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Executives

John F. Walsh - VP of IR

George L. Lindemann - Chairman, President and CEO

Eric D. Herschmann - Senior EVP

Richard N. Marshall - Sr. VP and CFO

Robert O. Bond - Sr. VP, Pipeline Operations and President and COO Panhandle Energy & CrossCountry Energy

Analysts

Craig Shere - Scottwood Capital

Faisel Khan - Citigroup

Reza Hatefi - Polygon Investment

Brooke Glenn Mullin - JPMorgan

Southern Union Company (SUG) Q4 FY07 Earnings Call February 29, 2008 2:00 PM ET

Operator

Good day ladies and gentlemen, and welcome to the 2007 Southern Union Company Earnings Conference Call. My name is Karen, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. [Operator Instructions]. As a reminder, this conference is being recorded for replay purposes.

And I would now like to turn the presentation over to your host for today's call Mr. Jack Walsh, Vice President of Investor Relations. Please proceed.

John F. Walsh - Vice President of Investor Relations

Thank you Karen, and welcome to Southern Union's 2007 earnings call and webcast. Presenting on today's call will be George Lindemann, Chairman, and President and CEO; Eric Herschmann, Senior Executive Vice President; Rick Marshall, Senior Vice President and CFO; and Rob Bond, Senior Vice President of our pipeline operations.

A replay of this call will be available for one week by dialing 888-286-8010 and entering passcode 66746396. A replay of the webcast will be accessible through our website at www.sug.com.

Today we will be discussing results for 2007, significant events and outlook. This morning, we issued a press release announcing our 2007 results and 2008 earnings per share guidance. Following our presentation, we will be happy to address your questions. If you have any further questions at the end of the call, please contact me directly at 212-659-3208.

Before beginning, I would like to remind everyone that the information discussed on today's call pertains to the financial results of Southern Union Company as filed on its Form 10-K. Certain amounts in variants explanations for the Transportation and Storage segment, may vary compared to Panhandle Eastern Pipeline Company's Form 10-K due to consolidating adjustments. I would also like to caution you that many of the statements contained in our call maybe based on management's current expectations, estimates and projections about the industry in which the company operates. These statements are not guarantees of future performance and involve risks.

The company undertake no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise. Such statements are intended to be covered by the Safe Harbor Provisions of the Securities Act of 1933, and the Securities Exchange Act of 1934. I would also refer you to the cautionary statement regarding forward-looking information in today's earnings release.

Any discussion during this call over proposed MLP shall not constitute and offer to sell with the solicitations offer to buy any securities. Any offer, solicitations of offers to buy or any sales of securities will only be made in accordance with the registration requirements of the Securities Act of 1933, or in exemption there from. This announcement is being issued pursuant to and in accordance with Rule 135 of the Securities Act of 1933. I would now like to turn the call over to Mr. George Lindemann. Mr. Lindemann?

George L. Lindemann - Chairman, President and Chief Executive Officer

Thank you and good afternoon. Today we would like to discuss our 2007 earnings and update you on some key items since our last call. To start, we are happy to have reported adjusted earnings of $1.70 per share, which is the top end of our previously announced guidance. This compares to adjusted earnings of $1.40 per share in 2006, a 21% increase. We are pleased to announce earnings guidance for 2008 in the range of $1.80 to a $1.90 per share.

We are also excited about our recently announced Florida expansion. We believe this project will produce significant value for the company and will provide... and we will provide greater detail about the positive impact to our shareholders as we finalize contracts with potential customers in the near future. We do not expect to issue any common equity related to this project. This project is an example of how we are always striving to grow our business and looking for new opportunities to create value.

I am also happy to announce that all of our business segments are performing well. When we are through with our prepared remarks, we will address any questions you might have. I would now like to turn the call over to Eric Herschmann. Eric?

Eric D. Herschmann - Senior Executive Vice President

Thank you George, and good afternoon. As you all know, during our last call we announced that we were moving forward with creating our own MLP for a portion of Southern Union gas services, our gathering and process assets. Our outside auditors have completed their audits of the SUGS business for the years 2004 through 2007 and we have been working on our S1 registration statement. Additionally, we are happy to report that we have been successfully adding positions to our hedging program at SUGS. In additional to the processing spread hedge, we entered into at the end of 2007, we have entered into floating to fixed natural gas swaps for both 2008 and 2009.

Rob Bond will discuss our hedges in greater detail in a few minutes. As we are certain you are all aware since our last call the MLP market has undergone a significant decline. We have seen yield backup well over 200 basis points for many high-quality MLPs. Likewise we've seen a lack of liquidity in the market in institutional demand has all, but evaporated. We are all aware that many IPOs have been delayed or cancelled during the last several months because of these market conditions.

Based upon the advice of our financial advisors, management's opinion of current market conditions and the feedback we have heard from many of our own investors, we have made the decision to delay our offering. I want to make this point clear to everyone: we are postponing the offering until the MLP market conditions improve.

We still believe that the MLP structure makes long-term fundamental sense for Southern Union. We will continue to evaluate market conditions and will keep you informed of our plans. We are excited about the significant growth opportunities throughout our businesses. As you'll see from the financial information we issued this morning, we are generating significant amounts of cash flow from our business units.

We are committed to deploying that capital in a manner that creates the greatest amount of value for our shareholders. Whether that is investing in additional growth projects, further increases to our cash dividend or ultimately share repurchases when our credit ratings permit.

With that, I would now like to turn the call over to Rick Marshall, our CFO to give you an overview of the numbers. Rick?

Richard N. Marshall - Senior Vice President and Chief Financial Officer

Thank you Eric and good afternoon. For the year ended December 31, 2007, Southern Union reported adjusted EBIT of $519 million compared to $482 million in the prior year. All references to adjusted EBIT and adjusted net earnings removed the impact of selected one time and non-recurring items. Our earnings release issued this morning set forth the selected items for 2007 and 2006 and in accordance with Reg G contains a reconciliation of EBIT to adjusted EBIT as well as EBIT to net earnings.

For the year, adjusted net earnings from continuing operations available to common stockholders were $206 million were at $1.70 per diluted share. This compares to adjusted net earnings from continuing operations of $164 million or $1.40 per share in 2006. Adjusted net earnings increased by almost 26% year-over-year.

In terms of segment results, transportation and storage including our investment in Citrus had adjusted EBIT of $376 million compared to $343 million in 2006, an increase of $33 million. This increase is attributable to 18 million of higher equity earnings from our increased ownership in Citrus Corp. Additionally Panhandle Energy posted a $16 million increase in EBIT.

During the year, Panhandle posted higher operating revenues of $81 million, driven primarily by increases in reservation revenue of $27 million, LNG terminalling revenue of $24 million, parking revenue of $18 million, and storage revenue of $8 million. This was partially offset by a $47 million increase in operating expenses including a $15 million increase in allocated corporate service costs, a $13 million increase in third party contract storage costs and $6 million increase in LNG power costs. Additionally, depreciation expense increased by $13 million due to an increase in property plant and equipment.

Our Gathering and Processing Segment generated $65 million in EBIT for the year compared to 63 million for the 10 months ended the December 31, 2006. Gross margin was negatively impacted in 2007 by amortization expense related to the 2007 put options, higher fuel, flare, and unaccounted for volumes as a result of our operation... operational issues during the first half of the year, and higher operating expenses.

Through 2007, we have seen improvement in each quarter and expect to see continued improvement throughout 2008. Our Distribution business generated EBIT of $71 million for the year as compared to 41 million in 2006. The $29 million increase is primarily a result of Missouri Gas Energy's successful rate case resulting in a $27 million increase in annual base revenues including a change in the company's residential customer class rate structure to a straight fix variable rate design. The straight fix variable rate design mitigates the impact of weather and conservation on earnings and cash flows and normalizes margin throughout the year.

Net operating revenues increased by $48 million due to the rate case and 14% increase in consumption volumes. This was partially offset by $19 million of higher operating expenses including $7 million of higher pension costs, $6 million of higher labor costs and $5 million of increased general costs.

Interest expense decreased $7 million in 2007 compared to the prior year. The decrease is due primarily to the retirement of the bridge loan facility in 2006 that was used to temporarily fund the purchase of SUG... of the SUG business in March 2006. The bridge long facility accounted for $49 million of interest expense and $8 million of debt cost amortization in 2006.

Interest of the Southern Union Company level decreased by $5 million as a result of lower average outstanding balances during 2007. This decrease was partially offset by $30 million... $35 million of interest associated with the junior subordinated notes and $21 million of interest related to higher debt balances at Panhandle. During the year, we invested approximately $689 million in our operations. Growth capital accounted for $448 million and maintenance capital was $241 million.

Broken down by segment, our Transportation and Storage Segment invested $591 million, $413 million for growth, and $178 million for maintenance, including compressive modernization, compliance, and integrity investments. Our Gathering and Processing segment invested $49 million, $23 million for growth, and $25 million for maintenance. At our Distribution segment, we invested a total of $45 million, $12 million for growth and $33 million for maintenance. Our corporate and other segment invested $4 million of maintenance capital.

For 2008, we expect total EBITDA including our proportionate 50% interest in Florida Gas Transmission to be in the range of $850 million to $890 million. Broken down by segment, we expect Transportation and Storage, excluding FGT, to produce $385 million to $395 million. We expect our 50% interest in FGT to produce $185 million to $190 million. We expect Gathering and Processing to produce $170 million to $185 million, and we expect Distribution and other to produce $110 million to $120 million.

Note that this guidance does not include any contribution from the infrastructure enhancement project at Trunkline LNG. The project was originally expected to come online in December of 2008. Due to engineering and construction delays, it is now expected to be in service in the second quarter of 2009. Additionally, the total cost of the project is now expected to be $365 million with an expected EBITDA contribution of $60 million to $65 million on an annualized basis. This project will contribute to total free cash flow growth for Southern Union of approximately 15% to 20% on an annualized basis. For 2008, we expect our total capital spending to be in the range of $510 million to $575 million.

Broken down by segment, we expect Panhandle Energy to spend approximately $395 million to $445 million, Gathering and Processing to spend approximately $60 million to $65 million and Distribution and other to spend approximately $55 million to $65 million. Of the total capital expenditures, maintenance capital is expected to be approximately $140 million at Panhandle, $30 million at Gathering and Processing and $35 million at Distribution and other for a total of $205 million.

I will now turn the call over to Rob Bond, who will discuss our Gathering and Processing and Transportation and Storage segment. Rob?

Robert O. Bond - Senior Vice President, Pipeline Operations and President and Chief Operating Officer Panhandle Energy & CrossCountry Energy

Thank you, Rick and good afternoon. I would like to begin by talking about our Gathering and Processing segment, Southern Union Gas Services. As many of you will recall, at the end of June we built and placed in the service a new 16-inch high pressure pipeline to connect our Jal and Keystone plants, so that we could better utilize our treating capacity throughout the system.

We also rebuilt the treating units at both Jal and Keystone. Investments that we made will allow us to continue to accept additional higher margin growth volumes into our North System and will help prevent the system from going offline due to a lack of treaty capacity. We are pleased to say at this point that we have not seen any reoccurrence of the operational issues that we experience during the first half of 2007. As you can see from our results, the fourth quarter continued to show improvement as EBIT was $24 million compared to $20 million in the third quarter.

As it relates to our hedging program, we have been active in the market over the last several weeks. As we have already announced, we have entered into a processing spread good option on 11,075 MMBtu per day with a gross strike price of $8.15 per MMBtu. We paid approximately $1.41 per MMBtu for the good option leaving us with the net price of $6.74 per MMBtu. To remind everyone, this is a processing spread hedge, which insures that we are effectively selling our hedged equity volumes at a minimum of 674 above the prevailing gas prices.

Recently we will be entered into floating to fixed natural gas swap agreements on 30,000 MMBtu, with the weighted average price of 828 per MMBtu for the period March through December 2008. We have also entered into floating to fixed natural gas swaps for 2009 on 10,000 MMBtu per day at 819. We continue to watch the market and expect that we will be entering into additional hedge positions on our equity volumes for 2008 and beyond.

I would now like to talk about the Transportation and Storage segment of our business. We are pleased to report that frontline gas companies builds on expansion project, which expands our system from east Texas into Louisiana as in place in services. Portion of the contracted capacity went into service in January with the remaining contract commencing on February 1st. This project created approximately 625 million cubic feet per day of incremental capacity from Texas to Louisiana and also created one Bcf per day of capacity to the Henry Hub. To remind everyone the project cost approximately $250 million, and is expected to generate EBIT between $20 million and $30 million, and EBITDA between $30 million and $37 million on annualized basis.

Our infrastructure enhancement project to Trunkline LNG continues to progress though we will be extending the in services date to the second quarter of 2009 as opposed to our last projection of late 2008. The cost of this project, which is fully contacted to be key LNG services through 2028 has also increased to $365 million up from $335 million. Because our negotiated rates are calculated based on the amount of capital we spend, we now expect the project to generate EBIT of $50 million to $55 million and EBITDA of $60 million to $65 million on an annualized basis. Both the extension of the in-service date and the increase in cost is largely due to the complexity of the project engineering and the project material requirements.

Finally, I would like to talk about our recently announced Florida Gas Transmission Phase 8 project. As the project currently stands, we expect to add approximately 500 miles of pipeline and 170,000 horsepower of compression to increase FGT's delivery capacity into Florida by approximately 800 million cubic feet per day. We are pleased to announce the Florida Power & Light has signed a 25-year agreement for 400 million cubic feet per day of that capacity.

As a result of our successful open season that ended February, the 15th, we are negotiating with potential shippers to determine the ultimate scope in cost of the project, based on our initial expectations for the scope, is estimated a cost of approximately $2 billion. As George mentioned earlier, we would expect to fund that project through debt and internally generated cash flows at Citrus and FGT. As we further develop and refine the scope of the project, we'll make sure that we'll keep you all updated.

With that, I would like to turn the call back over to George.

George L. Lindemann - Chairman, President and Chief Executive Officer

Thank you, Rob. At this point, we'd like to open the meeting up to questions.

Question And Answer

Operator

[Operator Instructions]. And your first question comes from the line of Craig Shere with Scottwood Capital. Please proceed

Craig Shere - Scottwood Capital

Hi, three questions; hopefully they are pretty quick. I believe in March last year that you gave guidance in '08 that was about $880 million plus, so that's kind of line with the new guidance particularly given the infrastructure enhancement delay. But for '07, I think it was $854 million, and not backing out one time items, which aren't huge. I think I come up with a total of $800 million. Can you first explain really if I am working at this right, and if so, where was the mess? And is this indeed non-recurring? The other couple of questions are: I want to better understand from an accounting standpoint how we get from $157 million of Citrus net income to $101 million of equity income to your 50%. And also I want to better understand the other net of $40 million at Citrus; what exactly is that and how repeatable is that?

Robert O. Bond - Senior Vice President, Pipeline Operations and President and Chief Operating Officer Panhandle Energy & CrossCountry Energy

Craig, your first question that dealt with the guidance that we gave in the March of 2007 specifically the strategic planned guidance on EBITDA. On an adjusted basis, the EBITDA for company wide is about $830 million. The strategic plan had $854 million. There is a difference there of about $24 million or so, and the... that's primarily the result of the shortfalls that we saw at the Southern Union Gas Services' operations. I view that... those to be non-recurring as it is evidenced by the guidance that we provided with respect to EBITDA for 2008 being right in the range of what was given last year through the strategic line.

Craig Shere - Scottwood Capital

Okay, and just the $830 million, I see about $195 million for half of the EBITDA, executing the one-time adjustments at Citrus. Is that right?

Robert O. Bond - Senior Vice President, Pipeline Operations and President and Chief Operating Officer Panhandle Energy & CrossCountry Energy

That's right.

Craig Shere - Scottwood Capital

Okay. And then I was just taking $427 million operating income and adding depreciation and adding the $195 million?

Robert O. Bond - Senior Vice President, Pipeline Operations and President and Chief Operating Officer Panhandle Energy & CrossCountry Energy

Right, I think what you are missing is from Gathering and Processing... from the Gathering and Processing segment, there is $30 million or so of cash flows that we received in 2007 that was not reflected in the income statement for 2007 or in the segment information for 2007. And if you go back to the strategic plan, you'll see that's something we anticipated and factored into the level of EBITDA for the SUGS business segment and that was made part of the strategic plan.

Craig Shere - Scottwood Capital

Okay the $30 million, and honestly looking at your stock price. I think the street is not clear on this. The $30 million, what is that? That's masked by mark-to-market. Whether it's cash you got this year?

Robert O. Bond - Senior Vice President, Pipeline Operations and President and Chief Operating Officer Panhandle Energy & CrossCountry Energy

Yes.

Craig Shere - Scottwood Capital

Okay, so you have $30 million of negative mark-to-market for the year, which you anticipated, because you knew what your positions were or maybe the street wasn't totally clear. So in fact you came in at $830 million. You guided like $20 million to $25 million higher, and the difference is mostly the first half in SUGS.

Robert O. Bond - Senior Vice President, Pipeline Operations and President and Chief Operating Officer Panhandle Energy & CrossCountry Energy

You got it.

Craig Shere - Scottwood Capital

Okay. And the couple of questions about how we go from the net at Citrus to your equity income and what that $40 million in other asset interest [ph].

Unidentified Company Representative

I'm not sure I followed the question, but... are you talking about 2007?

Craig Shere - Scottwood Capital

Yes, I am sorry. At the end of your 10-K, I see Citrus consolidated statement that shows $157 million net income? I am trying to figure out how I go from that to your 101 equity income for half of the... and then also within that income statement for 2007, I see $39.984 million of other, and I want to understand that.

Unidentified Company Representative

Well, one half of Southern Union's one half of Citrus is $79 million. There is $8 million related to the enrollment settlement, and another $12 million in purchase accounting accretion, which gets us to $101 million.

Craig Shere - Scottwood Capital

I got you.

Unidentified Company Representative

Approximately $101 million. And the other question, I am sorry.

Craig Shere - Scottwood Capital

Okay, but just to be clear, the purchase accounting accretion has nothing do with your EBITDA guidance, we walk through that just second ago just using the Citrus' income statement.

Unidentified Company Representative

Right.

Craig Shere - Scottwood Capital

Okay, great. And the other question was in the Citrus income statement, there is $40 million of other income?

Unidentified Company Representative

Yes, that's the Citrus litigation Duke settlement.

Craig Shere - Scottwood Capital

Okay, so this would... okay, so you were anticipating that in your guidance that you had given March last year?

Unidentified Company Representative

That's correct.

Craig Shere - Scottwood Capital

Okay. So when we see roughly flattish guidance for the segment in 2008, it's actually an increase because of the one-time items?

Unidentified Company Representative

That's correct; it's a slight increase because of the onetime item, but it's relatively flat for 2008.

Craig Shere - Scottwood Capital

Okay, I appreciate the help.

Operator

And your next question comes from the line of Faisel Khan Citi Investment Research. Please proceed.

Faisel Khan - Citigroup

Hi, good afternoon. I just want to follow-up on couple of question that were just asked. The SUGS EBIT for the quarter, if I understood right, was roughly $24 million; is that right?

Unidentified Company Representative

That's correct.

Faisel Khan - Citigroup

Okay. And is that kind of the sustainable level of operating income, we should see going forward in that segment?

Unidentified Company Representative

Yes. We see it is sustainable in fact, if you look at our guidance and assume the range of $170 million to $185 million, and depreciation of about $60 million. You can that we are actually forecasting a higher level of quarterly EBITs that would get us to the range of $170 million to $185 million, less $60 million.

Faisel Khan - Citigroup

And what were the... for your '08 guidance for the... or SUGS, what is your embedded gas oil price, your unhedged volumes?

Unidentified Company Representative

Originally, on the unhedged guidance, roughly and by the way, this is all backed by a combination of Waha and Permian Basin.

Faisel Khan - Citigroup

Okay.

Unidentified Company Representative

755ish.

Faisel Khan - Citigroup

Yes.

Unidentified Company Representative

And we had a built in processing spread using the curve at that time that I think came out to... between $0.65 and $0.70.

Faisel Khan - Citigroup

Okay. I got you. Now what would you say in '07 the impact of all the unaccounted for gas, some of that flared gas was for '07. How much that impact your earnings in '07?

Unidentified Company Representative

I don't know if we have it broken down that way. but I would say that based on the unaccounted for percentages that we were seeing, it would be somewhere in the... it would be better part of $30 million shortfall. I would say anywhere from $15 million to $20 million.

Faisel Khan - Citigroup

And do you believe you've kind solved all those problems going forward? Are there any other issues outstanding in terms of the... where your plants are operating on that system?

Unidentified Company Representative

Well, I think thee are couple of capital projects that we see that we need to complete, but I think we believe that the... transport line that we did build last year does it give us the flexibility to be able to manage it in the near terms until we complete some additional treating expansion at Jal, and find a way to handle the disposal of the asset gas.

Faisel Khan - Citigroup

Okay.

Unidentified Company Representative

For the high H2S. [ph]

Faisel Khan - Citigroup

And would you say that as the mix of the volumes on that system change at all in terms of more liquids or less liquids or more gas or less gas?

Unidentified Company Representative

No, I think we've seen the gallon to stay about the same, but I do think that we've seen a higher CO2 content, particularly on the north-end...

Faisel Khan - Citigroup

Okay.

Unidentified Company Representative

...which kind of led to some of the problems that we encountered last year, and which we have managed to overcome.

Faisel Khan - Citigroup

Okay.

Unidentified Company Representative

It's kind of a blessing and curse. It's an opportunity for us to be able to treat that higher CO2 gas, but it's also... we need to make sure that our facilities are able to handle it.

Faisel Khan - Citigroup

Okay, and I also noticed that in your 10-K, you talked about your corporate services costs going up at your different segment levels both at Panhandle and at SUGS. Can you comment on that why those corporate services cost to go year-over-year?

Unidentified Company Representative

We had... remember we had sold some operating divisions in 2006. So at Panhandle, it just... with Panhandle becoming a higher percentage of our overall business, our corporate, more of our corporate costs were allocated to Panhandle year-over-year.

Faisel Khan - Citigroup

Okay. And then did you see that benefit at the corporate level in terms of EBIT, offsetting effect or no?

Unidentified Company Representative

There were some additional costs that the corporate level as you would expect, but not in the same level of an increase that you saw allocated to Panhandle Eastern Pipeline Company under your typical annual expenses, but nothing dramatic.

Faisel Khan - Citigroup

Going forward, do we... should we see any of these corporate services cost going up or should we assume this as same?

Unidentified Company Representative

They should be consistent... relatively consistent year-over-year, 2008 versus 2007.

Faisel Khan - Citigroup

Okay. And then in terms of the... you talked about how the construction costs as your IEP went up and you said, it really went up from what's the $335 million to $365 million; is that what you said?

Unidentified Company Representative

Yes correct.

Faisel Khan - Citigroup

Okay. And that's up from... I think initially you had 250 is what you were saying earlier in the year. Is that right?

Unidentified Company Representative

I think the early... the very first perhaps cost estimate was in the $250 million to $260 million range, I think that's correct.

Faisel Khan - Citigroup

Okay. But either way you are getting your shippers are compensating you for that inflation.

Unidentified Company Representative

That is correct.

Faisel Khan - Citigroup

And then...

Unidentified Company Representative

It's actually effectively $70 million to $80 million growth project for us.

Faisel Khan - Citigroup

Okay. And then what about on some of your other enhancement projects that your compressor... you are replacing some of your compressor equipment I think on some of your Panhandle line? Is that... any sort of cost pressure on that?

Unidentified Company Representative

Yes, but I also think that we have some flexibility in the future into determining how best to install those compressors over time, and then perhaps, we... basically, we asses those stations one by one as move forward. So if as we re-estimate the cost, we don't see the benefit sufficient to offset, because we would delay until we would.

Faisel Khan - Citigroup

Okay. And can you... is it possible for you to give me the other quarterly EBIT numbers and then the EPS number for the fourth quarter, did you guys reported today. We only got the annual numbers in press release. So, I was hoping that you could give us the quarterly numbers for the fourth quarter both EBIT and EPS?

Unidentified Company Representative

Sure. On an... from the transportation and storage segment, the EBIT was $90 million.

Faisel Khan - Citigroup

Okay.

Unidentified Company Representative

Gathering and Processing was approximately $24 million.

Faisel Khan - Citigroup

Okay.

Unidentified Company Representative

Distribution approximately $21 million.

Faisel Khan - Citigroup

And Corporate?

Unidentified Company Representative

Corp was $6 million negative to the negative.

Faisel Khan - Citigroup

And then your quarterly EPS number, as I know there is a lot of one-time items that have happened in the quarter and had some mark-to-market?

Unidentified Company Representative

Right. We reported 134 in September and then $0.41 for this quarter giving us through the 175.

Faisel Khan - Citigroup

Okay and that $0.41 included the litigation charge of roughly $6.9 million, I think.

Unidentified Company Representative

That's... it includes the write-down of the Scranton building.

Faisel Khan - Citigroup

Scranton building; and that was 6.9 after tax?

Unidentified Company Representative

That's pretax.

Faisel Khan - Citigroup

6.9 was pretax?

Unidentified Company Representative

Yes.

Faisel Khan - Citigroup

Okay. Were there any other charges in the quarter?

Unidentified Company Representative

Not in the fourth quarter that are viewed to be onetime adjustments, no.

Faisel Khan - Citigroup

Okay. And then you also issued 3 million... 3 million shares was issued in the...

Unidentified Company Representative

3.7 million shares or so.

Faisel Khan - Citigroup

Okay. That was in February though. That was couple of weeks ago.

Unidentified Company Representative

Yes, correct.

Faisel Khan - Citigroup

Got it, thanks for the time guys. I appreciate.

Operator

Our final question comes from the line of Reza Hatefi with Polygon Investment. Please proceed.

Reza Hatefi - Polygon Investment

Thank you. Just to clarify; could you go over the EBITDA total for 2007 for each of the four segments, Citrus, the pipelines, the G&P and the distribution?

Unidentified Company Representative

Sure. Starting with... the total was approximately $830 million. Transport... this is for 2007 now. Transportation and Storage was $377 million, our Citrus share of Citrus was about $194 million, Gathering and Processing $154 million, and Distribution and other $103 million. And that again is the 2007 actual.

Reza Hatefi - Polygon Investment

And I missed this... a lot of your running through some of the numbers earlier, but the North Texas. What end there up being the final CapEx for that in the EBITDA contribution?

Unidentified Company Representative

$250 million was the final CapEx and the EBITDA contribution is between $30 million and $37 million a year.

Reza Hatefi - Polygon Investment

Okay. You gave some CapEx numbers earlier. What is going to be the CapEx for Citrus in 2008?

Unidentified Company Representative

Our share was $67 million. So, if you've got the maintenance, but the CapEx for Citrus, I believe.

Reza Hatefi - Polygon Investment

So that was '07 CapEx, which is kind of be the same for '08?

Unidentified Company Representative

I am sorry that was '08, CapEx, so.

Reza Hatefi - Polygon Investment

And so last year, when you had your strategic plan fourth quarter slides, you sort of had an annualized '08 number. So really this time around it's kind of difficult to do that, because the IEP is coming on in mid '09, but...

Unidentified Company Representative

Actually, it's not that difficult. I mean if we take the same approach, we had annualized IEP. Remember, we had about $10 million of IEP in the 2008 numbers previously, and came up with an annualized 2009 of $913 million. If we take the same approach, and we just add on to 2008, the annualized EBITDA related to the IEP project, we get to a range of $925 million to $950 million, which is higher than what we reported in the strategic plan, and it's higher because as Rob Bond said earlier this project although, if the cost have increased, it is the growth project and the EBITDA has increased along with it.

Reza Hatefi - Polygon Investment

Could you talk about some other drivers from '08 to '09? What else will drive EBITDA from '08 to '09? Is there... are there smaller projects here and there? I guess the CapEx is pretty healthy, the total CapEx of $510 million, $575 million?

Unidentified Company Representative

There are, but at this point, we are not giving guidance on '09 levels. But there are certainly projects, smallish projects that we have identified that will be reflected in 2009 at this point.

Reza Hatefi - Polygon Investment

The pebble CapEx of $395 million to $445 million the $140 million was maintenance, so that leaves around $250 million to $300 million, is that basically IEP?

Unidentified Company Representative

That's correct. I think it's the majority of it.

Reza Hatefi - Polygon Investment

Okay. Great, thank you very much.

Operator

Your next question comes from the line of Brooke Glenn Mullin with JPMorgan. Please proceeds.

Brooke Glenn Mullin - JPMorgan

I know you guys can't give us details on the FGT open season. But is there any way you can give some us additional color on the response you've gotten? And also I was wondering if that project could be upsized if you got the necessary demand.

Unidentified Company Representative

Yes, we obviously needed to... needed strong response on the $400 million a day that was not unsubscribed. Basically FG... of the $800 million FG... FP also [ph] so we had $400 million that we were looking for strong indications of interest from potential customers. We certainly got that amount and more. We are in the process of kind of figuring out the timing associated with the... with when those customers need that capacity, the exact location of where that capacity would be and what that really means in terms of the ultimate scope and size of the project. Yes, I think there is some opportunity for there to be in upsizing of the project if you will. But part of that's going to be driven really by the timing associated of... with when those customers need that capacity as to whether or not it ultimately in... at both Phase 8, certificate filing or if there turns out to be a subsequent filing that makes Phase 8.5 for example.

Unidentified Company Representative

Yes, I think the response was very positive and from terrific shippers and those people that we traditionally done business with. Together with some folks that are relatively new to the sort of market. So, we were encouraged.

Brooke Glenn Mullin - JPMorgan

What does the timeline look like in terms of doing that work in processing through that information; I guess when will we hear something on that?

Unidentified Company Representative

Well, I think we are very close to being able to have at least enough to find to enter the pre-filing process. We could do that as early as in next week, and then began probably throughout the next two to three months to finalize negotiations and ultimate design... final design with a goal of filing a certificate some September to... September, October, November timeframe.

Brooke Glenn Mullin - JPMorgan

Okay, and then just separately on the utility. Following rate release, can you give us a sense of what type of returns you earned in 2007 at Missouri specifically?

Unidentified Company Representative

Somewhere in our authorized rate of return was in the 10.5% to 11% range and our returns were right on top of that.

Brooke Glenn Mullin - JPMorgan

Great, thank you.

Operator

I would now like to turn your presentation over to Mr. Lindemann for closing remarks.

George L. Lindemann - Chairman, President and Chief Executive Officer

I just want to thank everyone for attending the meeting and we hope to see you at next quarterly meeting, which I am sure, will be as successful as this year. So, thanks again for everyone attending and see you soon. Bye.

Operator

Thank you for your participation in today's conference. This concludes the presentation. And you may now disconnect. Good day.

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Source: Southern Union Co. Q4 2007 Earnings Call Transcript
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