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Executives

Mary Ann Arico – Director IR

Ed Muller – Chairman, CEO

Jim Iaco – EVP, CFO

John O’Neal – SVP, CCO

Paul Gillespie – SVP of Tax

Bill Holden – SVP, Treasurer

Analysts

Greg Orrill – Lehman Brothers

Elizabeth Parrella – Merrill Lynch

Douglas Clifford – Omega Advisors

Paul Patterson – Glenrock Associates

Lasan Johong – RBC Capital Markets

Alex [Humajun] – Sandell Asset Management

Daniele Seitz – Dahlman Rose

Tyler Barron – [Boddy] Brown

Mirant Corporation (MIR) Q4 2007 Earnings Call Transcript February 29, 2008 9:00 AM ET

Operator

Good day everyone and welcome to Mirant Corporation’s fourth quarter 2007 earnings conference call. Today’s call is being recorded. For opening remarks and introductions, I’d like to turn the call over to Ms. Mary Ann Arico, Director of Investor Relations. Please go ahead.

Mary Ann Arico

Thank you Felicia, good morning and thank you for joining us today for Mirant’s fourth quarter and 2007 yearend earnings call. If you do not already have a copy, the press release, financial statement and year end filings with the SEC are available on our website at Mirant.com. The slide presentation is also available on our website. A replay of our call will be available approximately two hours after we finish. Speaking today will be Ed Muller, Mirant’s Chairman and Chief Executive Officer and Jim Iaco, Executive VP and Chief Financial Officer.

Also in the room and available to answer questions are Bob Edgell, Executive VP and US Region Head, Bill Holden, Senior VP and Treasurer, John O’Neal, Senior VP and Chief Commercial Officer and Paul Gillespie, Senior VP of Tax. Moving to slide 1, the Safe Harbor. During the call we will make forward looking statements which are subject to risks and uncertainties. Factors that could cause actual results to differ materially from management’s projections, forecasts, estimates and expectations are discussed in the company’s SEC filings. I encourage you to read them. Our slide presentation and discussion on this call may include certain non GAAP financial measures. For such measures a reconciliation to the most directly comparable GAAP measure is available on our website or at the end of our slide presentation. With that, I’ll turn it over to Ed.

Ed Muller

Thanks Mary Ann and good morning everyone. First a very minor but important correction, Bob Edgell’s title with the company is Executive Vice President and Chief Operating Officer and second let me turn first to page 3, I will try as I go along to remember to tell you what page I’m on. If I forget someone here in the room will hopefully nudge me. Starting on page 3, before turning to the specifics of our presentation and our results and so on, I’d like to take just a few moments to talk about how we think about enhancing stockholder value, that is enhancing the value of the business with which our owners have entrusted us. As you can see on page 3, we think about this in three ways.

The first is operational performance, we’re in the business of generating electricity from our power stations. Since the day I joined Mirant, we have been focused on having our plants run reliably. As those who follow the company know, we’ve had some disappointments, for example in the spring of 2007 this past year we took an extended planned outage to connect the SCR at unit 1 at Morgantown and SCRs selected catalytic reduction, this is part of our program under the Maryland Healthy Air Act to substantially reduce our emissions, in this case of nox. We took that outage but we were late coming back from it having had a variety of problems. Those kinds of problems concern us enormously.

We are focused on them, we are focused on making sure that we are as available as possible and as reliable as possible. One of the things we do here besides focusing in general is we focus on where things go wrong, so that we don’t repeat. And in doing that, no great surprise, we know that half of the problems that we have on reliability at our coal stations involve boiler tube failures. Now that sounds like a fancy term, for those who are in the power industry or have followed it, you’ll know what that is but boiler tubes are pipes of various sizes, of various thicknesses. They are inside the boiler and from the heat in the boiler, hot water and steam moves through those pipes at varying and often great pressures. Keep in mind that a large boiler at a coal station like ours as Morgantown will have tubes in it that if stretched out from end to end would go north of 300 miles, so think of pipe that would run say from the city of Boston to the city of Philadelphia if we put it out in a straight line.

When we have problems with those tubes, a leak, a rupture of a pipe what have you, we have to come down to repair it and it causes reliability. We have a very focused, very targeted set of initiatives underway to reduce these boiler tube failures. This is an example of the kind of thing we’re doing, we’re focused on it every day, we are focused on it seven days a week, we are focused on it 24 hours a day. I have a high degree of confidence that our reliability will improve but we will always be working on this, it is the nature of being in the power generating business, having big machines upon which we rely and upon which the electric system relies.

The second element which you see there on page 3 is cash generation. In my mind, cash is the ultimate test of how a business is doing and that’s what we’ve focused on. There are lots of and appropriately accounting standards to think about it, but ultimately cash is what it’s all about. Jim Iaco will later in our presentation go over our cash flows. I think when you look at them and he will lay this out well, our cash flows from this business are strong and getting strong. And that makes sense when you think about it because we are in markets where demand is growing faster than supply and our business and our sector is no different than any other sector that you would analyze in terms of microeconomics. When demand grows faster than supply, prices rise.

So we would expect to see revenues rising and therefore we would expect to see cash rising and we are, that is exactly what we are seeing and we expect to see it across the sector. Our cash flow is masked somewhat because I refer to the SCR a moment ago at Morgantown unit 1, we have in accordance with the Maryland Healthy Air Act a very large cap ex program underway in Maryland at all three of our stations there, Morgantown, Chalk and Dickerson to put in environmental controls, principally to control nox, sulfur dioxide and mercury. The program which is on budget and which is on schedule is a $1.6 billion program, that means we are taking $1.6 billion of cash and we are investing it in the fleet in Maryland.

As of December 31st, we had invested $500 million of that $1.6 billion, we have [overlay] 1 billion to go. Those expenditures will continue through the first quarter of 2010. The environmental improvements we are doing will all be completed by the end of the fourth quarter of 2009, but in the ordinary course with construction contracts, we will be finishing the payments about a quarter later. So Jim will show you that when you think about cash flow from our business, of course we properly show the cash flow that is going out as we invest it in these environmental improvements but these improvements are extraordinary and they are relatively short term and so the way we’ll show you how to think about the cash flow of the business subtracting those out, properly identified.

The third thing, element as you can see on page 3 that we think about is growing the business and everyone running a business and I am not exception, wants to grow their business. In the electric generating business, it is and it has been generally easier to say than to do. It is easier to get excited about. I like doing it. We look forward to doing it. You can see it is inevitable that it will happen. It is inevitable because with demand growing faster than supply, supply will have to catch up. Otherwise, we will see more and more things as we saw in southern Florida earlier in the week. And those are not acceptable in our society nor should they be acceptable.

Our locations, where we have existing generating facilities are ideally situated for this future growth in terms of location, in terms of space, in terms of infrastructure, in terms of existing facilities that can be repowered. We look forward to doing all that. We’d like to be doing it now. We’d like to be taking some of the cash and investing it for appropriate returns. We won’t do so until it’s prudent, we won’t make announcements until we think they’re real. We have a lot of things underway, both in terms of brown field development and in terms of repowering. And I hope that they all come true, they won’t and they won’t certainly all come true instantly. It is difficult as I think anyone following this sector knows, to add traditional generating capacity.

We are somewhat in an illogical situation politically and societally, we want more generating capacity, we want it to be inexpensive, we just don’t want to build it. And that will not continue forever, it will stop and we will invest when it’s appropriate and when we can get appropriate returns. We look forward to doing it, it is something we focus on every day just as we focus every day on improving the reliability of our existing generating assets. But we are in a business where we invest when we grow large amounts of capital, we want to, but we will only do so when we can do so prudently.

So with that, let me turn to page 4 and talk about our results. First, our adjusted EBITDA for the year was up sharply, 52% to $988 million. We’re pleased with this. Second, in the middle of 2006 we announced that we would divest three portions of our business, our Philippines business, our Caribbean business and six of our US natural gas fired facilities. By the middle of 2007 we had done exactly what we said we would do on schedule and with net proceeds to us of $5.1 billion. In 2007, in April, we publicly announced that we would explore strategic alternatives, again with our focus being to enhance the value of the company to its owners.

We completed that process in November and announced that we would return $4.6 billion in cash to our stockholders. Turn to page 5, here’s a description of both where we’ve been and where we’re going. In November we announced that we would return $4.6 and we announced that we would commence that with returning $2 billion in two parallel programs. $1 billion through an accelerated share repurchase program where we turned over $1 billion to JP Morgan, JP Morgan turned over to us 26 odd million shares and then we’ll be, under that program in effect they have borrowed the shares in the market, they will now go and have been going to buy the shares to return them. We’ll have a true up when the program is over. It is not over yet. JP Morgan will determine when it is over. It will be over in any event no later than May 15th, 2008. In parallel with that program, we commenced a $1 billion program of open market purchases by the company.

As of Monday of this week, that is February 25th, we had bought in $600 million or thereabouts of stock, so we have as of this past Monday expended $1.6 billion of the $4.6 billion in returning cash to our stockholders and we have decided that for the remaining $2.6, that is we authorized and told you how we would return the first of $2 billion of the $4.6, $1 billion through an accelerated share repurchase, $1 billion through an accelerated share repurchase, $1 billion through open market purchases, leaving $2.6 that we will return the remaining $2.6 through a continuation of our program of open market purchases by the company. We will of course continue to evaluate whether there are more efficient ways as we go along but our expectation now and our plan now is to return all of the remaining cash through open market purchases.

I think the charts on page 5 are self explanatory and I won’t dwell on them other than to note that when we began this program in November on a primary basis, we had about 256 million shares outstanding and as of this past Monday we had about 214 million shares outstanding. Turning now to page 6 on the financial highlights of how we’ve done for the year. As I said earlier, for the year, our adjusted EBITDA, $988 million is up 52% for the quarter, $214 million was up 23%. The year over year improvement is principally attributable to a higher capacity revenues, higher energy prices, the results of the Pepco settlement which was finalized and took effect in 2007, higher realized results from our proprietary trading and fuel management activities, offset some by lower incremental realized value from our hedging program.

In November our guidance for 2008 was $907 million of adjusted EBITDA, we are updating that today, Jim will walk you through the particulars and increasing it from $907 million to $925 million. We are also initiating for the first time guidance for 2009 and we are initiating that at $1 billion $11 million, $1.011 billion. Our guidance and what we’re seeing in the market is reflected on page 7, strong fundamentals particularly in the long term gas prices. When we prepared this the long term curves were at $8.50, looking at them this morning they are all north of $8.50. [Peeb] rates we are seeing expand particularly in the off peak hours in PJM and capacity prices in PJM continue to reflect what I mentioned earlier at the beginning of this presentation which is that demand is growing faster than supply.

All the words in the world don’t change the basic fundamentals of the economics. Turing to page 8, a chart that we have used before, modified for our most recent data which shows what is happening to reserve margins, that is how much extra is left in the markets. All of it is shrinking and remembering in particular that getting below 15, 15.5% is worrisome. You can see that both in the portions of New York where we have generating facilities and in the portion of PJM where our mid Atlantic fleet is located, we are heading as a society, as a region apart from our business into trouble. Running a business and thinking very narrowly and selfishly, this is terrific, but we all live in this society together, this is not sustainable, this is not good, something has to give here and all the words in the world don’t change the reality.

Turning to page 9, our strategy has been and continues and will remain to hedge substantially, though all of the market fundamentals are strong for us which might lead someone to say why do you bother hedging? The answer is we are in a commodity business. Electricity itself is a commodity. The fuels that we use, gas, oil, coal are commodities. The emissions credits we use are commodities and commodities by their nature all have volatile pricing and to ensure that we have enough certainty of cash flows and predictability to manage the business, we think hedging good portions of this is the right thing to do and we continue to do it and will continue. In the past, in our last presentation if you look at it, we were providing three years of data, we would provide the current year and the next two years.

We have expanded that here to give you a better sense of how we see this to show you five years. And if you look for example on the right here, on page 9, at our base load coal, you’ll see where we are and compared to the last time to give you a sense, in 2008 we are currently on our base load coal, 97% hedged. In November when we last had a presentation on this we were at 82% hedged. On our coal for that, we are currently 100% hedged when we last spoke, we were 96% hedged. For 2009 same factors on the power, when we last spoke we were 54% hedged, we are today 63% hedged. On the coal, the last time we spoke we were 67% hedged, today we are 100% hedged and you can see what the various numbers are there.

We are always in the markets, we are always assessing it, these numbers are always changing for us. Turning to page 10, an updated on the segment for our mid Atlantic stations. For the quarter, we were up 16.5% in terms of realized gross margin and for the year we are up 30%. And these increases result, no surprise from the higher capacity revenues and higher energy prices, offset again by lower incremental realized value from hedging.

Turning to page 11, still on our mid Atlantic and update on a couple of environmental issues. First, as I mentioned but it bears repeating given its size, we are marching along to comply with the Maryland healthy air act which has us, we have a program underway, a $1.6 billion program which is on schedule, on budget. We have as of December 31st, $1.1 billion to go and this program will result in an enormous reduction in the emissions at our Maryland stations of sulfur dioxide, nitrogen oxides and mercury. At the Potomac River station where we’ve been having ongoing issues involving how much of the plant we can operate and how we operate it, all of which arose back in 2005 with an issue known as downwash.

To remind everyone, the Potomac River station has 5 units, 5 coal units which operate well. It has very, very short stacks and the reason for that is it was built very near what is today Reagan National Airport. And so to avoid getting in the way of incoming aircraft it has very short stacks. That is what led to this so called downwash issue which is at least as theoretically modeled, a concern that under certain weather conditions what is properly coming out of the stacks could fall to the ground rather than disperse and do so in concentrations that might be unsafe for people. Our solution has been, we’ve had a variety of solutions in how we operate the plant.

One of those solutions is to merge the stacks and we would do that without changing their height but we would combine within the plant the five stacks to two which would give greater upward motion, lift if you will, in the stacks so whatever is properly and legally and permitted coming out of the stacks will go up and disperse better and not have, not risk concentrating at ground level where people are walking and living.

We have been in litigation, there have been lots of ins and outs, the bottom line is we expect that we will be able to move forward with the stack merge, we expect that by next year we will move from where we are today, where we are able to operate up to three of the five units to being able to operate all five of the units on a largely unconstrained basis. Finally, RGGI, RGGI stands for the regional greenhouse gas initiative, Maryland is a member of RGGI and this deals with carbon and greenhouse gasses. Maryland issued early this month proposed regulations on how they would go forward with RGGI. RGGI is to take effect in all of the states that have joined it at the beginning of 2009 and one question is how credits will work, is the cap and trade program, Maryland’s proposal is to auction all of the credits.

I think with some recognition that the price of this ultimately is going to end up being paid by the consumer or largely by the consumer. Maryland is proposing a cap on the cost of that for in state generators like us for half of what we would need in terms of carbon of $7.00 a ton. We will see how this resolves but that is the latest on where it stands.

Moving to page 12, I’ve spoken earlier today, probably repeatedly on supply and demand and this is reflected in what is happening in the RPM or the capacity market, [we] PJM, you’ll note for those who have followed it, we previously cleared our prices in what is called southwest mac which is the general area, in the Baltimore-Washington corridor where our plants are located. In the most recent auction, instead we cleared in the RTO, the regional transmission organization, that is the entire PJM rather than a small portion of it. And that reflects what is happening in the RTO and that reflects also if you look at the third bullet from the bottom on page 12, two things.

One is higher energy and ancillary service offsets, which John O’Neal, our Chief Commercial Officer will be happy to explain if anyone wants further information and that the rules when we bid on these which are detailed and with which we comply religiously, require us to assume that various new transmission lines will be in place to serve among other things southwest mac. Obviously if those lines are no in place the world will be different but then the world that we bid into, but again as I said, we bid and do so religiously by the rules here. Turning to page 13, the northeast, we had some improved gross margin for the quarter due to higher energy prices and capacity revenues in New England. New England for the SCM which is its capacity market, had fixed prices in the way it was set without a bidding and so we went through as did all the other participants, the first of the bidding is cleared at the floor price and so that will yield us the $4.25 a kilowatt month.

There was a surprising amount of demand side response as well as new generation, so that capacity market seemed to have a good effect. It is what we expected internally, not a surprise to us. New York [iso] has been seeking to update the cone, the cost of new entrant which translates into what the capacity prices will be in New York and [ferk] approved at the end of January New York’s efforts to increase that, that is the right thing to happen if you’re not getting enough new supply, why not, prices, need to be there, people have to believe those prices will be there in order for new capacity ultimately to be developed. Finally, in New York we have two stations, we have the [Bowline] station and we have the [Lubitz] station. [Lovit] has one remaining unit in operation that is unit 5, it is a coal unit running at about 180 megawatts and in accordance with a consent decree into which we entered, we currently intend to shut it down permanently on April the 19th, that is a month and a half and unless we can reach some satisfactory arrangements with the various jurisdictions and authorities in the state of New York, we’ll begin the demolition of the facility.

California, turning to page 14, piece of the quarter particularly that our realized gross margin is up sharply, 95% and that is due to arrangements we entered into for tolling the facilities at Pittsburg and [Confacasta]. And those facilities are a prime example of what I mentioned earlier, facilities with room to add capacity or to repower them and we are actively exploring both and in this instance for the gas and electric, PG&E, the load serving entity for northern California is working on a request for offers and we are actively preparing for and engaging the process of responding to that, utilizing our two sites, Pittsburg and [Contracasta].

Page 15, a slide we’ve used before, a slide we will use again. This lays out what I’ve said already that there is significant opportunity which we wish to pursue but we wish to pursue it prudently, to redevelop our sites, to put in brown field, brown field meaning we’re building at an existing site rather than a brand new virgin site or greenfield site or and to repower them, that is to take the existing facilities and augment them, modernize them and so one. Page 16 is a map showing you where we’re located, why we think our locations are strong. If you look at those [deserve] margin charts earlier in the presentation you can see why these are valuable sites, valuable places to be. We are in the midst of load centers with declining reserve margins where new capacity is needed, we have the sites to do so. We have the room to do so and we have the will to do so. And with that I will turn to page 17 and let Jim Iaco take you through the numbers.

Jim Iaco

Thank you Ed, good morning. As Ed mentioned earlier we had a strong 2007. We were 52% increase in adjusted EBITDA as compared to 2006. Our fourth quarter of 2007 was up 23% from the comparable 2006 quarter. As shown on slide 17, adjusted EBITDA for the fourth quarter of 2007 was $214 million as compared to $174 million for the 2006 period. The $40 million improvement is principally due to a $53 million increase in realized gross margin which I will discuss in more detail on the next slide, partially offset by a $13 million increase in maintenance related and environmental compliance costs and other miscellaneous cost increase.

Turning to the year ended December 31st, 2007, adjusted EBITDA was $988 million as compared to $648 million for 2006. The $340 million improvement is principally due to a $343 million increase in realized gross margin and again I’ll discuss this in more detail on the following slide. Taking adjusted EBITDA and deducting interest, taxes, depreciation and amortization, to arrive at adjusted net income. The reduction in interest, taxes, depreciation and amortization for both the fourth quarter of 2007 and full year comparisons is primarily due to an increase in interest income from higher cash balances as a result of the proceeds from the dispositions completed in 2007.

Turning to items that reconcile adjusted net income to income from continuing operations, a GAAP measure, net unrealized gains or losses on derivatives reflect the mark to market gain or loss on our hedging activities. Impairments for 2007 are related to the impairment taken earlier in the year related to the [Lubick] generating facility and for 2006, the impairment related to the [Bowline] unit 3 suspended construction project. The New York property tax settlement is a benefit recorded during the fourth quarter of 2006 related to the settlement of those disputes. T

he Pepco settlement is the total Pepco settlement gain of $379 million, adjusted for $17 million of refunds included in adjusted EBITDA which relates to 2007 payments made under the Pepco agreement prior to the settlement. And finally the benefit for income taxes relates to the release of the valuation allowance related to the 2007 taxable gain resulting from the sale of the Philippines business. Our average diluted share count is lower in the 2007 periods as compared to the 2006 periods due to share repurchases during the fourth quarter of 2007, partially offset by an increase in assumed dilutive shares for options and warrants due to additional grants and increases in our stock price.

And finally, earnings per share based on adjusted net income was $0.72 for the fourth quarter of 2007 as compared to $0.35 for the comparable 2006 period and $2.91per share for the year ended December 31st, 2007 as compared to $1.04 for 2006. Now turning to slide 18, this slide presents the components of the company’s realized gross margin for the fourth quarter and for the full year of 2007 as compared to the comparable periods of 2006. Energy, shown as the light blue bar represents gross margin from the generation of electricity at market prices, sales and purchases of emission allowances, fuel sales, purchasing and handling of fuel, steam sales and our proprietary trading and fuel oil management activities.

The $42 million increase for the fourth quarter of 2007 as compared to 2006 was attributable to a $74 million increase in energy gross margins in the mid Atlantic and northeast regions, principally due to an increase in electric energy prices, partially offset by a $35 million decrease in gross margins related to settled fuel oil management positions. The $172 million increase for the full year of 2007 as compared to 2006 was principally due to a $145 million increase in energy gross margins in the mid Atlantic and northeast regions, principally due to an increase in electric energy prices and an $80 million in gross margins related to settled fuel oil management positions, partially offset by a $42 million decrease in the results from our proprietary trading activities.

Contracted and capacity, the dark blue bar represents gross margin received from capacity sold and ISO administered capacity markets through RMR contracts, ancillary services and from the back to back agreement which was terminated on August 10th 2007. The $104 million increase for the fourth quarter of 2007 was principally due to a $72 million increase in capacity gross margin in the mid Atlantic and northeast regions, an $18 million increase in the California region, the result of a new towing agreement with PG&E and a $14 million increase as a result of the Pepco settlement.

$380 million increase for the full year 2007 was principally due to a $200 million increase in capacity revenue in the mid Atlantic and Northeast regions, a $43 million increase due to the new towing agreement with PG&E and a $77 million increase as a result of the Pepco settlement. And finally, the incremental realized value of hedges, the yellow bar, reflects the actual incremental margin realized in excess of market prices, fund of settlement of our power and fuel hedging contracts.

Turning now to slide 19, taking net cash provided by operating activities on a GAAP basis and adjusting it for bankruptcy payments which are non recurring in nature and emission allowance sales proceeds and capitalized interest which are included in investing activities for GAAP financial statement presentation results in adjusted net cash provided by operating activities of $146 million for the fourth quarter of 2007 as compared to $164 million for the fourth quarter of 2006 and $835 million for the full year of 2007 as compared to $945 million for 2006.

As we noted, 2006 includes a $446 million source of cash, the result of a substantial decrease in cash collateral. Reducing these amounts for total capital expenditures results in a free cash flow deficit of $29 million for the fourth quarter o 2007 as compared to free cash flow of $129 million for the fourth quarter of 2006 and free cash flow of $275 million for the full year of 2007 as compared to $812 million for 2006. Our Maryland Healthy Air Act expenditures which are non recurring in nature have been and will be funded by existing cash. I will discuss this in more detail on slide 26. Therefore, a more meaningful presentation of free cash flow is to use free cash flow adjusted for the expenditures related to the Maryland Healthy Air Act.

Accordingly, adding back actual expenditures under that program results in adjusted free cash flow of $104 million or $0.39 per share for the fourth quarter of 2006 and $685 million or $2.47 per share for the full year of 2007. Turning to slide 20, this slide presents our debt and liquidity as of December 31st 2007. Consolidated debt which is $3 billion $95 million at December 31st 2007 is down $180 million from consolidated debt at December 31st 2006 due to a $138 million worth of repayments of debt at Mirant North America and $39 million of purchases of Mirant America’s Generations Senior Notes due in 2011. After subtracting reserve cash, our available cash and cash equivalents including amounts available under the Mirant North America revolver and synthetic [unintelligible] of credit facility, amounted to $5 billion $656 million at December 31st 2007.

This balance reflects payments made under the accelerated share repurchase program and open market purchases totaling $1 billion $316 million through December 31st 2007. Let me take a moment and discuss the cash balances at Mirant North American and Mirant Mid Atlantic. Mirant North America’s ability to pay dividends is restricted under the terms of its debt agreements. At December 31st 2007, Mirant North America had distributed to its parent all available cash that was permitted to be distributed under the terms of those debt agreements, leaving approximately $697 million at Mirant North America and its subsidiaries. $242 million of that amount was held by Mirant Mid Atlantic which as of December 31st 2007 met the ratio test under the leverage lease documents for distribution to Mirant North America.

After taking into account the financial results of Mirant North American for the year ended December 31st 2007, we expect Mirant North America will be able to distribute to its parent approximately $55 million in March. Turning to slide 21, as Ed mentioned earlier we are updated our guidance for 2008 to $925 million and initiating guidance for 2009 at $1 billion $11 million. I will address the changes in realized gross margin, I will address a comparison of adjusted EBITDA for 2008 as compared to 2007 and 2009 as compared to 2008 and also give some detailed information on guidance sensitivities in the coming slides.

Taking adjusted EBITDA and deducting projected net interest expenditures, income taxes and factoring in projected changes in working capital, adjusted net cash flow from operations is projected to be $774 million and $773 million for 2008 and 2009 respectively. Reducing adjusted net cash flow from operations by a projected capital expenditures of $975 million and $527 million for 2008 and 9 respectively, provides an adjusted free cash deficit of $201 million for 2008 and an adjusted free cash flow of $246 million for 2009.

Again, adding back in the Maryland Healthy Air Act capital expenditures for 2008 and 2009, which is as I stated earlier are non recurring in nature and will be funded by existing cash, after the return of $4.6 billion to our stockholders, results in an adjusted free cash flow under the Maryland Healthy Air Act cap ex of $488 million for 2008 and $532 million for 2009. Our adjusted free cash flow yield, excluding the Maryland Healthy Air Act cap ex and based on the closing share price and diluted share count as of February 25th its 5.7% for 2008 and 6.2% for 2009. Our hedged realized gross margin for 2008 is $1 billion $213 million or 75% of our projected realized gross margin. For 2009, our hedged realized gross margin is $1 billion $26 million or 61% of our projected realized gross margin.

Hedged realized gross margin is defined as hedged merchant generation and other contracted capacity which would include reliability must run agreements and capacity sold in ISO administered capacity markets. And finally, hedged to adjusted EBITDA which is defined as hedged to realized gross margin reduced by our projected operating expenses for a full calendar year, is $530 million or 57% of our projected adjusted EBITDA for 2008 and $353 million or 35% of our projected adjusted EBITDA for 2009. Turning to slide 22, this slide presents the components of actual realized gross margin for 2007 and projected realized gross margin included in our guidance for 2008 and 2009. Realized gross margin is predicted to decrease from $1 billion $643 million in 2007 to $1 billion $608 million in 2008.

The $35 million decrease is comprised of $167 million decrease in the incremental realized value of hedging, partially offset by a $111 million increase in contracted and capacity realized gross margins and a $21 million increase in energy realized gross margins. Realized gross margin is predicted to increase from $1 billion 608 in 2008 to $1 billion $684 million in 2009. The $76 million increase is comprised of a $105 million increase in energy realized gross margins, a $36 million increase in contracted and capacity, partially offset by a $65 million decrease in the incremental realized value of hedges. Turning to slide 23, this slide presents a comparison of our 2008 guidance to actual 2007 results and a comparison of our 2009 guidance to our 2008 guidance. 2008 guidance as compared to 2007 actual results, adjusted EBITDA is projected to decrease by $63 million.

This change is comprised of the following, an increase of $111 million in contracted capacity gross margin, principally due to a full year of RPM capacity revenues for 2008 as compared to seven months for 2007 as well as higher prices for the RPM plan year 08 09 as compared to the RPM plan year 07 08. An increase of $64 million is due to changes in market prices. We have an increase of $40 million due to increases across the fleet in our commercial availability, a $167 million decrease in the incremental realized value of hedges, principally due to a reduction in the projected differential between market prices and hedged prices, an increase of $68 million in operating and other costs, a decrease $33 million due to the anticipated shutdown of [Lubick] unit 5 and finally a $10 million decrease in anticipated revenues from our proprietary trading and fuel oil management activities.

For 2009’s guidance as compared to 2008’s guidance, adjusted EBITDA is projected to increase by $86 million. This change is comprised of the following. An increase of $104 million due to changes in market prices, an increase of $48 million due to increases in our commercial availability, an increase of $36 million in contract and capacity gross margin, principally in the Mid Atlantic and Northeast regions, a decrease of $10 million in operating and other costs, a $65 million decrease in the incremental realized value of hedges principally due to the lower volume of hedge transactions and we have included a $40 million worth of costs related to compliance with the regional greenhouse gas initiative.

We expect to emit approximately 16 million tons of CO2 in 2009 and for purposes of our 2009 guidance, we assume CO2 credits under the RGGI program which cover 1 ton of emissions will cost $2.50 per credit. And finally, a $7 million decrease in anticipated revenues from our proprietary trading and fuel oil management activities. Turning to slide 24, I’ll address some of the key sensitivities regarding the guidance for 2008 and 2009 that we are providing today. NYMEX thrift prices utilized in our guidance are as of February 6th and are $8.32 per MMBTU for the balance of 2008 and $8.57 per MMBTU for 2009. Based upon our un-hedged adjusted EBITDA for 2008 and 2009, a $1.00 price move in natural gas will result in a change in adjusted EBITDA of approximately $25 million for the balance of 2008 and $65 million for all of 2009. Energy price changes due to heat rate movements of 500 BTUs per kilowatt hour will result in a change in adjusted EBITDA of approximately $25 million for the balance of 2008 and $70 million for all of 2009. The heat rates shown are 7 by 24 Pepco forward implied market heat rates as of February 6th.

As I indicated on the previous slide, we have included a carbon credit cost of $40 million in our 2009 guidance based on our expected emissions at a cost of $2.50 per ton. The sensitivity to adjusted EBITDA for $1.00 change in the price of credits is approximately $5 million. This sensitivity is based on our hedged position and our view that power prices will increase as the cost of complying with RGGI increases. Turning to slide 25, this presents a breakdown of our projected capital expenditures for 2008 through 2010. Our normalized maintenance cap ex approximates $100 million a year but is projected to be higher in the early years of our Maryland environmental cap ex program due to upgrades that will be timed in conjunction with our environmental retrofits. As Ed mentioned earlier, the total estimated cost for compliance with the Maryland Healthy Air Act remains at $1.6 billion. We have expended $500 million through December 31st, 2007.

Turning to slide 26, we have previously announced that we will be returning $4.6 billon to our stockholders starting with a $1 billion accelerated share repurchase program combined together with a $1 billion in open market purchases. Reducing the $4.6 billion by the accelerated share repurchase program and open market purchases through December 31st, 2007, the remaining cash to be returned to stockholders as of December 31st 2007 amounted to $3 billion $284 million. At December 31st 2007, cash and cash equivalents amounted to $4 billion, $961 million. Reducing that amount by the remaining cash to be returned to stockholders of $3 billion $284 million and by other unavailable cash, cash available to fund projected expenditures at December 31st, 2007 is $1 billion $662 million and exceeds the remaining Maryland Healthy Air Act expenditures by $562 million. And with that, I will turn it back to Ed who will wrap up, open up the presentation for questions. Ed.

Ed Muller

Thanks Jim, appreciate it. One page 27 the key takeaways from the presentation today, we have a business that generates good strong cash flow as we’ve said, it is masked by the very large environmental cap ex that we have underway in Maryland but taking that, looking through that you can see that this business generates very good cash. We are in the process and have underway returning the full $4.6 billion that we said we would return and other than the $1 billion we will be returning through the, have returned through the accelerated share repurchase program, we will return it through open market purchases, unless at some point we see a better way to do it.

Our generating facilities are located in regions with declining reserve margins, the laws of economics are working in our favor. As Jim just said, the environmental program in Maryland is if you will funded, we have the cash in hand to do it, it is underway, I repeat, it is on budget and it is on schedule. We are as I said at the very beginning, highly focused on our maintenance program to maintain and improve the availability of the plants and their reliability and we will, we are optimistic that we will succeed with that. We want, as we have, wanted to add capacity, brown field capacity at our existing sites and to repower and redevelop our existing assets, that will happen. The question is when. We are working on it but you will not be hearing from us until we think it is realistic and we will not be doing it until we think it is prudent. And with that, Mary Ann, I think we’re ready for questions.

Mary Ann Arico

Felecia we are ready to start the Q&A.

Question-and-Answer Session

Operator

Thank you, the question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star key followed by the digit one on your touchtone telephone. If you are using a speakerphone, please be sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one to pose a question at this time. We’ll go to Greg Orrill at Lehman Brothers.

Greg Orrill – Lehman Brothers

Thanks a lot, good morning. In your 09 EBITDA guidance, two things, I was wondering first if you included the ramp up from 3 units to 5 for Potomac River? And then second, on the exposure to RGGI, did you include any offsetting market power prices?

Ed Muller

The answer to both Greg is yes. We are assuming, it is our best judgment that we will be able to run largely unconstrained all 5 units in 09 and that is the basis of the guidance that we have given. And second, yes, in how we have calculated both the guidance for 09 and the sensitivity that Jim walked you through, we assume that there is going to be a reaction in market prices to the cost of RGGI.

Greg Orrill – Lehman Brothers

Okay, thanks.

Operator

We will go next to Elizabeth Parrella of Merrill Lynch.

Elizabeth Parrella – Merrill Lynch

Thank you, just following up on the 2009 guidance. You have an increase in the commercial availability of $48 million year on year after a big increase in 08. Just wanted to sort of get a sense as to, you know on the scrubber outages that you’re going to do in late 09, how long do you think those outages are going to take and how do you manage to also have a big increase in availability that year?

Ed Muller

Well, first, as to how long they will take Elizabeth, we will be doing a variety of things at the plants in conjunction with these outages to make them efficient and for commercial reasons we’re not going to disclose the exact lengths of the outages. And availability is up because of a variety of things across the fleet and while we will have some downtime, planned downtime at the coal stations, we’re looking at all of our fleet which is 11 stations across the country.

Elizabeth Parrella – Merrill Lynch

Okay and you mentioned that you’ve got a reduction in operating costs in 08, you know as part of, I’m sorry a drag in operating costs is the way I think we should be looking at it in 08 but no drag and in fact some reduction in operating costs in 09, can you walk us through what that is driving that pattern?

Jim Iaco

Sure Elizabeth. In 08 compared to 07 the increase I spoke to about $68 [m]illion, we have some increase at our plant operating and maintenance costs of about $33 million. This is a variety of things, some of which is tied to the discover program. We have an increase in property taxes because of some recently enacted legislation in Maryland and some increase in our corporate costs. As far as 9 compared to 8, that decrease, we’ve got a slight decrease across the board, I mean some of its related to property taxes, some decrease in our operating costs at our plants and we have a decrease in our corporate costs as well.

Elizabeth Parrella – Merrill Lynch

Okay and if I could just ask a question on your coal hedging, what should we be thinking about as the blend in 2010 and you know maybe on a normalized basis with the scrubbers on the 3 Maryland plants?

Ed Muller

John, you want to take that?

John O’Neal

In terms of the [spec] Elizabeth, is that [overlay].

Elizabeth Parrella – Merrill Lynch

Well I just meant assuming that you’re going to move to some type of higher sulfur coal so how should we be thinking about the blend of coals that you’ll be using in 2010 and I don’t know if it changes beyond that or you get fully to where you want to be in 2010?

John O’Neal

Yeah I mean certainly in 2010 we have the flexibility to burn a higher sulfur coal because of the scrubber upgrade that we’ll be doing at the mid Atlantic station, we also as you know are putting in a barge un-loader at Morgantown which will allow us to bring in imported coal. From a modeling perspective the way we think about it is right now we’re kind of modeling and again we’re not giving guidance for 2010, but as we think about it we kind of think about a typical kind of NGA spec in 2010 and beyond and obviously we’ll avail ourselves of what makes the most sense when we get there.

You know our coal plants have typically, we’ve purchased about around a 3 pound sulfur spec and that is probably a good way for you to think about it as you think about the outer years. Again, if it makes more sense for us to bring in a higher sulfur coal because of the sulfur differential and the savings we’ll do that. Alternatively if it makes more sense to bring in international coal at a low sulfur, we’ll do that. Obviously as we look at the international markets right now that doesn’t make a lot of sense but from a modeling standpoint we kind of think about a 3 pound NGA as being what we would model going forward.

Elizabeth Parrella – Merrill Lynch

Great if I could just ask one other question since Paul is there, I think there’s a slide in the appendix on the NOL situation, it sounds like something may have changed since the November call, is that correct and if you could just sort of walk us through whether anything has changed that we need to be aware of from an NOL perspective?

Paul Gillespie

Alright, two things happened. We think that in December 2007 we had a change in ownership, the effect of that change in ownership however is very limited. In essence we still think we’re in the same position that we had earlier advised you, namely that we can use about $500 million of NOL in each year through 2012, assuming that we have sufficient taxable income. The second thing that’s happened is that our NOLs have dropped down a little bit, that’s a result of a study that we completed in December. The NOLs, or the benefits, the tax benefits haven’t disappeared, they’ve simply shifted over to a different deferred tax assets.

Elizabeth Parrella – Merrill Lynch

Okay, thank you.

Operator

We’ll go next to Douglas Clifford of Omega Advisors.

Douglas Clifford – Omega Advisors

Good morning, I wanted to focus in on the share repurchases. If I understand it, you are not disclosing where JP Morgan is that short position right now other than Ed you said they have not covered their short completely as of today?

Ed Muller

Well, they have not completed, that’s correct, they have not completed the program, you understand it correctly Doug.

Douglas Clifford – Omega Advisors

That suggests then that the total number of shares that have actually been repurchased in the market is something less than 40 million shares and the total volume in your stock since November 9th is something over 270 million shares, so the arithmetic tells me that you and JP Morgan combined have been somewhere perhaps 12-15% of the volume and my question is that number seems a little low, seems lower than it certainly can be and you know, do you have a comment or do you think that going forward you’ll be trying to be closer to 25% of the volume in your stock?

Ed Muller

Doug, we don’t have a comment. You know the program is such that between JP Morgan and us we have some volume restrictions and we of course adhere to the restrictions and what else goes on in the market is beyond us.

Douglas Clifford – Omega Advisors

But I mean your restrictions are at least in the numbers I went through, your restrictions are well above the pace of your repurchases have been so far.

Ed Muller

Bill, go ahead.

Bill Holden

Yeah Doug maybe I can just add a little bit. You’re correct that the limitation on the repurchases across the two programs, the ASR and the open market repurchases is 25% of the average daily trading volume. You know, the way the programs are set up though, we allocated that 25% to the ASR and to the open market purchases. We’re not able to transfer unused amounts from one program to the other. So for the open market repurchases, we have a percentage of that 25%, for the ASR there’s a percentage allocated and then JP Morgan actually makes the trading decisions on that side of it as to how they cover the short and that’s all part of the documentation under the ASR where they’ve agreed that the final price that we end up paying for the shares will be adjusted based on the volume weighted average price during the program, minus a discount which they agreed to at the outset.

Douglas Clifford – Omega Advisors

The last question is would it then be logical for us to think that once that JP Morgan has covered their short and assuming you don’t do another ASR that it’ll be easier to coordinate a one pronged program at least in getting the volume up?

Bill Holden

Yeah Doug, once the ASR is complete then the open market purchase program would have access to the full 25% limit.

Douglas Clifford – Omega Advisors

Thank you.

Operator

We’ll go to Paul Patterson of Glenrock Associates.

Paul Patterson – Glenrock Associates

Good morning guys, alright I wanted to touch base with you on slide 29. When we look at the delivered coal price in the mid Atlantic, does that indicate that you guys haven’t hedged the coal prices and these are just the market prices that you guys expect to realize then?

John O’Neal

No, Paul, what we’re showing you there, the purpose of this slide is we want to allow you to model our business based purely on market prices as we see them and so the delivered coal price we’re providing for you there is what we believe the market prices for delivered coal to our fleet in the mid Atlantic, including transportation. So our transportation is roughly somewhere between $20-$22 a ton, you back that out of these costs, you get at the time we did this, again these are curves as of 2/6, you get the spec for our coal, you get prices in the high $60’s.

What we then provide you down below is the net value of all of our hedging activity on a $1.00 per megawatt hour basis. So the value of the hedges, because as Ed described, we’re near on 100% hedged in 2008 and 2009 both, the value of those hedges, because obviously a lot of that hedging activity went on long before this run up, so there’s a very large imputed value in those hedges, that’s reflected in the numbers you see below where we give you the net value of all of our hedging activity which includes both the coal hedges and the power hedges. One other note I would make is that at 12/31/07 and we disclosed this in our K today, because we think it’s good disclosure is the value of all of our coal hedges at 12/31 was $134 million on a mark to market basis. So obviously those are not contracts that we’re required to mark but we felt from a disclosure standpoint it would be helpful for people to know the value and it was $134 million at December 31st.

Paul Patterson – Glenrock Associates

Okay, great and then just on, again we saw the chart, we see the decline in these [ear] margins, we’ve also seen some statements by the Maryland Public Service Commission in terms of going for a sort of an IRP process for lack of a better term in terms of new generation and what have you. Any comments you have on that in terms of what you guys think the opportunities or the issues associated with something like that?

Ed Muller

You said IRP?

Paul Patterson – Glenrock Associates

Well I mean the contracting for generation, forcing BG&E to have long term contracts with IPPs and what have you is what they seem to be suggesting is a very likely outcome perhaps in the next few months.

Ed Muller

Well I think this Paul, you know the leadership in Maryland in the government has to its credit realized that there is a long term, a problem that has been long term in coming that needs to be addressed and how best to address that is complicated. And it’s evident that the leadership is concerned about a variety of things for which I think it deserves credit. One is reliability, is there just going to be enough? And as reserve margins come down that becomes worrisome.

And of course a second as you’d expect is price though with gas up where it is, it’s not surprise that electricity is expensive. How this comes out as in any process where you have a lot of constituents, different groups, interest is still unclear. I think a logical way for it would be some sort of contracting for new build, that’s certainly one way to do this and if the state decides that’s what it wants to do we would be very interested in participating in that process and adding or augmenting the capacity at our existing sites in Maryland. But for, beyond that I think, beyond our ability to predict with enough certainty, the answer to your question.

Paul Patterson – Glenrock Associates

Okay, thank you.

Operator

We’ll go next to Lasan Johon of RBC Capital Markets.

Lasan Johong – RBC Capital Markets

Yes, good morning, congratulations on a good year. I wanted to give you a couple quick questions, first of all is there any timeframe for completing the $2.6 billion of open market share repurchases at all?

Ed Muller

You know we have been Lasan, we’re not specifying a time period but as you can see from what we have done as through this past Monday, we are marching along with this. And our plan is to march along.

Lasan Johong – RBC Capital Markets

Okay and can you give us a sense of kind of what types of projects you’re looking at, mix of green field versus brown field, coal versus gas, contracted versus merchant?

Ed Muller

Well, we’re looking at a variety of things Lasan and as I said earlier, I don’t want to get out ahead, I’ve been in this business long enough to know that anything that gets said, people jump on and then the next call they want to know how much progress we’ve made. And things in this sector unfortunately often move slowly and I don’t want to hold out false hopes. We are looking at things that would make our existing, some of our existing boilers more efficient. We are looking at taking some of our existing peaking capacity and turning it into combined cycle capacity.

We are looking at bidding to build new natural gas fired peaking capacity in California. We are not looking at adding any coal fired capacity. I think that is and the reason is not because we don’t like coal and we don’t think it can be a good part of the mix going forward, there’s I think a strong argument that it should be, but we recognize the political realities out there and for us to spend a lot of time trying to do something that right now the public does not want would have us tilting at windmills, which is not our business.

Lasan Johong – RBC Capital Markets

Okay and the last question is, Maryland prepared for the potential sharp increase in rates due to the RGGI implementation, do you think that they are how shall I say this, are they fooling themselves into believing that this is not going to impact the customer at the end of the day or are they fully aware of what they’re doing and what it means to customer bills and how much this could potentially threaten and damage reliability?

Ed Muller

Well I think your question is an excellent one. I don’t know, I can’t speak for all of Maryland nor can I even speak for the Maryland government. I think that there is some growing recognition. I think in the beginning of this, as RGGI was coming along there was a perception that it was a free lunch that it would not affect the consumer at all. There was a sense that there might be some price increase but demand would go down sufficiently so the net bill to consumers would be unchanged, they would use less. I think that notion is somewhat dissipating. I think you see this cap for half of what the in state generators would need as being a recognition that somebody’s going to pay for this and by and large it’s going to hit the consumer. So where all that stands, you know if I think you got various people you’d get different opinions but I think there is rising concern in this regard.

Lasan Johong – RBC Capital Markets

Okay, thank you very much.

Operator

We’ll go next to Alex [Humajun] of Sandell Asset Management.

Alex [Humajun] – Sandell Asset Management

Hey guys, good year. Just a question regarding your hedging, you know coal for 08 and 09 I was just wondering if any of those contracts are subject to open [airs] or escalators.

John O’Neal

Allen all of our contracts are firm price contracts, we’ve not included anything in there that would include a price re-opener. So everything we’re providing to you today both from a value standpoint and also then from a volume standpoint on the hedge percentages are at fixed prices.

Alex [Humajun] – Sandell Asset Management

Okay, thank you.

Operator

We’ll go to Daniele Seitz of Dahlman Rose.

Daniele Seitz – Dahlman Rose

Thank you very much. Do you have any goals of capacity factor as you upgrade your coal units over the next two or three years of some you know some targets that you are looking at. It seems that you are focusing on operations and so I was wondering if there was anything that we could latch on?

Ed Muller

Well I think we have said that we are seeking to improve our commercial availability, it is one of the goals for our annual incentive plan. And I believe we’ve stated this in an 8K. And a factor we are seeking is to have commercial availability of 87% for 2008. Well if we didn’t say it [Julia] we’ve said it now. It is one of the factors and we are focused on it as I’ve said every day.

Daniele Seitz – Dahlman Rose

And this compares to what number for 07?

Ed Muller

It was a lower number in 07.

Daniele Seitz – Dahlman Rose

I assume so but you don’t have the number, I can request later. And as far as the cost of equipment environmental equipment, I was wondering if, are all of those contracts locked and there’s no chance of any cost escalation?

Ed Muller

Well I wouldn’t say that. I think the biggest issue for us is most of the equipment, the hard assets is fixed or we are very close to having it fixed. The issue for us that is open is labor costs which is a problem I think throughout the industry though it may be a problem that is given the state of the economy, mitigating somewhat. But not on the physical equipment, the parts the components and so on, it is the labor.

Daniele Seitz – Dahlman Rose

And your impression is the $1.1 billion that is left towards labor will represent maybe 25%, 35%?

Ed Muller

I think it I probably more than that. But you know when I say Daniele as I’ve said probably repeatedly here that we are on budget. We are assessing the labor markets and we are doing so on a bi-weekly basis.

Daniele Seitz – Dahlman Rose

Right, no I was asking that because other companies had been mentioning it. The other last question, the Potomac River issue, I mean isn’t there some stuff to be worried out there that the capacity reversals will be very limited during the summer, is there any chance for the plant to actually operate on a dark basis?

Ed Muller

On a which basis Daniele?

Daniele Seitz – Dahlman Rose

Well because, on an emergency basis?

Ed Muller

Well, there is always that possibility. In February of 07 we were ordered indirectly by the United States Department of Energy to run at full capacity because of reliability concerns in the District of Columbia and having been ordered by the Federal government to run, we did so. So now due to some transmission improvements made by the load serving entity here, there seems to be at least currently, less of a concern about that but you raise a very good point and that depends on availability, it depends on problems. To wit, look what happened in Florida in a substation. So can that happen? It can. We have to operate within the terms of our permits, though of course when we are ordered by the Federal government to operate to maintain the electric supply in the nation’s capital, we will do so.

Daniele Seitz – Dahlman Rose

I understand, thank you.

Operator

We’ll go to Tyler Barron of [Boddy] Brown.

Tyler Barron – [Boddy] Brown

Good morning. First question on capital structure, if we look at your 09 guidance and then roll forward the continued share repurchase, that would put us levered at around 1.4 times. The expectation for that still do you eventually migrate to becoming a 3.5-4 times?

Bill Holden

Tyler I guess the way I would think about it, not sure where you get that number. If you look at the starting point, if you look at the debt we had at year end and you impute the debt from the [Marma] leases, we’re just around 4 times debt to EBITDA[R] based on the 08 guidance and obviously the 09 guidance is up so it would come down a little bit. But I think I’ve mentioned this before, we’re thinking about this more in terms of gross debt than net debt and if you’re looking through time at net debt, the cash balances are going to decline as we spend the cash on the shares, returning capital to stockholders and as we invest the cash into the capital expenditure program in Maryland.

Tyler Barron – [Boddy] Brown

Right, well yeah I’m talking on a net debt basis but I mean even still you have net cash right now of $1.8 billion, you have around $3.3 billon remaining on the share repurchase, that would get you to net debt of $1.4 billion on 09 guidance of $1 billion.

Bill Holden

Yeah but Tyler I think you have to keep in mind that we’ll be, the net debt balance can move around quite a bit because we’ll be investing that cash in the Maryland cap ex program and then we’ll be returning a lot of the cash as well. So I think after we get to 2010 and then the Maryland cap ex program is behind us, net debt probably becomes a more meaningful measure. But at this point because the obligations in front of us for Maryland, we’re thinking about it more as gross debt and you know as I said on that basis we’re about 4 times debt to EBITDA[R].

Operator

And at this I’ll turn the conference back to management for any additional remarks.

Mary Ann Arico

Thank you for joining us today, if you have any further questions I will be available by phone in just a few minutes. Thank you.

Operator

That concludes today’s conference call, we thank you for your participation.

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