OGE Energy Corp. Q1 2010 Earnings Call Transcript

| About: OGE Energy (OGE)

OGE Energy Corp. (NYSE:OGE)

Q1 2010 Earnings Call

May 06, 2010 9:00 am ET


Todd Tidwell - Director of IR

Pete Delaney - Chairman, President and CEO

Sean Trauschke - VP and CFO

Keith Mitchell - COO

Howard Motley - VP, Regulatory Affairs, OG&E Electric Services


Jay Dobson - Wunderlich Securities

Brian Russo - Ladenburg Thalmann


At this time, I would like to welcome everyone to the OGE first quarter Earnings Call. (Operator Instructions)

Mr. Todd Tidwell, you may begin your conference.

Todd Tidwell

Thank you. Good morning everyone and welcome to OGE Energy Corp's first quarter 2010 earnings call. I'm Todd Tidwell, Director of Investor Relations. And with me today I have Pete Delaney, Chairman, President and CEO of OGE Energy Corp; and Sean Trauschke, Vice President and CFO of OGE Energy Corp; and several other members of the management team to address any questions that you may have.

In terms of the call today, we will first hear from Pete, followed by an explanation of first quarter results from Sean. And finally, as always, we will answer your questions.

I would like to remind you that this conference is being webcast and you may follow along on our website at www.oge.com. In addition, the conference call and the accompanying slides will be archived following the call on that same website.

Before we begin the presentation, I would like to direct your attention to the Safe Harbor statement regarding forward-looking statements. This is an SEC requirement for financial statements and simply states that we cannot guarantee forward-looking financial results, but this is our best estimate to date.

In addition, there is a Regulation G reconciliation for ongoing earnings in the [end] index.

I will now turn the call over to Pete Delaney for his opening comments.

Pete Delaney

Welcome to our first quarter earnings call. This morning I'll discuss our recent accomplishments and forward initiatives and our outlook for our businesses, and Sean will review our financial results in more detail.

Our first quarter results were good. Income from ongoing operations came in at $0.36 per share, up $0.18 in the first quarter over last year. We did take $0.11 non-cash charge related to the elimination of the tax deduction of the Medicare Part D subsidy, and Sean will discuss that in more detail in a minute.

The utility delivered a strong quarter, driven largely by cool weather in our service area and the rate recovery on the significant capital investments that we've made in utility to maintain our reliability and to bring renewable energy resources to our customers.

At Enogex, earnings were up significantly as we continued to experience volume growth in the gathering and processing businesses, coupled with the rebound in natural gas liquids prices. Enogex had record NGL (inaudible) production in the first quarter of this year as our investments in the prolific natural gas basins in our area are producing positive results. These rich natural gas liquids streams not only benefit Enogex's returns, but also provide good economics for our customer and the producer.

Our new Clinton [call center] facility that came into service last year located in the heart of these basins has improved the efficiency of our NGL recoveries, which translates into higher liquids volumes and better financial results. We continue to anticipate the gathering and processing volume growth will be 7% and 12% respectively this year.

As our stock price reached our prior record close of $41.01, it reflected on the differences in our financial profile since February of 2007 when we hit a previous all-time high. We have invested over $2.5 billion in our businesses, while strengthening our credit profile.

And at the midpoint of our guidance, utility earnings this year were $0.45 per share or about 26%. And those earnings represent a much higher portion of consolidated earnings which themselves are up 15% to 20% from the 2007, assuming the midpoint to high end of our 2010 guidance. And the dividend is 7% higher. So we feel good about where we're positioned today to continue to grow our earnings and dividends to provide a solid shareholder return.

Moving on to the Oklahoma, economy continues to remain steady and has not experienced severe economic impact that has plagued much of the country. The latest unemployment data for the metropolitan area is over 1 million, shows Oklahoma City with the second lowest unemployment rate in the nation at 6.7%. This is well below the national average of 10%.

However, our state and local government, like many others, were facing serious budget constraints. We do see we're continuing to add utility customers near our historical growth rate of about 1% per year.

Our industrial load is recovering and while not back to 2008 levels, it has shown growth for three consecutive quarters. We expect to add an additional 20 megawatt from industrial load this year. That said, we remain vigilant and are mindful of the challenges faced by many in our area.

Turning specifically to some of our key initiatives to position us to meet our goal of no new fossil fuel generation until 2020, the Windspeed transmission line which was energized at the end of March and will provide much needed transport capacity for renewable generation in the western part of our state. This was the first major transmission project this company has undertaken in many, many years. And I'd like to recognize our members involved in the project for completing this line on time and on budget.

Transmission is an area we remain focused on and excited about, as we've already committed to invest about $700 million over the next several years. In addition, the Southwest Power Pool Board met on April 27 and approved additional transmission priority projects of which OG&E would build about 300 million. We expect a notice to construct these lines sometime this summer at which time we will update out projected capital expenditure and our financing plans. Two important applications before the Oklahoma Commission include our system wide Smart Grid roll out and the Crossroads wind farm.

Hearings on the Smart Grid application will take place towards the end of June and we expect a decision from the Commission in the third quarter. As you know, approval in the Smart Grid program is an integral part of achieving our 2020 goal.

The Crosswinds wind farm procedural schedule has not been issued by the Oklahoma Commission, but we anticipate that if the Commission approves this project, it would be operational in late 2011. The favorable terms of the Crossroads project will save our customers millions of dollars in fuel cost over the next several years and many years after that.

Along with the 280 MW of approved wind PPAs, this almost 200 MW wind project will bring our wind portfolio to near 750 MW or over 10% of our generation capacity.

Turning to Arkansas, we anticipate filing in May for recovery of both the OU Spirit wind farm and the 280 MW of wind PPA. We'll be seeking a rider for the OU Spirit and to recover the wind PPA through the fuel addressment clause. So, you can see we still have a great deal of activity taking place in a regulatory front and we continue to work with our State Commission in an open and transparent manner to advance project and improving our service to customers. Looking at Enogex, for a moment we are evaluating many growth projects and as you know, it is our practice to only include known and committed capital expenditures in our forecast.

So we only show $45 million of capital expenditures in the outer years of the forecast. I would expect that number to increase. As mentioned earlier, the natural gas from our core areas have a rich blend of natural gas liquids that considerably boost produce of returns over dry gas streams. And we have identified numerous opportunities for Enogex's growth in the mid-continent and once we have completed due diligence regarding these projects and confirmed our economics, we expect that they will be included in our capital claim.

The tax of projects we're evaluating, include additional build out of our gathering system, the addition of process and capacity and investments in a new base. We continue to focus on speed type business and converting more of our key pole processing into fixed feed arrangements. I'm excited about the future of Enogex and the many opportunities available for expansion. I want to thank all of our members for our focus on executing on our business plans. They're keeping a focus on their day-to-day tabs critical to our success and at the same time deliver two key projects, the OU Spirit and Windspeed transmission project on time and on budget. These accomplishments reinforce our creditability with regulators and other key stake holders.

Enogex continues to execute on developing new business opportunities to serve our midstream customers. And more importantly, our members have improved their safety performance at the same time.

We have affirmed our 2010 earnings guidance and expect ongoing EPS to come in towards the high end of the range driven largely by better than previously projected performance at Enogex.

There's a lot left of the year, but we currently expect Enogex to be at the top end of its earnings guidance.

And now Sean is here to discuss the details. Sean?

Sean Trauschke

Thank you, Pete. For the first quarter ongoing net income was $35.6 million or $0.36 per average diluted share, as compared to ongoing net income of $16.8 million or $0.18 per average diluted share in 2009.

Ongoing net income, for the first quarter excludes the charge for the Medicare part D subsidiary. This non-cash charge resulting from the elimination of the tax subsidiary associated with the retiree prescription drug benefit, lowered GAAP earnings by $0.11 per share in the first quarter. The contribution by business unit, on a comparative basis for both ongoing and GAAP earnings per share is listed on the slide.

At OG&E, ongoing net income for the quarter was $8.2 million or $0.08 per share, as compared to ongoing net income of $1.3 million or $0.01 per share in 2009. Some of the primary factors are as follows. Gross margin increased $27.5 million or 17%. And I'll touch on the gross margin on the next slide. Operation and maintenance expense increased by $8.6 million primarily due to higher employee cost, plant maintenance and post retirement benefit expenses. Included in increased (inaudible) is approximately $3 million of expenses that also has revenue offsets in the form of writers.

Depreciation and amortization expense increased $4.2 million, primarily due to additional assets being placed in the service, including the OU Spirit wind farm. Net other income and expense was lower by $1.7 million, in part due to lower margins associated with the guaranteed flat bill program, which is based on normal weather.

Basically the way this works, its margins increased with milder weather and decreased when weather has a greater impact than normal. The impact of the elimination of the Medicare part D tax subsidy, created a one time non-cash impact of $7 million or $0.07 per share at OG&E.

Now turning to gross margins. You can see the drivers on the slide for the $27.5 million increase and gross margin at utility for the first quarter compared to 2009. Cooler weather in the first quarter compared to last year, increased margins by $11.6 million. Heating-degree days were 28% higher compared to last year, and up 9% compared to normal.

In the quarter, cold weather increased margins $5.5 million compared to normal. Various Riders including the OU Spirit wind farm, increased gross margin by $9.5 million. You can also see on this slide, the other drivers for the quarter, including the Oklahoma and Arkansas rate increases.

Megawatt hour sales were up 5.9% for the quarter. Industrial sales were up 5%, and although industrial sales are still below 2008 levels, we continue to see a gradual improvement.

Our overall customer growth rate was just under our historical average of 1%, with the majority of customer growth occurring in the residential sector. On a weather normalized basis, residential and commercial sales grew approximately 2%.

Now turning to Enogex, ongoing net income for the quarter was $29.4 million or $0.30 per share, as compared to net income of $15.4 million or $0.16 per share in 2009.

Some of the primary factors are as follows. The largest variance was the gross margin, which increased by $28.3 million, and I'll discuss that in a moment.

Operation and maintenance expenses were basically flat in part due to increment weather that impacted the timing in certain projects in the first quarter.

Depreciation and amortization expense increased $3 million, primarily due to higher levels of depreciable plant placed in the service. Interest expense was $2.3 million higher compared to 2009, primarily due to higher levels of capitalized interest in 2009. And the impact of the elimination of the Medicare part D tax subsidy, created a one time non-cash impact of $2 million or $0.02 per share at Enogex.

Now turning to gross margin. The vast majority of the increase in gross margin came from the gathering of processing businesses. Volumes increased 3% and 16% respectively and realized commodity spreads increased from $2.85 per MMBtu 2009, to $5.79 per MMBtu in 2010.

Natural gas liquids prices also saw a significant increase from $0.63 per gallon in 2009, to a $1.05 per gallon in 2010. Condensate volumes were up 34%, due primarily to a richer natural gas stream, cooler weather and increased operating efficiencies at our processing plants.

Condensate contributed $9.3 million of gross margin compared to $3.1 million in the first quarter of 2009. For a more detailed explanation of these financial results, I would refer you to the company's first quarter 10-Q filed with the SEC this morning.

Before moving on to your question, I would like to mention a couple of key items. As Pete mentioned, we have reiterated our 2010 guidance of the $22.70 and $2.95 per share. We now expect to be at the upper end of the range excluding the one time Medicare Part D charge of $0.11. This was driven by higher margin expectations at Enogex coming in at the top end of the range.

Second, OGE Energy Corp. will be filing a universal shift at the SEC. This is consistent with our previous message of our plan to issue $250 million of long-term debt at the utility this year.

This concludes our prepared remarks and we'll now take your questions.

Question-and-Answer session


(Operator Instructions) Your first question comes from the line of Jay Dobson, Wunderlich Securities.

Jay Dobson - Wunderlich Securities

Pete, I was hoping that you or Sean could maybe take us back through sales, those at OG&E seem as if they're modestly better than you'd previously expected and sort of how, as you stand here now, you look out through the balance of 2010 and how that might impact your previous expectations for OG&E?

Sean Trauschke

Sure, Jay, this is Sean. The sales obviously, we had a very good quarter from a weather perspective that impacted margins by $11.6 million. We do key customer growth, from our margins perspective of $1.6 million; that was the gross margin impact.

Is I look at customer account, it was right on line with come our historical average, just slightly below 1%, so we feel pretty good about where we are and really right on plan. Don't foresee any change, we're cautiously optimistic that we'll continue to see the improvement in industrial sector.

As I mentioned, it's still below our 2008 levels, but we are seeing a slow steady improvement there.

Jay Dobson - Wunderlich Securities

Just to be clear, I'm sort of avoiding the weather and talking more about industrial sales, this would fall within your range of guidance or expectation as you look out through 2010, if in fact this continues. So this wouldn't drive us to higher ranges?

Sean Trauschke

No, I think its well within our plan and if you recall back to 2009, Jay, we did begin the see some of this gradual improvement in the third and fourth quarters. So this is a continuation of that and that's what we'd expect.

Jay Dobson - Wunderlich Securities

And I think in your previous guidance, when you talked about the mid-part of the range, you were pretty clear that you were assuming ethane rejections throughout the year and that you would have a benefit, of about if I recall about $5 million, in pushing the guidance range to the higher end and we do assume you've changed that assumption or help me understand where you are.

Pete Delaney

Yes, have been. When we put that guidance out originally back in early part of November, it was forecast as being rejection. When we updated that, when we talked on the column February, we're obviously in a recovery mode and I think your numbers are correct there. We're very pleased, the volumes are up there at Enogex as well, so there's a lot of contributing factors there and I think would be one of them.

Jay Dobson - Wunderlich Securities

Got you. And then last question, Pete on the MLP and your sort of latest thoughts given the strength at Enogex and the potential for greater capital spending or thinking of the MLP as a capital of financing decision rather than a strategic one, maybe giving your latest thoughts.

Pete Delaney

I think, Jay you're right. It is a financing option on a strategy option or strategy, it's not based on that. And I think we are very fortunate that with investment opportunities, Crossroads. We're very excited about the priority projects. You know, building into the Guymon area, we're very excited about, but as you know that when we start looking at all that, it's getting to a point where we would need to issue equity to support our balance sheet, we're committed to maintaining our strong ratings.

And so we do realize that in fact, that there maybe alternatives. But looking at cost of capital, maybe more advantageous than issuing OG Energy and common stock and all I could say is we're you know evaluating those alternatives. We're not really prepared this time to say anything or make any statements of what steps we may take or when we may take them. But just let you know that we are evaluating those. We are aware that there maybe something that's better for our share holders in that regard.

Jay Dobson - Wunderlich Securities

Got you, but just clarify, you characterized it as a financial decision, which I agree with. So we'd really have to see the CapEx beginning to rise at both Enogex and OG&E to be the catalyst for that, which suggests maybe it's less of a 2010 decision and more a later decision?

Pete Delaney

Well, I think we're, we talk a little we're (inaudible) optimistic. We, on our strategy around on our utilities, not driven really by economic growth. We see our growth continuing, our customer growth 1% a year. But where, most of our infrastructure is associated with builders. Transmissions really, renewable wind farms. We don’t see the need for that infrastructure changing, given the direction of where energy policy is heading, and so we don't think that's dependent on the economy. We again, are very well positioned, in that our natural gas plays have heavy liquid components and so the crude natural gas ratio and the high crude prices, I say high, run a throttle base is really support those returns.

So we continue to be bullish. We're also aware that when we're talking about not just financing with OG Energy stock, but taking other actions, it takes time. So I'm not sure if it's, I wouldn't want to say we won't make decision till 11 because you need to do things that advance and get positioned to be able to finance your growth in the best possible way.

So we're looking at it and we'll continue to look at it. We've a great opportunity; we will look to capitalize on that.

Jay Dobson - Wunderlich Securities

Thanks very much, I really appreciate it.


Your next question comes from the line of David [Frank, Calliper], your line is open.

Unidentified Analyst

Just one check, I was looking at your CapEx slide and it looks like your CapEx forecast came up modestly and I guess that's pretty much all the electric utility and does that include the proposed or is it the cross wind, the 200 MW wind project?

Sean Trauschke

Yes, David, this is Sean. There was a slight increase there, we had some compression projects at Enogex to add about $20 million, but that CapEx table is essentially the same as you've seen before. It does not include the Crossroads wind project, as you know we filed that and we'd hoped receive approval on that in August timeframe sometime.

It does not include priority projects, we've not received a notice to construct those and we'd expect to receive that later this summer too. I think the only other change in the CapEx table there is probably on the transmission front, there's a slight increase in the Sunnyside to Hugo transmission line.

Unidentified Analyst

Okay, and the Crossroad is about $400 million?

Sean Trauschke


Unidentified Analyst

And you said that final approval, so that would be for rider or how would you…?

Sean Trauschke

Yes, we requested a rider and so the procedural schedule has not been established yet. But we anticipate approval in August.

Unidentified Analyst

Okay, and then you mentioned something about some other projects approval this summer what were you referring to?

Sean Trauschke

Yes, on the 27th of April, the SPP approved a number of, what they called priority projects, and two of those would be OGE projects. This was similar to the list of projects they announced last fall. And so they approved those, but they've not issued notices to construct.

In concert with that, the SPP has also filed a tariff with the FERC for approval of the highway/byway cost allocation methodology. And there's a 60 day process at the FERC; I'm assuming it doesn't go to hearing. So, the SPP is not going to issue notices to construct until the tariff is approved and the cost allocation is finalized.

So that's probably late June early July timeframe at the earliest. At that point in time we'll have the notice to construct in our hand, we'll also know what the total cost estimate is and we'll also know the timing under which the projects are expected to be brought online.

So that'll give us a lot of clarity around what sort of funding and financing needs we may or may not need.

Unidentified Analyst

So I'm clear the SPP priority projects are or are not in your forecast?

Sean Trauschke

They are not.

Unidentified Analyst

And what kind of range could we be looking at, do you think?

Sean Trauschke

Probably around $300 million is a good number. Give or take.

Unidentified Analyst

So you're talking about potentially $300 million of additional CapEx on the SPP priority projects, $400 million of potential CapEx related to the Crossroads and then you were talking about some growth opportunities at Enorgex. I guess this gets back to Jay's question about meeting the funding needs and you're talking about some potential alternatives to OGE issuing common stock and he was alluding to MOP or asked you directly about the MOP, obviously the Plains All-American deal, just one of the IPL, was red hot. They upsized it and priced it above the range and it stocks were doing quite well even in this market.

So do you think an IPL is really the root or might you actually look at just monetizing or actually or just selling the stake for cash?

Pete Delaney

As you know, there's alternate ways to about this and we're going to look at alternatives and as you know and we've said and I've said, we focused on our long term value and try to make the best decisions. We don't focus on increasing our stock price at one point in time, we want to try to maximize that by the last over a period time. So that our highest keep getting higher and our lowest of stock keep getting higher as well. And so we're going to look at what works best for us and I think Jay was sort of right. For us, it's not a part of our strategy at Enogex, we compete in the field that doesn't impact us there. We're organically growth driven, we're not acquisition driven and we still have some work to do in reducing our (inaudible) exposure.

We want to still continue to move commodity out of that business; we still think that that will help our evaluation and that we've done to date on doing that has helped our evaluations. So, we're going to continue to work on that. And so we've got, as you said, several alternatives and we just have to look at the pros and cons of each and given our long term plans our financing needs and where we're headed and make that right decision and we're looking at those and we do the best job we can do it as quickly as we can. Execute as best as we can and that's all I've really have to say at this time.

Sean Trauschke

Just, David, one follow-on piece there. Your correct Crossroad's about $400 million the priority project should be about $300 million, but the big assumption there is the timing of those expenditures and they're not all occurring at the same time. And as we've said all along, we're very committed to our balance sheet, we're going to protect that balance sheet and if we were fortunate enough to receive approval on all of those projects, we're not concerned about or afraid of issuing equity because those will be accretive projects and we feel like those will be good investments for our company.


(Operator Instructions). Your next question comes from the line of Brian Russo, Ladenburg Thalmann, your line is now open.

Brian Russo - Ladenburg Thalmann

Just in terms of the Crossroads wind project, I mean, is there any risk that the Commission does not approve that, I don't think there is an RPS standard in Oklahoma and I'm just curious what your thoughts are there?

Pete Delaney

Given my views on this and Howard Motley, our Vice President of Regulatory Affairs here as well. One, this Crossroads project is a very good project economically. Our guys have done a great job in going out and aggressively taking advantage of the weak turbine market. And so we are glad that there's no RPS. We're not big in favor of mandates that ramp up cost to our customers. But we find without a mandate, that especially with Crossroads, that the economics of these projects, because of just offsetting fuel cost, are very good for our customers. And then on top of that in terms of positioning ourselves for potential CO2 legislation, it helps us in that regard and also I think we all believe that we will have a national RPS at some point of time and it helps us for that. So we're not mandatory, we've never have been. We've really driven what's best for our customers and we're looking at the numbers and our testimony, which I think is very solid, it's a strong argument; this is the best thing for our customers. And so there's always a risk of not getting approved, but we feel very good about.

Brian Russo - Ladenburg Thalmann

Okay and in terms of the external financing needs, can you finance the $400 million Crossroads project with your DRIP and operating cash flow or would you need to tap the debt or equity markets for that specific project?

Pete Delaney

Obviously that'd be incremental to our existing claim today. But, I'm going to hold and reserve comment on that until we receive approval on that and we have very definitive schedules of when those expenditures occur and where we are coming in, in August. But I think obviously there would be a requirement for some incremental financing. The split between what if any amount of equity would be required. We'll certainly lay that out for you, when we receive approval in August.

Brian Russo - Ladenburg Thalmann

Okay and where you stand today, what's the most attractive cost of capital, for you in terms of financing equity or monetizing Enogex?

Sean Trauschke

Well, I think clearly and it's no secret if we look at kind of a cost affecting worst than the multiples are, there are some very attractive multiples today for Enogex, but I think as Pete mentioned, that's just one element we're considering. But we're looking all across the business; we're really trying to make sure we maximize the long term value. So there is today an opportunity, but we want to make sure it's there for the long term.

Brian Russo - Ladenburg Thalmann

Okay and then just lastly on the 2010 out look, the $2.70 to $2.95, you alluded it a bit to the high end of the range. Can you just provide us with the subsidiary earnings range as well?

Sean Trauschke

OG&E has not changed; we're still leaving that guidance set at $2.10 to $2.20. And as we said before, we've moved Enogex up to about the higher end, when higher end of their range was $0.86.

Brian Russo - Ladenburg Thalmann

And what about corporate, is there any sort of drag there?

Sean Trauschke

No same things as we've said before, roughly $0.08.

Brian Russo - Ladenburg Thalmann

The $0.08 drag?

Sean Trauschke

Yes, and that hasn't changed.


Your next question comes from the line of [David Frank with Catapult].

Unidentified Analyst

I had just one follow up, as far as timing goes on the decisions since you're going to be getting better clarity from SPP and the Commission on the wind project this summer. Can we expect some decision in terms of funding or some kind of potential announcement related to funding this summer as well?

Pete Delaney

In the comment, I'd just refer to the fact that once we get the approval or the notice to construct, and then Crossroad approval. And again we don't have the procedural schedule for that. But again, we would expect that decision, Howard, in fall?

Howard Motley

Well I think that for both those cases the procedure schedules, I think are for signing next week. And we have a hearing for the Smart Grid in June and Crossroad in July and we're (inaudible) the completion to try to issue an order for both cases by the end of July or early August. So, that kind of timeframe we'll know whether they will approve projects or not.

Sean Trauschke

So at that point in time we'll update our CapEx. And then we'll update our financing plans. And then we'll have much more clarity about the timing of when and in our plans, when we would look to issue equity to support our balance sheet.

Unidentified Analyst

Right, but I'm saying, will you have an announcement as far as either going corporate common or potentially doing an alternative financing that that could involve Enogex?

Pete Delaney

I really can't, I'm not in position to really put a timeline on that, if that's going to be in the fall or the summer, or year end.


(Operator Instructions). Your next question comes from the line of Jay Dobson.

Jay Dobson - Wunderlich Securities

Sean, just wanted a follow up on David's question. If we think about the crossroads and then the SPP projects, thinking first about crossroads, I think Pete said that would have COD sort of late '11. So if you get approval, I mean it would seem as if most of those dollars are spent in '11, obviously you have to actually purchase turbines and things like that. So there would be some of that that's occurring in '10, but then most of it probably in '11.

And then SPP would seem as though you'd have a longer tail with maybe like a three year spend. And maybe if you can just sort of confirm that, and sort of help us think about understanding if you don't have approvals, but just how some of those dollars would spread over that horizon?

Sean Trauschke

I think you're assessment there on crossroad is correct. And the majority of dollars would be spent in '11. As far as the priority projects, we're not anticipating those dollars to be flowing out the door immediately. If you look at our CapEx schedule on the existing projects, we have one of those lines coming in each year. So it's kind of a stair step there.

I'm not anticipating, and I haven't heard any indications that those priority projects are going be requested be in service by 2012 or anything like that. So I don't think those are necessarily near term capital expenditures of significant amounts.

And so if you're think in terms of those are typically 12 to 18 month projects that there was a 2014, 2015, even a 2013 timeframe, you really wouldn't begin those real expenditures, so '11 or '12. Did that help, Jay?


There are no further questions at this time. Presenters, I turn the call back over to you.

Pete Delaney

Thank you, operator. In closing, I'd just like to say I'm pleased with where we are today as an organization and our performance against our plans. And while we feel positive regarding our position, we are aware that uncertainties remain, regarding the strength of the apparent economic and market recovery.

However, our financial profile's strong, and we look forward to continue to execute our strategy in the weeks and months ahead. I thank you for your continued interest in OG&E. Have a good day.

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