OGE Energy Corporation (NYSE:OGE)
Q3 2010 Earnings Conference Call
October 29, 2010 9 AM ET
Todd Tidwell – Director, IR
Pete Delaney – Chairman, President and CEO
Sean Trauschke – VP and CFO
Keith Mitchell – Senior VP and COO, Enogex LLC
Arlen Buchanan [ph]
Greg Reese [ph]
Brian Russo – Ladenburg Thalmann & Co
Good morning. My name is Alicia and I will be your conference operator for today. At this time I would like to welcome everyone to the OGE Energy Corp Q3 Earnings Call. (Operator Instructions). Thank you. Mr. Todd Tidwell, you may begin your conference.
Thank you. Good morning, everyone, and welcome to OGE Energy Corp’s Q3 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; Sean Trauschke, Vice President and CFO of OGE Energy Corp; and several other members of the management team to address any questions you may have. In terms of the call today we will first hear from Pete followed by an explanation of Q3 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 can follow along on our website at www.oge.com. In addition, the conference call and 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 guidance in the appendix along with projected capital expenditures.
I will now turn the call over to Pete Delaney for his opening comments. Pete?
Thank you, Todd. Good morning, everyone. Welcome to our Q3 earnings call. This morning I’ll update you on some of our more important initiatives and the outlook for our businesses, and Sean will review our financial results in more detail. Our Q3 consolidated operating results were $1.65 per share up from $1.40 compared to the Q3 of last year, with increased earnings at both the utility and midstream businesses. Utility earnings increased primarily due to hot summer weather and regulatory riders associated with various investments in the utility. Cooling degree days were 19% above normal and 30% above the cool summer of last year. These gains were tempered by higher operation and maintenance expenses. The extreme summer temperatures which produced five new system peaks strained our electrical system, particularly our generation, and my many thanks to our members for doing a great job of managing through those tough conditions.
We remain focused on controlling our operating costs and we have several initiatives focused on controlling costs. One of those as you know is our 2020 Plan, underway now for several years, that defers the need for any additional fossil fueled capacity for another ten years. Part of that effort is an effective demand response and distribution automation, both based on our SmartGrid deployment. As I will discuss later, we have committed to cost savings associated with that deployment.
To leap into a very topical discussion, in the face of ever-tightening environmental regulation of generation planning, our generation has a low embedded cost of about $180 per KW, excluding wind, reflecting the age of our fleet and the cost of the recent purchases in the last five years of about 1000 megawatts, for a combined cycle capacity for about $575 per KW. As a consequence, with the older units our operational and maintenance expenses will tend to be higher than that associated with a more modern fleet, especially during periods of extreme conditions. However, we do find great value for our customers in operating and maintaining the reliability of our low cost fleet.
As you know generational planning is a complex issue under normal circumstances and more so given the environmental regulations scheduled for release by the EPA late next year, and this will only be compounded by CO2 legislation which at this point in time seems to be less of a concern. But in regard to potential retrofits with pollution control equipment, we are looking at all of our options prior to committing the large capital outlay associated with scrubbing coal plants. In the meantime we will continue to invest in our plants to extend reliable service with an eye on these future outcomes. As always our primary focus will be on an approach that results in the lowest risk to our customers, which should deliver over the long run the lowest cost of power.
Several weeks ago we announced a transaction with ArcLight, which is expected to close Monday, selling just under 10% of Enogex for around $184 million. We are excited about the financial flexibility that this ongoing funding commitment provides us. We have already begun working with ArcLight to pursue additional opportunities together. Bottom line, we look for that partnership to accelerate our growth at Enogex.
Enogex had another solid quarter with earnings increasing 33% as we experienced record processed volumes. National gas liquids prices were also higher compared to the Q3 of last year, with year to date commodity spreads remaining fairly consistent, around $5.24 per MMBTU. Gathering volumes increased 6% and processing volumes grew 16% compared to the Q3 of last year.
In our updated guidance we lowered our year over year gathering volume growth to 6% due to line outage and capacity constraints, not a change in our fundamental outlook or the potential in our region. Concerns over the economy continue to dominate the media and the markets, and from our perspective here in Oklahoma the economy does remain stronger than most of the country. The Oklahoma City and state unemployment rates are 6.3% and 7% respectively, as we know well below the national average. However, like much of the country state and local governments are under spending pressure as tax revenues have declined, and the state has a sizeable structural deficit going into the next budget cycle.
We do closely track our customer growth. We just added about 6300 customers to the system at an annualized growth rate of about 0.8% per year, slightly below our historical average of 1%. Our industrial load increased for the fifth consecutive quarter, and industrial sales were up 8% since September of last year. As we have for the last two years, however, we remain cautious regarding the economic outlook, recognizing this state often lags the national economy. In terms of next week’s elections in Oklahoma, we do not believe the outcome of the governor’s race in which the republican is currently heavy favored will have any impact on the company. The only Oklahoma Corporation Commissioner who’s up for reelection is Dana Murphy, a republican, and she is running unopposed.
Since our last call we have continued to make progress on our Smart Grid transmission and wind farm initiatives. We have 144,000 Smart meters functioning at this time, still early into our total $357 million system-wide rollout. We are on schedule and the technology’s functioning in line with expectations. As part of our rate rider, we are committed to reducing our annual O&M by $12 million by the end of the third year. We continue to believe that is attainable. We expect the program to be fully implemented by the end of 2012.
The Crossroads wind from continues to move forward and once all the wind projects are complete our portfolio will be near 780 MW, or about 10% of our generation mix. Our transmission program continues to advance, with four high-voltage projects either in the routing or design phase. Additionally we did notify the Southwest Power Pool in September that OGE will construct portions of two priority projects in accordance with their notice to construct.
Turning to regulatory activities in Arkansas, we filed for the recovery of the OU Spirit wind farm in August and hope to secure a rider if approved. In September we filed a general rate case in Arkansas related to infrastructure investments, and requested a rate increase of $17.7 million with new rates in effect by the Q3 of 2011. Earlier this month as well we filed with FERC for recovery of CWIP for our high-voltage transmission projects and have requested an effective date of January 1, 2011.
At Enogex we continue to see opportunities to invest in the expansion of our gathering and processing business. Enogex has begun the construction of a new processing facility and related gathering lines due to projected volume growth on the system. This new 120 million a day processing facility in Wheeler County, Texas, is expected to cost about $109 million. This plant is expected to be in service by January of 2012. So this project, which our board just approved last quarter, combined with our previously announced South Canadian plant will add about 320 million a day of processing capacity to our system which represents an increase in inlet capacity of 33%.
Enogex continues to see ample growth opportunities in and around our system and our agreement with ArcLight will help us take advantage of these opportunities. Enogex’s management team is reviewing with ArcLight potential investment opportunities to develop a capital expenditure plan for growing the business. We are very pleased with our new equity partner and excited about the future of the Enogex business.
Today we’re increasing our 2010 ongoing earnings guidance from $2.95 to $3.05 per share. The increase in guidance is primarily driven by higher earnings expectations at Enogex as we realize higher than projected commodity pricing. We continue to hit our milestones on key business initiatives in both businesses, which should position us to sustain our earnings growth. As always, much work remains as our management team focuses not only on traditional issues of environmental compliance and cost management, but also the new challenges and opportunities associated with the Smart Grid deployment.
All in all we continue to believe that there are ample opportunities in both of our businesses for us to continue to deliver value to our shareholders. And now Sean is here to discuss our results. Sean?
Thank you, Pete. For the Q3 our net income was $163.1 million, or $1.65 per average diluted share, as compared to net income of $136.8 million, or $1.40 per average diluted share in 2009, for an 18% increase in quarterly earnings. The contribution by business unit on a comparative basis is listed on the slide.
At OGE, net income for the quarter was $142.1 million, or $1.43 per share, as compared to net income of $123.2 million, or $1.26 per share in 2009. Some of the primary factors are as follows: gross margin increased nearly $70 million, or 20%, and I’ll touch on gross margin on the next slide. Operation and maintenance expense increased by $25.1 million. Of that, $7.8 million of the variance was from new riders which have revenue offsets.
There are two primary drivers for the increased O&M in 2010. First, the hot summer put a great deal of stress on the generation system, and in particular as we began work on some of our units we found more repair work needed to be done than expected. We’re taking this information and incorporating this into our outage plans for the remainder of the year as well as next year. Second, our post-retirement medical costs continued to escalate and this year they expect it to run about $8 million higher than our previous estimates. We are working on various solutions and regulatory options regarding these issues which I’ll discuss later.
Depreciation and amortization expense increased $5.8 million, primarily due to additional assets being placed into service, including the OU Spirit wind far and the Wind Speed transmission line. Net other income and expense was lower by $9.1 million, primarily due to lower margins associated with the guarantee flat bill program of $4.8 million as a result of our warm summer weather, and lower amounts of equity AFUDC of $4.8 million. Finally, interest expense increased $4.6 million, in part due to the issuance of $250 million of long-term debt at the utility in June of 2010.
Now turning to gross margin, you can see the drivers on this slide for the $69.6 million increase in gross margin at the utility for the Q3 compared to 2009. The biggest driver for the increase was that cooling degree days were 30% higher than last year and 19% above normal. Quarter over quarter favorable weather added $33.3 million of gross margin. However, the net weather impact was $28.5 million because revenue from the guaranteed flat bill program was $4.8 million lower. Compared to normal weather, gross margin was positively impacted by approximately $22 million. Year to date favorable weather has increased gross margin by approximately $32.3 million compared to normal, and $46.7 million compared to 2009. Various riders including the Wind Speed rider and the OU Spirit rider increased gross margin by $25.1 million, and the Oklahoma rate increase implemented in August of 2009 added $5.2 million of gross margin. Higher demand fees for non-residential customers grew by $4.5 million and new customer growth added $2.9 million.
System megawatt sales were up 12.4% for the quarter, industrial sales were up 8.1%, and our overall customer growth rate year to date was 0.8%, with the majority of customer growth occurring in the residential sector. For the year, weather normalized megawatt hour sales are up 0.7% compared to 2009.
I did want to briefly discuss our current regulatory activities. In Arkansas, we have two filings under review. First is the application to recover the Arkansas portion of the OU Spirit wind farm and the 280 megawatts of wind PPAs OGE entered into earlier this year. The OU Spirit recovery equates to roughly $2.6 million of margin in 2011, and the PPAs would recover our costs for the Arkansas portion of the contracts. No procedural schedule has been established in this matter to date.
The second item in Arkansas is the general rate case we filed in September to recover infrastructure investments made since our last rate case in 2008. We are requesting $17.7 million on 53% equity with an ROE of 11.25% on a rate base of $444 million. Also as part of the Arkansas rate filing we are requesting two other items: first, an SPP cost tracker. This would recover the actual costs allocated to OGE by the SPP for transmission built by others. Second, in Arkansas we do not have a tracker for pension costs nor post retirement expenses, and we’re addressing both of these in the current filings. The tracker would defer costs as a regulatory asset or liability to the extent actual expenses vary from what is in base rates. The intent of this is to reduce volatility in our rates to our customers. A hearing has been scheduled for May of 2011 and we would anticipate new rates in effect by the Q3 of 2011.
Now moving on to Oklahoma, we are evaluating requesting a tracker for post-retirement medical costs similar to the existing pension rider we have filed for an SPP cost tracker to recover the Oklahoma allocation of SPP costs similar to what we are doing in Arkansas, and we are asking for a regulatory asset effective January 1st until the tracker is established.
Moving on to FERC, we are requesting 100% CWIP recovery for certain 345 KV projects. These are primarily the SPP projects we have discussed at length before. In addition we are requesting that if a project is canceled or abandoned we can receive 100% recovery for prudently incurred costs. We are requesting new tariffs in place by January 1st, 2011. We view this as the prudent thing to do for both our customers and our shareholders. We’ll keep you posted on timelines and outcomes as they become known.
Now turning to Enogex, net income for the quarter was $24.2 million, or $0.24 per share, as compared to net income of $18.1 million, or $0.18 per share in 2009. The largest variance was gross margin, which increased by $10 million or 11%, which I’ll discuss in a moment. The other primary drivers were operations and maintenance expenses which increased $4.2 million, in part due to the pipeline integrity work we mentioned last quarter. Interest expense was $5 million lower, primarily due to the Enogex refinancing we did in 2009.
Looking at gross margin, the vast majority of the increase and gross margin came from the gathering and processing businesses. Volumes increased 6% and 16% respectively, and realized commodity spreads increased from %3.73 per MMBTU in 2009, to $5.28 per MMBTU in 2010. Natural gas liquids prices also saw a significant increase from $0.74 per gallon in 2009 to $0.92 per gallon in 2010.
We established many new records in the quarter. For the second consecutive quarter, Enogex had record gathering volumes which were 123 million MMBTUs. The processing business had record volumes for the third consecutive quarter, which were 79 million MMBTUs. In addition, we established a Q3 record for condensate sales of 4.4 million gallons, as well as a natural gas liquids production record of 58.7 million gallons in September. We continued to make progress on increasing our fixed fee contracts, and at the end of the Q3, 28% on inlet volumes were under fixed fee arrangements. This compares with 20% at the end of the Q3 in 2009. So not only are volumes increasing, but we are also increasing our fixed fee percentage.
Finally, transportation gross margins were slightly lower because a section of line associated with the MEP and Gulf Crossing pipeline was out for maintenance. For a more detailed explanation of these financial results I will refer you to the company’s Q3 10Q filed with the SEC this morning.
Before turning to your questions I would like to address some of the changes we’ve made to our 2010 guidance. We’re now projecting our earnings for 2010 will be between $2.95 and $3.05 per share, an increase from our previous guidance at the upper end of the $2.70 to the $2.95 range. At the utility, we are maintaining our guidance of $2.10 to $2.20 per share, but now are projecting earnings at the upper end of the range. We have benefited from favorable weather thus far in 2010, but are expecting an increase in operating expenses primarily resulting from the higher maintenance at some of our power plants and higher post-retirement benefits, as well as the increase in our effective tax rate mentioned last quarter to offset most of the weather benefit.
As a result of the announced transaction with ArcLight the marketing business will be contributed to Enogex. At year end the marketing business will be part of Enogex’s results so we need to adjust the geography of our guidance. At Enogex we are now projecting ongoing earnings for 2010 will be between $0.85 and $0.95 per share, an increase from our previous guidance at the upper end of the $0.64 to $0.86 range. This is largely driven by higher margins for the processing business, which is primarily a result of projected commodity prices and NGL recoveries outpacing our previous expectations. Also included is the projected loss for the marketing business which remains unchanged at $0.07 and $0.09 per share.
The revised guidance for Enogex also includes $2.5 million of pretax income for our equity partner. In addition we have revised down our projected gathered volume to 6% from the previous midpoint of 9% due to system constraints as a result of line maintenance. The projected loss at the holding company is $0.04 per share, down from the projected loss of $0.11 to $0.13 per share as a result of moving the marketing business to Enogex.
This concludes our prepared remarks, and we’ll be glad to open it up for your questions.
(Operator Instructions.) And our first question comes from the line of Anthony [ph] (inaudible). Your line is open.
Good morning. Just a question, I think you mentioned the South Canadian processing facility that goes online I guess in mid-’12 and maybe I think there’s another increase in processing facilities. Are those fully contracted or how long does a contract last? Or do I think of it as like a merchant facility and you’re really out there looking for volumes?
This is Keith Mitchell. We have dedications from producers and they’re drilling, and we see the volume growth increasing and we’re going to need that capacity at that time that those come on.
What is dedication? Is dedication the same as a contract that somebody takes say an PPA or something out of an electric power plant? Is it similar or is dedication something different?
No, it’s a situation where they have certain acreage that they have contracted, they have leased up, and so they have plans to drill that. And what it is, is in their agreements when they drill that that volume will come to us. We have the contract where that volume will come to us upon drilling.
Okay, thank you.
Our next question comes from the line of Arlen Buchanan [ph]. Your line is open.
Hey, thanks for taking the call. Regarding ArcLight, can you just talk about ultimately where this relationship ends up? What is the game plan there? And also the growth opportunities that you see. And then lastly just on South Canadian to follow up the last question, is it possible that the producers could not drill out that acreage?
This is Pete Delaney. Let me do reverse order. Keith will talk about South Canadian. You want to talk about the producers?
And the risks associated with the South Canadian.
Sure. You know, first of all these areas that the volumes are coming from is the granite wash areas as well as the Canadian County Woodford area. These are very economic because of the liquids associated with these areas, so these are very economical to drill even at low commodity prices. So we really looked at what the different drilling plans are, the various producers and there are multiple producers. We see an opportunity for volumes exceeding the capacity that we are building, and so we feel like this is the appropriate amount of capacity to build given the activity that we see in the area.
Okay, so just to be clear then, there is potential risk there on the CAPEX if for some reason the drilling doesn’t take place.
The drilling would have to drop off fairly significantly for us to really have too much CAPEX here. I think that we’ve looked at that, assessed that risk, and we think it’d really have to drop off quite significantly.
The other parts of your question, ArcLight. We are expecting to close on Monday so we’re very excited about that, and you know, the transaction structure really focused on continuing growth on Enogex in the midcontinent. We’ll talk about that for a minute. We see a lot of potential opportunities for continued expansion. Keith just talked about the additional, well I mentioned and talked about South Canadian but the Fort Elliott plant that we added in the far western part of our system. Again, when looking at the economics and using consultant numbers, not our numbers but, and what the producers tell us, that this is probably their best returning plays that they have in their portfolio. We’ve seen analysis of natural gas prices below $3 and still being able to provide a return to the producers that keep them actively engaged – because of the wet nature of this gas and the correlation with oil prices they’ll be getting very good returns.
So we see other basins’ growth of course not being that strong and again we believe that fundamentally that demand for natural gas going forward is pretty good, particularly looking at the power generation side. So we see a lot of opportunities. Our policy has been that we put in our capital expenditure plans known and committed projects, but at all times we have a, I would say pretty robust backlog – backlog may not be the right word but a lot of projects we’re working on. And at this point in time we see that as strong as ever, and so we’re very excited about that.
And of course the ArcLight plays into that. Again, we hope that they are able to increase their ownership. The only way that really happens is that we need new equity capital and they’re working hard, and we are already meeting with them looking for opportunities. And I was really talking more about in the midcontinent but of course we see there’s some opportunities with them to expand our presence outside the midcontinent and we’re already talking about those. So we’re very excited about that business.
And can you just talk about ultimately what their exit strategy might be for this?
Say again? What’s that question?
Can you talk about ultimately what their exit strategy might be for this investment?
Oh, exit strategy. Well, I can’t talk for ArcLight. I just know from the structuring of it it’s a long-term transaction. And basically we preserve all the options we have today. Our anticipation is it’ll grow the company dramatically and we’ll have all the opportunities. We could do an MLP at some point in the future and we’re going to look and see what the best thing is for our shareholders at that time.
Okay, thank you.
(Operator Instructions.) Our next question comes from the line of Greg Reese [ph]. Your line is open.
Hi guys, quick question. Could you elaborate a little bit more on this new Enogex processing facility you have in your guidance and also talk about how it’s going to be funded?
Yes. Keith, do you want to cover this?
Sure. We have a pretty extensive processing header where we gather a lot of gas to process in Oklahoma, as well it extends into the Texas panhandle. And in addition to South Canadian we’ve now sited a plant site out in the Texas panhandle in Wheeler County. There’s a lot of development out there in the granite wash, a lot of producers that are producing that very condensate-rich area, and given the location of that production we felt like the right spot to put that was in Wheeler County, Texas, out there on the west side of our processing header. So it was a 120 million a day skid, processing skid that we had in our inventory that we’ll be installing, and that’ll go online in early ‘12.
And is this going to be primarily funded with equity contributions from ArcLight?
This is Sean. That’s primarily going to be funded actually out of working capital and cash on hand at Enogex unto the extent that equity would be required. That would be drawn on by OGE and ArcLight, you’re correct. But this project’s $109 million; we actually had some of the materials already procured in previous years and so as Keith said, this’ll come on late in ‘11, early ‘12 and we’re very comfortable with the funding plan.
And in terms of any potential equity contribution, would it be 50/50? Is that a safe assumption? Or would you guys let ArcLight pick up the majority of whatever equity (inaudible)?
I think we’re going to look at those on a case by case basis. And that’s actually part of the beauty of this agreement is, you know, that gives us the flexibility to decide what our position is and how we’re going to participate. But again, our preference is really to continue to invest in the business with ArcLight, and to the extent that we can do that and maintain our credit metrics we’re going to continue to do so.
Our next question comes from the line of Rudy [ph] (inaudible). Your line is open.
Hi. With regard to the processing facilities, can you just kind of give us an idea of what type of contracting strategy you’re pursuing? Are these mostly fee-based type contracts or are you also taking on frag spread risk exposure as well?
Yeah, this is Keith. Obviously we’ve made a tremendous amount of shift towards fixed fee, and you’ll see that as we continue to grow the percentage of our portfolio in fixed fee. Obviously that is our preference. So these agreements are fixed fee as well as some percent of liquids agreements that we have had. I mentioned a lot of this gas has been dedicated under previous agreements and so some of those will be those previous percent of liquids agreements. But as you look at our volume forecast and then the change in the portfolio as we go forward we continue to see an increase in fixed fee percentage.
Okay, and as far as the additional contracts, can you give an idea of what percentage incrementally is fixed fee a percent of liquids roughly?
Well, I think if we look at our portfolio for 2010 by the end of the year we’re looking at a 30% fixed fee percentage of our portfolio which is up from previous years, and we certainly see that transition continuing.
Okay. I guess we’ll chat more at EI next week.
Our final question comes from the line of Brian Russo. Your line is open.
Brian Russo – Ladenburg Thalmann & Co
Hi, good morning. Just curious in terms of the utility projected capital expenditures. Are there any projects being considered outside of what you’ve outlined on slide 13? Or is this pretty much with Crossroads and the two SPP transmission projects, is this pretty much a good outlook for the utility CAPEX through ‘15?
That’s a good outlook of where we are today, Brian. This is Sean, and you know, we’re, as you know the SPP’s continuing to evaluate additional projects and we’d be very interested in pursuing more projects there. As we look at the generation portfolio at OGE, as we mentioned before we were always open to additional renewable opportunities, and that Crossroads opportunity presented itself and it was very attractive to our customers so we pursued that. So right now that plan we’ve laid out, we’re good with that, but again, if the SPP were to award some more projects, as we’ve said before we like that business and we would certainly go after that. I think the other big wildcard out there is environmental, and we’ll see where that ends up. But obviously if environmental regulations came out we would have to deal with that.
Brian Russo – Ladenburg Thalmann & Co
Okay, and just on the renewable side. Is there any more appetite for wind in Oklahoma? I know Oklahoma doesn’t have an RPS standard, so I’m just wondering how much of your generation or sales are derived from the wind projects under development and how that might compare to a federal RPS.
Well, I think we actually have a goal in Oklahoma of 15% and when we complete Crossroads and the other PPAs come online we’ll have 10% of our generation portfolio with wine. So there is a goal. It’s not a standard or anything like that. So there is certainly appetite. Oklahoma does have a lot of wind resources available, and again, I think we’re going to look at that in terms of what’s good for our customers.
Brian Russo – Ladenburg Thalmann & Co
Okay. And can you give us a sense of your earned ROE in Arkansas that’s embedded in your 2010 guidance?
Yeah Brian, I think we’re probably earning close to 5% there in Arkansas, about half of what we’re allowed.
Brian Russo – Ladenburg Thalmann & Co
Okay. And maybe can you just comment or elaborate on some comments earlier. It seems as if I’ve been hearing that a lot of the gas drillers are targeting liquids-rich areas, and I’m just wondering if you had any thoughts on how that might impact future NGL pricing along with how that might impact your future volume growth and processing and gathering volumes.
Yeah, this is Keith. You know, there’s certainly if you look at the NGL pricing as a percent of crude, it’s been continuing to go down as a percent of crude. But crude stays strong. And if you look at the petrochemical market, obviously a lot of these folks who were cracking heavies have switched to the lighter ends. And so we’ve seen actually good demand side response on NGLs. So certainly as the drilling continues and more NGLs are produced, I think that what we see anyway is that petrochemicals are liking the light ends and that they’re picking those up.
Brian Russo – Ladenburg Thalmann & Co
Okay. And just which looks like incremental growth in Enogex in ‘10 and possibly extended into ‘11 and ‘12. Can you comment on your 5% to 7% (inaudible)?
Sure. And Brian, I think one of the real beauties of that growth rate, that’s a long-term growth rate as we’ve said before; that’s not just a one- to two-year outlook. We have a very clear line of sight much longer beyond that. You’re exactly right with the two projects Keith has mentioned coming online in late ‘11 and ‘12, obviously that’s helpful for Enogex in the future. You’re looking at the same numbers I’m looking at with a lot of the utility and transmission lines coming in. So some years it’s going to be on the high end of that, some years it’s going to be on the low end of that. We’re going to put out our 2011 guidance early in February at the yearend call, but we feel very good about the long-term growth rate. And as we’ve talked before, some years it’ll be a lot higher and some years it’ll be lower, but we feel pretty good about the long-term prospects.
Brian Russo – Ladenburg Thalmann & Co
Okay, thanks very much.
We have no further questions at this time. I turn the call back over to the presenters.
Thank you, operator, and I want to thank everybody for dialing in this morning. Thank you for your continued interest in OGE Energy and have a great day.
This concludes today’s conference call. You may now disconnect.
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