a revised in service date for Iatan No. 2, which has been expected to be the late summer of 2010. Fighting construction delays and unusually cold weather the completion date has now been shifted a couple of months into the fall of 2010.

KCP&L reported no expected material increase in the estimated construction cost due to this change. Our total investment in Iatan No. 2 remains at approximately $218 million to $230 million. Due to the delay in the in-service date of Iatan No. 2, we expect the recovery of Iatan No. 2 will be delayed. We intend to file a follow-up case in Missouri to recover the costs associated with Iatan No. 2. The staff’s audit is underway and we’re working with all parties to establish a procedural schedule in this case.

However, in Kansas, we requested new rates in November and are seeking an annual increase of approximately $5.2 million or 24.6%. The Kansas rates will cover costs associated with the environmental upgrades at Iatan I. The SCR that we put online a couple of years ago at our Asbury Power Plant, the costs associated with new generating units, Riverton Unit 12, which came online at April of ‘07, Iatan No. 2 and Plum Point. Request also includes recovery of operating and maintenance costs associated with all of these units.

A procedural schedule has been established in the case and an audit is now underway. Testimony from the Commission staff is due in March. A local public hearing is scheduled for next week and the technical hearing is scheduled for May 11. We anticipate the rates for our Kansas customers will go into affect by July 16.

This case will include expenditures for the plants that are already in service including Iatan I and Riverton 12 and Asbury SCR and then the expenditures for Iatan I, Iatan No. 2 and Plum Point through January 2010. We’ve agreed to file an abbreviated case to true-up other expenses associated with our building projects within a year.

Also on the rate case front, on December 8 and 31, the Court affirmed the Missouri Commission’s orders pertaining to our 2006 and 2008 electric cases that were on appeal in Cole County, Missouri. 2006 case has now been appealed into the Western District Court of Appeals by the Office of Public Council and the industrial interveners.

Our eight mile, 161 KB transmission line project from Ozark to Riverside was energized on January 19. This project was built to ensure reliability for that part of our transmission system. The project has taken nearly five years from inception to completion during which time we made a couple of trips to the Missouri Supreme Court defending our condemnation authority.

Finally, on Wednesday, January 20, a major milestone in the construction of the Plum Point generating station was achieved. First fire of the plant’s boiler was completed and steam blows were started. Steam blows are a procedure by which steam is passed through the boiler piping and tubing at high velocities to clean the piping. These are the preliminary steps for bringing the plant online and it’s scheduled for completion this summer.

I’ll now turn it back to the operator for your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Michael Goldenberg - Luminus Management.

Michael Goldenberg - Luminus Management

I have two questions that, you might have discussed them, but I didn’t get to catch the whole call. During the quarter how much equity did you issue out of your program?

Bill Gipson

We issued about 2.1 million shares, about $37.9 million of equity for those shares during the quarter.

Michael Goldenberg - Luminus Management

So you’re about a little more than halfway to your target?

Bill Gipson

Well, our capacity under that equity shelf is $120 million and we’ve got just slightly over $50 million remaining of capacity.

Michael Goldenberg - Luminus Management

Then can you please elaborate more on the statement in the press release about Iatan No. 2? We know that Great Plains issued a press release saying that they can’t do it in time. They’ve chosen to delay the filing of the rate case to get it into that rate case. It seems you’re going ahead with the rate case. Are you going to delay it or are you going to end up filing a new rate case right after to get Iatan No. 2 online?

Bill Gipson

Yes, the rate case we have that we filed contemplated Plum Point, Iatan I and Iatan No. 2 and we certainly don’t want to pull this case and not have the benefit of getting cost recovery for Iatan I and Plum Point. So we would anticipate filing a second case after this one is completed with respect to Iatan No. 2.

Michael Goldenberg - Luminus Management

So, let me get the timeline. This case is expected, assuming everything goes on target to be finished around October of 2010?

Bill Gipson

About the end of September, yes.

Michael Goldenberg - Luminus Management

Then you would file right after?

Bill Gipson

Yes.

Michael Goldenberg - Luminus Management

That would be 11 months, so some time around August, 2011 is when we would see Iatan No. 2 in rates?

Bill Gipson

If we want to the full 11 month schedule, that’s correct.

Michael Goldenberg - Luminus Management

Is that just for Missouri or is Kansas in the same boat or you going to get Iatan No. 2?

Bill Gipson

In Kansas what we filed for are the expenditures for all of those facilities through January 2010. In other words we have the opportunity to earn equip in Kansas.

Michael Goldenberg - Luminus Management

The cash flow would be on the same similar timeframe as Missouri, but earnings in Kansas will be faster?

Bill Gipson

Well, the rates are expected to go in at mid July in Kansas.

Michael Goldenberg - Luminus Management

Iatan No. 2 will not be in fully in that rate case in Kansas either, right?

Bill Gipson

Not quite fully, that’s correct.

Michael Goldenberg - Luminus Management

A little ahead of Missouri and you will file another case in Kansas together fully in?

Bill Gipson

That’s correct.

Operator

Your next question comes from Anthony Crowdell - Jeffries.

Anthony Crowdell - Jeffries

Hopefully just a couple quick questions, I wonder if you could tell me the ROE you guys filed for in your Kansas electric case and regarding Empire Gas, I was wondering if staff has put out a recommendation yet or if you’ve received any final order on that. You filed, I believe June of 2009 in 11 months, I’m guessing staff has made some proceedings and could you possibly give us an update on the equity on what you’ve done say up to year-to-date beginning in 2010 or by the end of January?

Greg Knapp

Anthony, this is Greg, let me answer the last question first here on the equity. Our program, we’re in a blackout period right here until we get our 10-K filed. So we’ve not done anything in January on that equity program. What I answered earlier on the $37 million of equity and 2.1 million shares in the fourth quarter and being at about 69 point something million dollars issued under that $120 million shelf, where we were at the end of the year is where we are right today.

Operator

Your next question comes from Michael Goldenberg - Luminus Management.

Michael Goldenberg - Luminus Management

I forgot to ask one question. What was the percent equity layer that you filed in Missouri and Kansas? Where do you think those percentages will go by the time you do the true-up? So where was it filed originally and where do you think the true-up filing would be on the percent equity?

Bill Gipson

Test year was June 30, so we would have filed an actual capital structure June 30, 2009.

Michael Goldenberg - Luminus Management

Which was what percent equity?

Jan Watson

We don’t have that right now. Do you what to get the actual?

Bill Gipson

Let us work on that and we’ll get to you.

Michael Goldenberg - Luminus Management

I can probably calculate it myself. If I’m not mistaken there’s a true-up allowed in Missouri and Kansas for the equity?

Bill Gipson

Yes, there is and that’s part of the procedural schedule that we’re working on now.

Michael Goldenberg - Luminus Management

Where do you think that percent equity will end up around true-up, do you have a target?

Bill Gipson

Well, we always try to be in that 50/50 sort of range or one-to-one.

Michael Goldenberg - Luminus Management

You think you’ll get to 50% by then?

Bill Gipson

It might be just slightly less than 50% by the time we get to the true-up.

Operator

Your next question comes from Nancy Doyle - MetLife.

Nancy Doyle - MetLife

Just getting back to your Missouri gas rate case, the ruling, I think you were going for a fixed variable request. Did that get approved?

Bill Gipson

Nancy, we entered into a stipulated agreement on that case and it’s got a couple of parts that are important to you. One is we had filed for $2.9 million and this stip calls for a revenue increase of $2.6 million and the other thing that we had filed for was a straight fixed variable, putting all of the fixed costs on the customer charge and we got about halfway to where we wanted to go in this stipulation.

We’ll move from a roughly $7 to $9 customer charge to around a $16.50 customer charge, whereas our filed position was more like in the high 20s. We’re pretty pleased with that. The only remaining issue that went to trial was the level of our energy efficiency funding program. Of course, you’ll remember that our energy efficiency programs, we treat those as regulatory assets for future recovery of as and on.

Nancy Doyle - MetLife

Was there a disclosed ROE that you got on that case versus…?

Bill Gipson

No, it was really a black box. As I said, we filed for $2.9 million and we’re able to get $2.6 million, which was about 90% of our request. So there were some adjustments and depreciation and things with that nature, but we’re pretty pleased with the outcome.

Nancy Doyle - MetLife

Could you just tell me, how much is the dividend basket now?

Bill Gipson

It’s still at $10.75 million. You’re talking that the modification to the bond indenture?

Nancy Doyle - MetLife

Yes, how much you can dividend out, is it $10.75 million?

Bill Gipson

$10.75 million.

Operator

Your next question comes from Phyllis Gray - Dwight Asset Management.

Phyllis Gray - Dwight Asset Management

On the Missouri rate case, you filed for $68.2 million, will you update that filing to take out costs associated with Iatan No. 2?

Bill Gipson

If we were to do that we would basically moved out the case that got filed. So, no, we’ll not file additional tariffs, but we’ll do something in this procedural schedule to indicate removing we’re loosing Iatan No. 2, we don’t want to file new tariffs.

Phyllis Gray - Dwight Asset Management

About how much of the $68.2 million request would be for Iatan No. 2?

Bill Gipson

It would probably be on the order of $30 million.

Phyllis Gray - Dwight Asset Management

So a pretty big difference in the…?

Bill Gipson

Let me remind you of this regulatory amortization, that at the end of the process the Commission renders its decision and then the parties take a look at their decision and determine what additional cash is to be received from customers in order to support credit metrics. Just because Iatan No. 2 might represent $30 million of the $68 million doesn’t mean that it might not be a play with that regulatory amortization in the end.

Phyllis Gray - Dwight Asset Management

A little more complicated than I thought it would be, but that sounds like a good thing. I didn’t hear what your depreciation expense for the year was. I wondered if you could…?

Greg Knapp

Just give me a second here and I’ll get that. Depreciation is on our income statement about $51.5 million is the income statement depreciation number for the year of 2009.

Phyllis Gray - Dwight Asset Management

Interest expense for the year?

Greg Knapp

Interest expense: the just straight interest expense for our long term debt and the trust preferreds, just a little bit more than $46 million and of course, when you look at that off of the income statement, you’re going to have AFUDC netted against that and then different items. So it would come down on the income statement basis, that interest line would be about $38.8 million.

Phyllis Gray - Dwight Asset Management

The capitalized interest?

Greg Knapp

The AFUDC is in total about $14 million.

Phyllis Gray - Dwight Asset Management

Do you include in the AFUDC the interest that you’re differing associated with Iatan or is that in a different category?

Greg Knapp

That’s in a different category. That’s for the year about $1.3 million.

Phyllis Gray - Dwight Asset Management

There’s some securitized interest also in addition to the interest expense?

Greg Knapp

No.

Phyllis Gray - Dwight Asset Management

Then your dividends for the year?

Greg Knapp

Total dividends for the year on that $44.8 million, Phyllis.

Phyllis Gray - Dwight Asset Management

Did you have a scheduling conference in Missouri yet to know like when the staff is giving their testimony? Did you cover that already?

Bill Gipson

We’re still working on that.

Operator

Your next question comes from Anthony Crowdell - Jeffries.

Anthony Crowdell - Jeffries

I know I spoke to Jeffries about Joplin. What was the Kansas ROE that you filed for? Was it the same as Missouri, the 11%?

Bill Gipson

No, it was 11.3% and it common stock.

Anthony Crowdell - Jeffries

I think you issued about 2.1 million shares in the quarter. Was it just that the timing was so late in the year that it hadn’t or so late in the quarter actually that it had no impact on an EPS basis?

Greg Knapp

The EPS is on that average shares outstanding. So, yes, you issue it in December and it doesn’t affect the year end much.

Anthony Crowdell - Jeffries

Okay, and what was your year-end count, was it 35.9 million or something?

Greg Knapp

No, we’re at 38.1 million shares outstanding at the end of December.

Operator

Your final question comes from Julian Demulan Smith - UBS

Julian Demulan Smith - UBS

Do you mind walking through I apologize, you’ve been slammed with this a little bit the schedule as far as completing the Missouri rate case and afterwards what that would look like necessarily? You would file immediately after, is that the deal there?

Bill Gipson

That would be our plan as soon as we can assemble a case.

Julian Demulan Smith – UBS

Do you have any sense I mean, I don’t know if you’re willing to provide anything here, but in ROE at Missouri this year, what your thoughts are there?

Bill Gipson

The only thing I can tell you is in terms of the case discussion that we’re aware of with respect to Missouri Gas & Energy, we’ve got a couple of commissioners in the 10.2, 10.3 range, a couple in the 10 range and one sub 10. That’s the only anecdotal information that I can give you right now.

Operator

I’m showing no further questions in the queue, please continue.

Bill Gipson

Okay, well we appreciate the opportunity to review the earnings with you and the other issues and bring you up-to-date and we continue to focus on increasing shareholder value as we provide reliable, affordable service to our customers and have a great afternoon.

Operator

Ladies and gentlemen, this concludes The Empire District Electric fourth quarter and 12 months ending 2009 earnings conference call. If you’d like to listen to a replay of this conference, please dial 303-590-3030 or 1-800-406-7325 and enter the access code of 4205928. AT&T would like to thank you for your participation and you may now disconnect.

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