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Dividend Growth Stock Overview: American States Water Company

About American States Water Company American States Water Company (NYSE: AWR ) has subsidiaries that provide utility services to portions of 10 counties in southern California, and to military bases in certain parts of the United States. The company has its headquarters in San Dimas, California, and employs over 700 people. Through its Golden State Water Company (GSWC) subsidiary, American States provide water and wastewater services to 75 communities in California, and electric services to the city of Big Bear Lake and portions of San Bernardino County in southern California. GSWC was incorporated in California in 1929, and at the end of 2014, served over 250,000 water utility customers and 23,000 electric customers. The American States Utility Services subsidiary provides water and wastewater services to various military installations through its subsidiaries. The subsidiaries are on 50-year firm, fixed-price contracts with the government; the contract prices are subject to redetermination every 3 years. The military installations include Fort Bliss, TX; Andrews AFB, MD; Fort Lee, Fort Eustis, Fort Story, VA; Fort Jackson, SC; and Fort Bragg, Pope Army Airfield and Camp Mackall, NC. American States Water has three reportable segments: water utilities, electric utilities and contracted services. In 2014, 74% of the company’s EPS came from the water utilities segment, 4% came from the electric utilities segment and 20% came from the contracted services segment. (The remaining 2% came from other earnings, like earned interest.) In 2014, American States Water earned $61.1 million of income on $466 million. These numbers were each down less than 3% from 2013’s figures, but income was up more than 12% from 2012. EPS in 2014 was $1.57, down 2.5% from 2013. Given the current annualized dividend rate of 89.6 cents a share, the company’s current payout ratio is 57.1%. In addition to the annual dividend, American States Water also has an active share repurchase program. In March 2014, the company authorized the repurchase of 1.25 million shares, to be completed by June 30, 2016. By the end of 2014, there were 705,000 shares remaining to be repurchased. The company is a member of the S&P Small Cap 600 and Russell 2000 Small Cap indices, and trades under the ticker symbol AWR. American States Water Company’s Dividend and Stock Split History (click to enlarge) American States Water has accelerated its dividend growth recently, compounding its dividend at a rate of nearly 11% over the last 5 years. American States Water Company has paid dividends every year since 1931, and has increased them since 1955. Until 2012, the company would increase dividends on an irregular schedule, sometimes going up to 8 quarters without an increase. (Because the dividend increases occurred in the middle of the year, they still increased year-over-year.) In 2012, American States began to increase the dividend in the 3rd quarter of the calendar year, with the stock going ex-dividend in mid-August. Most recently, the company increased its dividend by 5.41% to an annualized rate of 89.6 cents. I expect American States to increase its dividend for the 62nd consecutive year in mid-August 2016. Since introducing the regular pattern of increasing dividends annually in the 3rd quarter, the company has grown dividends very nicely for a utility. Dividend growth from 2011 to 2012 and 2012 to 2013 exceeded 15% each year. Prior to 2012, the dividend growth was very sluggish and usually in the low-single digits. Over the 5 years ending in 2014, American States compounded its dividend at a rate of 10.92%. For the 10 and 20 years ending in 2014, the company compounded its dividends at 6.85% and 3.96%, respectively. In the last 25 years, the company has split its stock 3 times, most recently 2-for-1 in September 2013. American States Water also split its stock in October 1992 (2-for-4) and June 2002 (3-for-2). For each share of American States Water stock purchased prior to October 1993, you would now have 6 shares. Over the 5 years ending on December 31, 2014, the stock appreciated at an annualized rate of 19.79%, from a split-adjusted $15.10 to $37.25. This greatly outperformed the 13.0% annualized return of the S&P 500 index, the 15.9% annualized return of the S&P Small Cap 600 index and the 14.0% compounded return of the Russell 2000 Small Cap index over the same period. American States Water Company’s Direct Purchase and Dividend Reinvestment Plans American States has both direct purchase and dividend reinvestment plans. You do not need to be a current investor to participate in the plans. New investors can join by purchasing a minimum of $500 of American States Water stock upon enrollment. Note that you’ll be charged an enrollment fee of $10 to join. Also, the dividend reinvestment plan can be used only if you agree to reinvest dividend on at least 15 shares of the stock. If you own less than 15 shares, your dividends will be paid to you by check. If you already participate in the dividend reinvestment plan, you can purchase additional shares with a minimum investment of $100. The plans’ fee structures are favorable for investors, with the company picking up all costs on stock purchases. When you sell your shares, you’ll pay a transaction fee of $15, plus a sales commission of 12 cents per share. All fees are deducted from the sales proceeds. Helpful Links American States Water Company’s Investor Relations Website Current quote and financial summary for American States Water Company (finviz.com) Information on the direct purchase and dividend reinvestment plans for American States Water Company Disclosure: I do not currently have, nor do I plan to take positions in AWR.

Entergy’s (ETR) CEO Leo Denault Discusses Q2 2015 Results – Earnings Call Transcript

Entergy Corporation (NYSE: ETR ) Q2 2015 Earnings Conference Call August 4, 2015 11:00 ET Executives Paula Waters – Vice President, Investor Relations Leo Denault – Chairman and Chief Executive Officer Drew Marsh – Chief Financial Officer Theo Bunting – Group President, Utility Operations Bill Abler – Vice President, Commercial Operations Analysts Greg Gordon – Evercore Paul Patterson – Glenrock Associates Julien Smith – UBS Dan Eggers – Credit Suisse Jonathan Arnold – Deutsche Bank Anthony Crowdell – Jefferies Michael Lapides – Goldman Sachs David Paz – Wolfe Research Operator Good day, ladies and gentlemen and welcome to the Entergy Corporation Second Quarter 2015 Earnings Teleconference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Paula Waters, Vice President of Investor Relations. Ma’am, you may begin. Paula Waters Good morning and thank you for joining us. We will begin today with comments from Entergy’s Chairman and CEO, Leo Denault and then Drew Marsh, our CFO will review results. In an effort to accommodate everyone with questions this morning, we request that each person ask no more than two questions. In today’s call, management will make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Additional information concerning these risks and uncertainties is included in the company’s SEC filings. Now, I will turn the call over to Leo. Leo Denault Thank you, Paula and good morning everyone. Consistent with the first quarter, Entergy’s second quarter performance was in line with our expectations. Operational earnings per share were $0.83 about where we planned it to be and we are on track to meet our full year guidance. Given market conditions and recent business developments, current indications point to utility, parent and other earnings near the lower end of the 2016 range that we outlined on Analyst Day, still meaningful year-over-year growth in the base utility business. We remain on track to achieve our financial outlook for 2017. To achieve the expected growth, we made notable progress on our 2015 to-do list as shown on Slide 2. These important tasks are key steps in moving forward, with our near and longer term strategies for the utility as well as Entergy wholesale commodities. At the utility, the strategy we are implementing is centered on our opportunity as well as our obligation to invest capital in order to replace aging infrastructure, strength and reliability, meet economic development and other growth needs and ensure that the environmental profile of our generation fleet is in line with the evolving regulatory framework. We are also taking steps to facilitate this investment by combining the Louisiana utilities. In July, Entergy Louisiana and Entergy Gulf States Louisiana filed a unanimous settlement to combine the two companies. Pending action from the Louisiana Public Service Commission later this month, closing is on track for the fourth quarter. In May, New Orleans City Council approved several significant matters paving the way for more economic and efficient service for the city’s residents. First, the transfer of the Algiers assets in New Orleans to Entergy New Orleans, which ships approximately 22,000 customers to the utility and second, the $99 million securitization financing, which includes three components: the recovery of Hurricane Isaac storm costs, $75 million in cash storm reserves for electric restorations, and nearly $6 million for restorations for the gas system. This financing, completed in July, gives Entergy New Orleans a fully funded storm reserve. We have come a long way since the devastation of Hurricane Katrina 10 years ago. The New Orleans City Council recognizes that our city is stronger when its power infrastructure is stronger, more efficient and more reliable. Taken together, these actions will benefit Entergy New Orleans and its customers in several ways. Stakeholders will benefit from a more streamlined and efficient regulatory process. The utility will be better able to attract capital at reasonable rates, because it will have an expanded balance sheet. It will also have stronger liquidity which will make us stable and it will secure lower cost efficient generation needed to more reliably serve its customers. We are also pleased that representatives of the New Orleans City Council expressed interest in exploring Entergy New Orleans purchase of one of the units of the Union Power Station. We will be filing an application later this month seeking City Council approval for this transaction. The purchase of the union unit will take the place of the power purchase agreement that had been previously approved by the City Council. We believe the purchase of the union unit is an ideal way to meet New Orleans generation needs at approximately half the cost of building a comparable new unit. We made other notable progress on the generation investment front. In May, we announced the results of the request for proposal for long-term capacity in the south region of Louisiana, which generally covers the southeastern part of the state. Consistent with the views of an independent monitor, the Entergy Operating Committee elected to proceed with the self-build options. Next summer, subject to regulatory approval, we will begin construction of the St. Charles Power Station, a natural gas-fired combined cycle generating plant located in Southeast Louisiana, along the Mississippi River industrial corridor. Entergy Louisiana plans to file for regulatory approval with the OPSC in the third quarter of 2015. We anticipate that the plant will begin commercial operations in the MISO market by summer of 2019, one year ahead of the schedule we presented last November at EEI. In June, Entergy Texas distributed the final documents for its 2015 RFP, which seeks both limited and long-term resources. In the long-term portion of the RFP, Entergy Texas is seeking up to 1,000 megawatts of CCGT capacity and energy located in the western planning region of the state beginning in the summer of 2021. Entergy Texas intends to offer a self-build option into the 2015 RFP that can provide its customers long-term capacity, energy and in-region reliability benefits. Entergy recently provided notice that it plans to issue another RFP for new CCGT capacity beginning in the summer of 2020. Again, this is one year earlier than we have previously indicated. This RFP will seek long-term capacity and energy in the West of the Atchafalaya Basin planning region, or WOTAB and will include a self-build alternative. Capacity is needed in this region of Southwest Louisiana to mitigate supply constraints as well as to modernize aging infrastructure. Selections for both RFPs in Texas and Louisiana are targeted for early to mid-2016. Regarding the 4-unit Union Power Station transaction I mentioned earlier, we continue to anticipate a closing by the end of 2015. Entergy Arkansas and Entergy Gulf States Louisiana are on track to purchase their respective units. In addition, as I stated, Entergy New Orleans is now positioned to seek regulatory approval to purchase one of the facility’s 495-megawatt trains in place of Entergy Texas. We heard the positions of the commission staff and other parties in Texas and do not see a viable path forward. We have concluded that the parties in Texas prefer a long-term market tested capacity solution located in the State of Texas. Our RFP is seeking exactly that. Our objective is to obtain the support of the staff and customer groups for our approach to meeting generation resource needs in Texas. We look forward to continuing to work with the Public Utility Commission of Texas and other stakeholders to develop strategies to meet the states’ future generation resource needs. We also continue to make productive investments in transmission. In April, we announced that in the fourth quarter of 2015 Entergy Arkansas will begin construction – constructing a new approximately $62 million transmission line from Monticello to Reed, crossing parts of Drew and Desha counties. The project will include expanded electrical facilities, including a new substation in Reed to move power more reliably and efficiently into the region. Also in April, Entergy Louisiana filed for certification of an approximately $57 million transmission line in Southeast Louisiana, with an in-service date of December 2018. This project is expected to lead to $515 million in savings to Louisiana customers over its first 20 years, which will be realized through a lower fuel adjustment cost. We are taking advantage of MISO market opportunities to meet the needs of the changing generation landscape. In May, we announced the significant $30 million transmission investment to upgrade the connection of the New Orleans metro area to Ninemile 6. At Michoud generating facility, which currently supplies the area was placed in service in the 1960s and will soon be deactivated. The upgrades we are making now are required by MISO prior to deactivation. In June, Entergy Gulf States Louisiana filed for certification of an up to $187 million transmission project with an in-service date of June 2018. This project will expand capacity in the WOTAB region in order to strengthen reliability there. It will also facilitate industrial growth. Improvements to ETI’s transmission system are progressing, including upgrading of existing transmission lines and the construction of three new transmission lines we see the new PUCT approval in 2014 and 2015. The new transmission line projects totaling about $165 million will add approximately 64 miles of 230 KV transmission lines, along with other transmission facilities. These projects are expected to be in service by the summer of 2016. Entergy Mississippi has four transmission projects in various stages of development. These projects represent more than $280 million of investments in Mississippi to support the economic growth and provide additional reliability. And the service dates are scheduled in 2018. As we have said many times before, one of Entergy’s priorities is to invest in infrastructure to better serve our customers, while maintaining reasonable rates. Our rates across all classes are approximately 20% below the national average. Industrial rates in Louisiana and Texas are 15% to 20% below the national average. In addition, there is every indication that natural gas prices in the United States will retain their competitive advantage for some time in relation to the rest of the world. We believe that these low energy costs, combined with our competitive power rates and other regional advantages, will continue to attract jobs and businesses to the communities we serve. The resulting increase in the industrial and other sales can and will facilitate our investment opportunity. It is important to remember however, that there are significant drivers of the need for that investment in addition to sales. On that note, I know many of you have questions as to why industrial sales were lower this quarter following seven straight quarters of robust growth. Macroeconomic factors as well as outages by some of our large customers, mass expansions by others as well as the fact that other new customers began to come online. Drew will provide more detail in a minute, but the vast majority of the projects in our plan that were in advanced stages of development earlier this year remain on course. The fundamentals driving industrial renaissance in our region low natural gas prices, sophisticated connected infrastructure, already talented workforce, all remains strong. We therefore, continue to be optimistic about the opportunity for sustained industrial growth in our region. The significant economic development prospects for Southeast Louisiana in particular have garnered recognition from the federal government. Last month, the U.S. Department of Commerce named the New Orleans to Lake Charles chemical corridor to a program launched in 2013 designed to accelerate the resurgence of manufacturing in America. This designation may result in federal incentives and grants for the 12 new regions selected, of which ours is one. Entergy is proud to have worked with local officials and other stakeholders to help this area achieve this distinction. All of this progress as well as that made in the first quarter of this year is due to the sustained hard work of Entergy employees, Entergy’s collective efforts to work more collaboratively with our regulators and other stakeholders and of course our regulators’ commitment to balance the best interest of our customers, our communities and this company. I will say again that we remain on track to execute our investment program that is the backbone of the commitments we have made to our customers and other stakeholders. We continue to make progress on short-term and mid-term objectives and expect substantial gains to result from that progress. We are doing what we said we would do and there is every reason to believe that we will achieve the financial performance that we have targeted. EWC’s strategy revolves around executing well on what we control the operations of the plants and the commercial transactions to hedge the risk. In the second quarter our plants ran well. Aside from an Indian Point 3, the EWC nuclear fleet delivered approximately 92% capacity factor, which includes a 34-day outage to refuel program. As many of you know, the transformer outage at Indian Point resulted in a 16-day shutdown of Unit 3. You have heard me say before that EWC is a volatile business. We felt the negative impact of that volatility this quarter much as we felt the positive impact in past quarters. Average Northeast power prices for the second quarter were more than 40% below last year’s levels. Moreover, forward power prices continue their decline following an average of more than 6% for our plants in the Northeast since the end of March this year. These low prices are coupled with the market structure that does not reflect the value of nuclear power. Congress continues to indicate its concern about the specific market structure challenges. On July 8, the Chairs of the Senate and House committees and subcommittees responsible for energy and power Senator Murkowski and congressmen Upton and Whitefield communicated this concern in a letter to the Federal Energy Regulatory Commission Chairman, Norman Bay. In the letter, the committee chairs raised concerns about organized wholesale electricity markets, including the impacts certain market rules were having on reliable base load plants, including nuclear plants and ultimately on consumers. Entergy shares these concerns and we are encouraged by FERC’s willingness to consider these issues. We are also hopeful that FERC will take subsequent action as soon as it can. Our mission at EWC is today what it has always been, to optimize asset value and minimize risk. We continue to pursue this mission through effective commercial operations and by vigorously pursuing clear regulatory processes and frameworks. The latter would include an improvement in the design of the Northeastern power markets as well as constructive outcomes on Indian Point. On that note, over the years many different studies have provided clear evidence of Indian Point’s importance to the region. We saw the release of another last month by the Nuclear Energy Institute. This study founded Indian Point contributes an estimated $1.6 billion to the economy of the New York State annually and $2.5 billion to the nation as a whole, all life while contributing to New York State and national clean air goals. Quantification of these important benefits reaffirms the value of this facility and provides yet another reason why we believe Indian Point must and will operate into the next decade at the least. That said, based on 2015 guidance, EWC is currently less than 15% of Entergy’s earnings. Our robust utility growth grounded in $8 billion of investment and $3 billion to $4 billion in rate base growth, both through 2017 will continue to reduce this percentage. Also, as most of you know the U.S. EPA issued a final version of its clean power plan yesterday. The rule is complex and would take time for us to conduct a full analysis. While we continue to be concerned about the legality of EPA’s approach, that analysis will focus on five key issues: One, the compliance timing. Two, the requirements the rule will impose on each state. Three, a state’s ability to elect a mass-based approach and establish a training ready plan. Four, the impact on the nation’s existing nuclear fleet, which in 2014 comprised nearly 63% of the U.S.’s emissions-free generation. And five, the overall impact that we could have on our customers. You should expect to hear more from us on the months to come. In conclusion, I would note that as we have said in the past, our business is a long-term play. Short-term and even mid-term volatility is embedded in it, but is that does not detract from this company’s strong fundamentals. We are confident that the growth opportunity in our utility service area is intact and we have a solid strategy to realize that opportunity. And we remain focused on managing risk and preserving optionality of EWC and that we will vigorously pursue our business plans and continue to make productive investments to help achieve long-term growth. As a result, Entergy’s performance for the quarter as well as the year is in line with our expectations. Earnings expectations for 2016 remain insight and we are on track with our 2017 outlook. As we noted last quarter, we expect that the stability and financial flexibility created by our actions this quarter, this year and indeed over the last several years will put us in a position to begin to act on one of our major objectives of sustained dividend growth starting with a discussion with our Board as early as this fall. With that, let me turn the call over to Drew. Drew Marsh Thank you, Leo. I will start by covering our second quarter results and then I will turn to our longer term financial targets. Slide 3 summarizes consolidated earnings per share. In the second quarter of 2015, Entergy earned $0.83 per share in line with our expectations. Additional details on the results are provided in the press release and slides published this morning. I will cover some highlights on results starting on Slide 4 where utility, parent and other had combined earnings per share of $0.87 on an adjusted basis. This compares to $0.98 per share last year. Details of quarter-over-quarter variances can be found in Appendix B1 of the release and here are some of the key points. Despite a 1.5% decline in sales volume quarter-over-quarter on a weather-adjusted basis, our overall net revenue variance was positive. This was partly driven by capital investments that benefit customers, such as the new Ninemile 6 plan. Residential sales growth also contributed as well as new industrial customers and expansion projects. The increase in net revenue was offset by a corresponding rise in related depreciation, operations and maintenance expenses and other items. O&M increases not offset in that revenue included increased nuclear-related expenses of about $0.09. Over half was from increased nuclear regulatory commission oversight of the Arkansas nuclear 1 plant. Earlier this year, ANO was placed in column 4 of the NRC’s reactor oversight process. The increased levels of cost for ANO were expected to continue into 2016. I will take a moment now to talk a little more about industrial sales volume this quarter on Slide 5. In total, the segment was down 1.5%, driven by our existing customers. Refineries were down the most quarter-over-quarter due to their turnaround season. We anticipated a more significant turnaround season than last year, however, was a bit more expensive than we expected due to macroeconomic factors, such as high product inventories and a strong dollar. Core alkali was also down quarter-over-quarter and more so versus our expectations. Utilization from this sector was lower than anticipated due to unplanned outages compounded by margin pressure from lower demand and the market’s recently added supply, including our customers. The decline in our existing large industrial group’s mass growth from expansions and four new customers who began to ramp up this quarter. Continuing the trend from last quarter, these new customers and customer expansions are coming online and ramping up more slowly than expected. I will talk more about that later as part of our forward-looking view. Switching over for a minute to EWC, Slide 6 indicates operational earnings per share this quarter were about breakeven as expected. You may recall that we said on the first quarter earnings call that the bulk of 2015 earnings were completed at that time. The quarter-to-quarter decline was driven by a $5 per megawatt hour decrease in revenue on the operating nuclear plants and lower volume from the 34-day refueling outage of Pilgrim compared to none last year. This decline in EWC nuclear revenue was the primary factor in the operating cash flow change as shown on Slide 7. Also reflected was improved net revenue with the utility largely triggered by productive investments put in service to benefit customers. For the full year view on Slide 8, today, we affirmed our 2015 earnings per share guidance with the midpoint of $5.50 and a range of plus or minus $0.40. Recognizing we still have the summer to go, we remain on track at each of our segments to meet full year expectations. You may recall that we expect some tax items to come into play this year, but we currently do not expect any tax items in the third quarter. Slide 9 recaps the 2015 guidance midpoint for utility, parent and other, adjusted for weather, tax and special items in 2016 and 2017 midpoint outlooks. These outlooks are consistent with our previous disclosures last year at Analyst Day and at EEI. The slide also provides 2013 and 2014 results on a comparable basis. This presentation illustrates how the base business has grown, with the expectations for continuing growth through 2017. The two main drivers for this growth are making productive investments in improving our utility return on equity as shown on Slide 10. Importantly, our plans for capital investment to modernize our infrastructure, maintain and enhance reliability, and meet new compliance standards have not changed. Our 2016 rate base growth includes the Union Power plant acquisition, which approved by the required regulators. We contribute roughly $0.02 per share per month in 2016. While we have made some adjustments to the structure, our regulatory procedural schedules in required jurisdictions still allow for us to close by the end of the year. In addition, we have moved up the projected in-service date of the St. Charles power station project. Assuming LPSC approval next summer, the new construction drawdown schedule will accelerate about $0.03 per share of AFUDC into 2016 and $0.08 per share into 2017. Approximately, 90% of our $8 billion of planned investment from 2015 through 2017 will fall under a formula rate plan, rider or other constructive regulatory mechanism. This percentage includes the forward test year, FRP proposed in the Entergy Arkansas rate case. New rates will be effective by early 2016 for the rate case. And in early 2017, the changes are warranted in the first FRP review. Regarding sales growth for the balance of the year, we are already seeing evidence that the refining sector is once again performing as expected. However, with the core alkali markets challenged, the balance recently added supply. Overall uses from these customers for the remainder of the year may not reach the levels we had anticipated. Still, new customers and expansions are coming online. Previously, we had indicated that the vast majority of our large industrial customers were already under construction or had reached their final investment decisions. This is still the case. However, we have seen them trail their own expectation for the last couple quarters. Of 17 large industrial projects expected during the year, 14 are complete or under construction. Of the 14, most have experienced delays getting online and a few have lower ramp rates than expected or lower peak usage than expected. Of the three that are not under construction, they currently are delayed and represent only about 0.1% of our expected industrial sales next year. O&M expenses and other elements of managing our return on equity, you are anticipating some benefit over time from the roll off of temporary nuclear compliance cost and an estimate – an approximate 50 to 75 basis point increase in discount pension rate to 4.75% in 2016 and 5% in 2017. Looking further ahead, we expect our capital investments and plant infrastructure, transmission and other distribution system improvements will ultimately lower O&M costs for our customers, while enhancing reliability in our service territory. We will persist in looking for every opportunity to control O&M costs as part of this. Given current considerations such as capital investment, rate actions, cost changes and interest rates assumptions, our financial outlook continues to support our previously stated expectations for utility, parent and other earnings per share. As illustrated on the slide, for 2016, we are currently near the lower end of the range. For EWC, EBITDA projections have declined as shown on Slide 11. Our expected energy and capacity prices have dropped by $1 to $2 per megawatt hour since March 31. As you know, wholesale prices are volatile. We continue to follow our hedging philosophy that allows us to benefit from upward price movements, while protecting against the operational and credit risks. All-in-all, our actions this quarter and plans for the future represent sizable utility, parent and other earnings growth potential in the coming years. The fundamentals of the utility business to achieve this growth are in place, including our solid credit profile reflected on Slide 12. Backed by these credentials, we are maintaining a sound financial foundation to make investments and better serve our customers. We will continue to execute on the plan we have laid out for you. Every plan faces challenges, we are confident in our ability to meet them and succeed. Our mission as a company is to create sustainable value for our four stakeholders. Our owners, our customers, our employees and the communities we operate in. That mission is foremost than what we do everyday. And now, the Entergy team is available for questions. Question-and-Answer Session Operator Thank you. [Operator Instructions] And our first question comes from Greg Gordon from Evercore. Your line is now open. Greg Gordon Thanks. I have two questions. At what point – and when we are looking at 2017 midpoint outlook, do you reassess the ramp rate on the industrial projects that are already up and running and the excess expected in-service those that are still in queue and give us a full update, it would seem that you really wouldn’t have the visibility for – with any degree of certainty until some point in early to mid-16, is that fair? Leo Denault Theo? Theo Bunting Greg, this is Theo Bunting. As part of our planning process, we would try to as get much information around as we possibly can. And I think in terms of when we would – you would expect us to see some updates relative to that, we would probably be pointing toward EEI in that timeframe. And as you said and as drew has mentioned in his opening comments that information does change from time to time. And our expectation is we will try to stay abreast of that as best we can and continue to update it as new information becomes available so that we can roll that into our overall expectations. Leo Denault Great. Greg, this is Leo. I will just add while and we have said this since the beginning as it relates to the addition of these customers that there are big projects, billion-dollar investments, in some cases, $10 billion investments. Schedule is always an issue in that kind of thing. Our sector has the same issue when we build big projects that are first of the kind or unique or whatever. The issue here is while its common and some may come early, some may come late, they may ramp differently the investment profile that we have got between now and then is remains intact. And as you recall, the way the business model works, the rate base growth is kind of what we are targeting here. And so if you look out there whether they come in a little bit late, a little bit early, it doesn’t really change when these power plants come. The only changes we have made, I think Drew outlined and a little more details would lie in the script is a couple of the capital projects that we had are actually coming up earlier than we had originally planned, just given the timing and the need and it’s a combination of this growth from this sector, but also the need to replace the aging infrastructure that we have and the opportunity to get these things done and constructed. So it’s not just the sales piece of it that we need to look at it from a timing standpoint. It’s coming – some of it’s coming later because of the size of the projects and other factors, but the investment profile that we have got over the next several years through the first part of decade is pretty much on track. Greg Gordon Okay, understood. So to get to your guidance aspiration for ‘17 and it reflects expectations for top line revenues from industrial, you would have to either readdress your expectations for revenue requirement from other customer classes reflects your costs then? Drew Marsh Yes. I think that’s true and on a short-term basis, if we have said these productive investments we would expect to ultimately get into rates. And if the sales aren’t where we have expected them to be in any given period, you are right and you would have to adjust in another area. Greg Gordon Okay. Second question is on EWC, obviously the power curves come off quite a bit in New York and New England, can we attribute that to winter premiums coming off or is it summer discounts getting steeper, some combination of both and do you think there was any market activity that you can see in the foreseeable future that might reverse that trend? Bill Abler Greg, this is Bill. A couple of things, I mean obviously we have seen gas prices come off tremendously at $1 since last summer. We have also seen some folks take some steps to try to mitigate the gas supplies issues, that type of thing, in terms of using LNG facilities for base loading of plants, that type of thing. So I think there is a number of issues in the market that have driven those prices down. As we look forward, we are – we are slightly bullish gas prices as we look into ‘16 that increases a little bit over time, but we are seeing some movement in New England in terms of some market structure improvements that would come on in the ‘17, ‘18 timeframe on some energy price formation issues that could be constructive. I don’t anticipate at this point seeing the numbers we saw in 2014. I mean, that was largely driven by the polar vortex and kind of the after math of that, but we do see some constructive positive steps from an energy price perspective. Greg Gordon The reason I asked is because you moved your hedging, the construct of your hedges around a bit for next year and hedged up just a fair amount more, but you – there were no demonstrable changes in your hedge profile beyond ’16, is that a fact – is that a function of your point of view? Drew Marsh Yes, that is a function of our point of view. And to be frank, what we are seeing out in the market as well, there is a little bit less liquidity out in the market. And obviously, we are not – we don’t want to ourselves in a situation where we are locking in at these low prices at this point in time. So we are evaluating that as we go and we think there is some upside. Greg Gordon Thank you. Leo Denault Thanks Greg. Operator Thank you. Our next question comes from Paul Patterson from Glenrock Associates. Your line is now open. Paul Patterson Good morning. Leo Denault Good morning Paul. Paul Patterson Just I guess I wanted to sort of follow-up on that letter that you mentioned from Murkowski and some other Republican leaders regarding market reforms. And I noticed this as well and I guess what I am wondering is I mean, how quickly do you think anything from that will actually come about and I mean I don’t know, I mean, they also sort of threaten legislation that they are going to get it done, I don’t know I mean I just wanted you just elaborate a little bit more what you think the practical benefit of that would actually maybe be? Leo Denault Sure. As it relates to that letter, I think it’s on track with our general thoughts in terms of what needs to happen in the market. We have had similar discussions with the ISOs and a number of other stakeholders. We think that in general, depending on what gets implemented, there is upside potential of say $3 to $6 a megawatt hour as a result of these changes to energy price formation. Now the question on timing, this will come probably in increments. And as you look at the timing of being implemented, you are probably looking at the timeframe of ‘17, ‘18 before they could actually make those changes to their systems and get those in place where we would see that uplift. Now the exception there is what we have got going in ISO New England as it relates to the winter reliability program. That’s currently being reviewed by FERC as we speak. We could see some uplift there in the upcoming winter if we get a decision in our favor as it relates to that. So it will kind of evolve over time, but we see that happening across the next 5 years or so, 3 years to 5 years. Paul Patterson And it will be a series of debt is what we are talking about I guess as opposed to one sort… Leo Denault That’s what I would think, Paul is it’s I think just having discussions with the ISO, there are some practical issues you have to deal with in terms of how you can change the systems associated with that and so they are more than likely would be steps taken along the way as opposed to one just big massive change. Paul Patterson Okay, great. And then just on the – on Friday there was an order out of FERC that denied the authorization that some of subsidiaries were seeking for – to issue and sell securities and what have you. And I can’t recall seeing that before with FERC, think it was kind of run of the mill, maybe I am wrong, so I was a little surprised to see that they rejected it, I know that you guys can put pressures, you can re-file, I was just wondering is there any significance to this or is this just sort of a hiccup that happened because of the format which they seem to be unhappy with or how you guys report it, could you just elaborate a little more on that? Drew Marsh I think you hit on most of it in terms of the format. They have a way of using backward-looking results to assess what the coverage ratio ought to be. And we had suggested some changes to that and they didn’t want to put them in. So I think it is a bit of a technical challenge, but we should be able to put the new filing in and get that complete fairly quickly. Paul Patterson Okay. Thanks a lot. Drew Marsh Thank you. Leo Denault Thanks Paul. Operator Thank you. Our next question comes from Michael Weinstein from UBS. Your line is now open. Julien Smith Hi, good morning. It’s Julien. Leo Denault Good morning, Julien. Julien Smith So perhaps, first question just as it relates to Texas and East Station and the decision to pull that out. Just to be curious, could you jive that with the RFP and what the ultimate thought process is around pursuing self-build options or acquisitions under rate base? I suppose what drove the decision to provide a little context and ultimately next steps? Leo Denault Theo? Theo Bunting Hey, Julien, this is Theo. As Leo indicated, I mean, really in Texas, it came down to – it was clear that a clear path in Texas that the parties really preferred a long-term capacity solution located in the State of Texas. And as he said earlier, our Western RFP is seeking just that. Our objective in Texas is to obtain support of the staff and the customer groups or approaches that meet the generation’s resource needs in Texas. And I mean, clearly, as the record indicated as it relates to Union transaction that was not the case. And as Leo mentioned in the script also in the opening comments, there has been interest expressed in New Orleans and we are pursuing regulatory approvals. We will pursue regulatory approvals in New Orleans with the City Council relative to that. The second part of your question, I am not sure I understood when you said kind of what’s next. Julien Smith Right. I suppose fundamentally there is not necessarily any opposition to doing rate-based or cell phone options per se, right? This was more about a locational angle on the plant rather than your ownership of the unit per se, correct? Theo Bunting We don’t believe there is any opposition to self build. Matter of fact, if you look – if you go explore the record I will mention by the other parties around another option being a self-build option in Texas. So, we don’t clearly believe there is any opposition to it. It was just a preference in Texas, the interveners and other parties in Texas. And clearly, I think their views and comments relative to other options made it clear that was self-build. It is something that could be pursued in the future. Julien Smith Got it. And then separately on transmission, I know you have provided some background here, but I would be curious, I suppose MISO did an out-of-cycle study on MISO’s doubt during the quarter, could you elaborate on that as it relates to the studies that you discussed yourself at the various capabilities? And ultimately, how that jives with your capital budgeting process and if that’s already reflected in your CapEx expectation? Theo Bunting Sure. I am not – when you talk about, I mean, we had one out-of-cycle project, I believe, which was the Lake Charles project. But in terms of just transmission and MISO in general, I mean, as you know, we have a fairly robust transmission investment in ‘15 through ‘15 – ‘15 through ‘17, I am sorry, capital cycle. We nearly doubled in ‘15 versus ‘14. And as Leo went through his opening comments, he mentioned a number of transmission projects that are currently being approved and the process of being approved and will be underway shortly, approximately almost $800 million of transmission projects. So, we feel good about the fact that we have got transmission opportunities. In terms of the MISO study, the VLR study in that MISO accelerated six projects into ‘15. And largely, most of those projects were already in our plan, but what we do see potentially is an opportunity for acceleration of some of those projects. And the fact that MISO is moving forward in that process gives us our confidence as these projects will be approved by MISO. Julien Smith And perhaps just to clarify is that already reflected in your CapEx outlook as it stands today? Theo Bunting For the most part, yes. Julien Smith Alright, great. Thank you. Leo Denault Thank you, Julien. Operator Thank you. Our next question comes from Dan Eggers from Credit Suisse. Your line is now open. Dan Eggers Hey, good afternoon guys. Leo, just on the industrial outlook and kind of maybe the longer term prospects, can you share a little bit about how much time you are spending on economic development and kind of your quoting industrial customers and you were pretty busy last year. How is that changing, if at all, right now? Leo Denault I will let Theo jump in, but we continue to work that process across all of our jurisdictions. You have seen a lot of success, obviously, with things that are under construction in the near-term, in the Louisiana, Texas, Arkansas and others, but we have – as we mentioned earlier, as we went through our reorganization last year, one of the things that we had done was beef up the business and economic development functions and we continue to have those folks out working the process, things like the region designation here in Louisiana and other things we are working to make sure that we help continue to promote the region. So, I guess how much time we spend in quite a bit, some people – we have a department that’s their full-time job working with the states. And obviously, the states are backing off this either as all of them are working, working very diligently to try and help bring economic development. So, that includes we continue to utilize our site selection database. We continue to try and pre-certify sites. We continue to build transmission into areas that could house more manufacturing before the fact that they are not necessarily ready yet. So, all of those things, both in our activities from an economic development, operationally and also from the regulatory process, we are continuing to pursue forward on all of them. Theo, I don’t know if you want to add anything. Theo Bunting I guess, Dan, one thing I will add in addition is we continue to work very closely with states in which we serve. And as Leo mentioned, we – in the regulatory environment itself, I mean, if you look at some of the transmission projects, he mentioned that we have done some of those transmission projects or specific around working to foster economic development in the regions. So, we have a lot of people dedicated full-time to helping the regions that we serve growth. That’s part of our growth story. Dan Eggers Okay. So, I guess if I think about the economic growth from here, maybe I will say it differently. If you look at industrial demand, industrial recruitment today are the whiteboards more full or less full than they were 6 or 9 months ago? I mean, is the population of opportunity changing as you talk to customers? Theo Bunting I would say we are continuing to pursue more opportunities and tried to keep that pipeline growing. I mean, that’s our objective quite frankly is to do as much as we can to continue to see a growth in the pipeline. In terms of kind of where we are now versus 6 months ago, I would have to go back and look at the data specifically, but it is something we focus on. And we understand that having a strong pipeline is really a key to having success in the economic development area. Leo Denault And I will just add the investments that we are making in the system again make the area more conducive. So, we are modernizing the generation fleet. We are improving the fuel cost because of that. We are improving reliability, because we are building things like the Lake Charles Transmission Project that’s going to not only help serve the customers that are under construction down there, but it’s going to beef up the system down there to be able to handle more. So, we are – we kind of get out. While we are placing the aging infrastructure, beefing up the reliability to meet new requirements and to meet existing construction of those facilities, it puts us in a better position to bring those in. So, the investment profile helps fulfill not only what we are doing right now but bring other stuff in as well. Dan Eggers And I guess just separate from market reforms, when you guys think about your more than and your point of view, do you see gaps against the fours, where you think New England New York prices should be today and maybe help quantify what you think the delta is with the sell off in power prices? Leo Denault Yes, I don’t. I think what we are seeing obviously from a supply perspective is continued growth in the supply in Marcellus. Obviously, that is creating a discount to Henry Hub. And as we look forward in terms of our pricing, we don’t see those numbers going above 4% anytime in the near future. I mean, we see that staying fairly consistent with now, but again, I said we are bullish. So, we see it rising, but not getting above that level. So, that’s kind of where we sit. And obviously, the power prices are commensurate with that. I mean, as you look at that from an energy price perspective. Theo Bunting And that’s true. I will just add that once you get out little further on the curve and don’t mention this earlier, there is a bit of liquidity discount that’s out there. And we have seen this in the past as you roll the props, some of that comes out of the market and improves things a little bit, but some of that had gone away last year, but it seems to have reasserted itself again. So, I guess but for some backwardation because of liquidity you think the curves are pretty realistic to where the fundamental value is? Leo Denault No, I have said we are still slightly bullish. For ‘16 we are a little bullish and that kind of increases as we got – go out over time, but it’s relative to where we were a year ago. It’s, obviously, a lower price level. Dan Eggers Okay, got it. Thank you, guys. Leo Denault Thanks. Operator Thank you. Our next question comes from Jonathan Arnold from Deutsche Bank. Your line is now open. Jonathan Arnold Well, good morning. Leo Denault Good morning Jonathan. Jonathan Arnold Leo, could you just help us kind of parse your statement about the dividend still being potentially up for discussion in the fall, when we would look at your utility, Parent & Other, the low end of guidance for 2016 would put the pay out ratio above 65% to 75% target a little bit. So you are going to be thinking about other things beyond payout? Leo Denault What we are looking at is a long-term perspective, Jonathan in the growth and the business. So I think the way I have characterized it in the past is that we are looking out several years. We are looking at sustained dividend path. We are not going to jump around with it to follow when earnings go up a bunch in 1 year raise it a lot. When they don’t go up raise it a little, we are trying to get ourselves more of a glide path view about the long-term prospects of the company. And as we have said, we look at the investment profile that we have for the aging infrastructure, for the reliability requirements, for environmental needs as well as the growth we are seeing in the business and that helps facilitate all of that. And we see an upward sloping long-term trajectory that would indicate to us that the time is right to look at when to start to follow that earnings path, and that could be as early at this fall. Jonathan Arnold Okay, thank you. Operator Thank you. Our next question comes from Anthony Crowdell from Jefferies. Your line is now open. Anthony Crowdell Good morning. Just two quick questions, I wanted to follow-up on Dan’s question, your view on gas, I mean is it closer to the $3 number or the $4 number. And second, in your comment, Leo, you had stressed or stated that EWC makes up roughly 15% of the consolidated company’s earnings, where is the sweet spot there with EWC? Leo Denault You want to talk about gas? Theo Bunting Yes. I think on the gas price, I mean, you guys know where it is right now, we are closer to the $3 level and the $4 level at the front end of the curve. Leo Denault As far as the sweet spot, I mean I wouldn’t say there is a sweet spot or not, it’s just the fact of the matter is right now, the investment profile that we have and the utility is very, very robust. The opportunity for returns are very good there. The need for the investment, because of, as we have mentioned before 75% of our non-nuclear facilities in the utility are over 30 years old, I mentioned the Michoud plant, for example in my prepared remarks. That’s a plant that’s been online since 1960s and there are more efficient ways currently if we – once we beef up the transmission system and meet the MISO requirements to be able to serve that load and deactivate that unit, we deactivated 25 units since 2010 and we continue to go on the path to have more and bigger units in that realm as we add to the system. The risk reward trade off is just better at the utility than it is at EWC for our deployment of capital. So it’s less than 15% and I am being generous with that because I take out the tax benefits that we are showing up in the 2015 numbers before you get close to 15% in 2015. And if you just protect out forward what’s happening with the utility business and the growth profile we have there, 15% becomes smaller. The 15% become smaller and smaller as we go through time given that trade off. So there is no sweet spot, it’s just a fact. And as it relates to the business itself, it’s a different business. It should have a different investor mix. It should have a different dividend profile. It should have a different commercial reality. And so our objectives right now are to grow the utility business and we – we have no plans to grow the EWC business to merchant business, given that risk-reward trade-off and the different investor base. But the fact is over time, between now and 2020 in particular, we are going to become more and more and more a utility. That’s just the fact. Anthony Crowdell Great. Thanks for taking my question. Operator Thank you. And our next question comes from Michael Lapides from Goldman Sachs. Your line is open. Michael Lapides Hi, guys. Just I wanted to make sure I understood something on the utility capital spending levels and the utility demand trends, it strikes to me that your tone today was that the demand trends a little bit softer or maybe a little bit more delayed than expected. But then when you talked about the capital spending trends and the generation, it seems as if several new projects have moved forward a year or so, I am just curious, it seems like if demand more pushed out a little bit, maybe projects would get pushed out, not accelerated, but can you just kind of walk me through the difference there? Leo Denault Well, I will start and let others jump in, Michael. But the – remember for almost a decade, we have had I think we called it the portfolio transformation strategy where we have been working to replace the generation fleet over the course of the last several years, maybe not quite a decade, but maybe close. We have seen an ever-changing landscape of the reliability requirements out of the NERC and certainly the continuation of environmental policies, etcetera, whether it’s MATS, or now CPP or what have you. All of those things have created a real need for us to continue to modernize our generation fleet to add new transmission facilities and to make investments in environmental compliance and we are going to continue to do that. We are at a point now where we – as we change out that generation fleet, it’s turning more and more, absent the union projects, turning more and more to construction to replace that aging fleet. So that part of the process is reasonably agnostic to what the demand growth is. You are changing out the megawatt for megawatt because you get the more efficient new power plant in place versus one that with the O&Ms creeping up, etcetera, because of its age that just happens over time. So that’s really not changed one way or the other. The growth whether it’s a little bit delayed or not, is still pretty crisp. And we are making plans to build generation and replace the aging infrastructure as well as meet that new demand. If a plant slips a year, that doesn’t really change the capital program. And in fact even as long ago as Analyst Day when we were asked, so what could be your capital program, we said, well not very much, because it’s a long – you got to plan this stuff in advance. So even back then, we had mentioned that the capital program around the edges wouldn’t change a lot as long as the demand growth stayed in a reasonably close proximity to what we are seeing. And so delays, one way or the other where – what we mentioned back then might have some impact, that projects might move around, but that they were still going to show up. So all it is, is sharpening the pencil on the need for the facilities and when we can get it done based on the age of the fleet, interaction with the transmission system and when this stuff is showing up. And right now there hasn’t been big enough shifts in anything to change the construction program versus where we were. We have a couple of projects. We are going to market test for an earlier project. We are bringing the new generation here at St. Charles project online a little earlier. We brought Ninemile 6 online early. And I think we have learned from that in terms of the timing it takes. So we were embedding in some of these projects how long it would take to go from planning to development to construction and we have proven we can do it faster and at a lower cost and that’s what happened in Ninemile and that’s what we had anticipated what happened at St. Charles project and likely happens on some of the other stuff as well. So we are – the construction program meets many needs, sales growth is one of them and an important one we have to be ready, willing and able to serve these customers when they show up. And if they show up six months later than they had planned, we still want to be there with a reliable system when they show up and that’s really all we are doing. Michael Lapides Got it. And then one question on EWC, what do you see is the impact and do you think it’s already embedded in market expectations for some of the new pipeline projects, maybe constitution, which is coming online in New York, there is also some smaller pipelines that actually came on in New York pretty recently as well as some of the more longer dated projects, the Eversource and Spectra projects or the Kinder Morgan 1, to get you new gas up into New England? Theo Bunting I think the Eversource-Spectra project is one that is kind of included in the current market expectations. Obviously, in New York, I think those are progressing well and are also kind of already included in the market. I think the issue is going to be how do some of those get paid for specifically in New England and how – what is the cost recovery mechanism going to be and how is that going to work, is it going to go through the legislative process. And then – but I think a lot of that is built into expectations kind of going forward. Michael Lapides Got it. Thank you, guys. Much appreciate it. Leo Denault Thanks Michael. Operator Thank you. And our final question will come from David Paz from Wolfe Research. Your line is now open. David Paz Hi, good morning. Leo Denault Good morning, David. David Paz I believe your 2017 utility outlook expected 3.25% or 3.75% retail sales growth on average, just want to make sure, is that still – does your outlook still expect to reflect that figure? Drew Marsh Well, I mean we have continued to look at that and as Theo mentioned, we will have a fuller update later this fall, probably the EEI, but our expectations given the number of changing variables are that we are still in the middle of that range. David Paz Great. And do you just have – I don’t know if you have given this before, but have you – what would every 100 basis point change in that figure do to your 2017 target, all else equal? Drew Marsh I don’t know that we have published a rule of thumb on the growth rate of industrial change. Certainly 1% change in our existing base is about $0.11… Paula Waters Total… Drew Marsh Yes. So it’s like $0.02 for industrial, $0.04 for commercial, $0.05 or so $0.06 for the residential piece. So I think – and that’s a 1% change across all segments, so on the existing piece. But I don’t know that we have published a rule of thumb around sensitivities for the industrial change in the growth piece, 1%. It would be a little different than the existing piece because the existing piece has the demand charges built into it already and so you would only be seeing the variability around the energy piece that we actually sell to customers. So – and that’s about 50% of the margin for the industrial piece. So I don’t know, it seems like there might be about $0.04, but I don’t have those numbers in front of me. David Paz Okay, that’s helpful. Thank you. Operator Thank you. And I would now like to turn the call over to Paula Waters for any closing remarks. Paula Waters Thank you and thanks to all for participating this morning. Before we close, we remind you to refer to our release in website for Safe Harbor and Regulation G compliance statement. As a reminder, we plan to file our quarterly report on Form 10-Q with the SEC this week. The Form 10-Q provides more details and disclosures about our financial statements. Please note that events that occur prior to the date of our 10-Q filing that provide additional evidence about conditions that existed at the time of the balance sheet will be reflected in our financial statements in accordance with Generally Accepted Accounting Principles. Our call was recorded and can be accessed on our website or by dialing 855-859-2056, conference ID 44024303. The telephone replay will be available until August 11, 2015. This concludes our call. Thank you. Operator Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.

WEC Energy Group (WEC) Q2 2015 Results – Earnings Call Transcript

WEC Energy Group, Inc. (NYSE: WEC ) Q2 2015 Earnings Call July 29, 2015 2:30 pm ET Executives Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. J. Patrick Keyes – Chief Financial Officer, Director & Executive VP, WEC Energy Group, Inc. Allen L. Leverett – President & Director, WEC Energy Group, Inc. Stephen P. Dickson – VP & Controller, WEC Energy Group, Inc. Analysts Julien Dumoulin-Smith – UBS Securities LLC Greg Gordon – Evercore ISI Jonathan P. Arnold – Deutsche Bank Securities, Inc. Michael J. Lapides – Goldman Sachs & Co. James von Riesemann – Mizuho Securities USA, Inc. Brian J. Russo – Ladenburg Thalmann & Co., Inc. (Broker) Andrew Bischof – Morningstar Research Paul T. Ridzon – KeyBanc Capital Markets, Inc. Paul Patterson – Glenrock Associates LLC Operator Good afternoon, ladies and gentlemen. Thank you for waiting and welcome to WEC Energy Group’s Conference Call to review the 2015 Second Quarter Results. This call is being recorded for rebroadcast and all participants are in a listen-only mode at this time. Before the conference call begins, I will read the forward-looking language. All statements in this presentation, other than historical facts, are forward-looking statements that involve risks and uncertainties which are subject to change at any time. Such statements are based on management’s expectations at the time they are made. In addition to the assumptions and other factors referred to in connection with the statement, factors described in WEC Energy Group’s and Integrys Holding’s latest Form 10-Ks and subsequent reports filed with the Securities and Exchange Commission by each company could cause actual results to differ materially from those contemplated. During the discussions, referenced earnings per share will be based on diluted earnings per share unless otherwise noted. After the presentation, the conference will be open to analysts for questions and answers. In conjunction with this call, WEC has posted on its website a package of detailed financial information at wecenergygroup.com. A replay of our remarks will be available approximately two hours after the conclusion of this call. And now it’s my pleasure to introduce Mr. Gale Klappa, Chairman of the Board and Chief Executive Officer of WEC Energy Group. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Colleen, thank you. Good afternoon, everyone, and thank you for joining us, as we review our second quarter results. As I’m sure you know, on June 29 we acquired Integrys in a $9 billion transaction to form WEC Energy Group. We now serve 4.4 million electric customers and natural gas customers across four Midwestern states. I’ll provide you with much more detail on the new company shortly, but first, as always, I’d like to introduce the members of our management team who are here with me today. We have Allen Leverett, President of WEC Energy Group; Pat Keyes, our Chief Financial Officer; Susan Martin, General Counsel; Steve Dickson, Controller; and Scott Lauber, our Treasurer. I’d also like to welcome Beth Straka, our Senior Vice President of Corporate Communications and Investor Relations. Now, many of you know Beth from her work over the past decade or so as one of the more perceptive analysts covering our industry. I want to tell you we’ve forgiven her for that, and we’re delighted that she’s with us. Turning now to the second quarter, Pat will review our financial results in detail a bit later on the call, but as you saw from our news release this morning, we reported adjusted earnings of $0.59 a share for the second quarter of this year. That compares with adjusted earnings of $0.59 a share for the second quarter of 2014. I should point out that the numbers we’re reporting to you today reflect Wisconsin Energy only. Since the acquisition closed on June 29, Integrys earnings were immaterial. Taking a very quick look now at the state of the economy, Wisconsin’s unemployment rate stood at 4.6% in June, well below the national average. Deliveries of electricity to our large commercial and industrial customers, however, excluding the iron ore mines, fell by 1.4% in the second quarter. But several sectors showed strength including plastics, printing, and food processing. Also, our small commercial and industrial segment is growing, with electricity use rising by 2.3% over the second quarter of a year ago. In addition, we continue to see an uptick in customer growth across our system. New electric service connections are up 8.2% and new natural gas installations are up 4% compared to the same time period last year. Now I’d like to spend the next few minutes discussing our plans for the future of the new WEC Energy Group. When we first considered the opportunity to acquire Integrys, we weighed it against our three important criteria for evaluating any potential acquisition. After considerable due diligence we found that it met or exceeded all three criteria. First, it would be accretive to earnings per share in the first full calendar year after closing. Second, it would be largely credit-neutral. And third, the long-term growth rate would be equal to or greater than Wisconsin Energy’s standalone growth rate. We also saw tremendous opportunity in the framework of the new company. WEC Energy Group has the scale, scope, technical depth, geographic reach, and financial resources to thrive in our consolidating industry. We plan to leverage those strengths to deliver operational and financial benefits to all of our stakeholders, from the customers and communities we serve, to the people we employ, to the shareholders who count on us to create value. And with our proven leadership team, we will incorporate best practices across the organization to streamline our operations and reduce costs. So what does our new footprint look like? Well, as I mentioned the new company provides electricity and natural gas to 4.4 million customers across four states through our customer-facing brands: We Energies, Wisconsin Public Service, Peoples Gas, North Shore Gas, Michigan Gas Utilities, and Minnesota Energy Resources. Our company operates in a balanced regulatory environment with greater jurisdictional diversity than before the acquisition. And of course, more than 99% of our earnings will come from regulated operations. WEC Energy Group is now the eighth largest natural gas distribution company in the country and one of the 15 largest investor-owned utility systems in the United States, with significant opportunities for growth. Of course, the majority of the earning assets we acquired are here in Wisconsin, a familiar landscape for us, and major infrastructure upgrades are underway now at Wisconsin Public Service in the northern part of the state. These investment opportunities are similar to those we have pursued over the years, on time and on budget, at We Energies. We are also in excellent position to take advantage of new customer growth across the region, especially in Wisconsin, Michigan, and Minnesota, where propane and oil users are continuing to convert to natural gas. In addition, as many of you know, Integrys and Wisconsin Energy were the two largest owners of American Transmission Company. Today WEC Energy Group has become a 60% owner of ATC. As you will recall, ATC plans to invest between $3.3 billion and $3.9 billion between 2014 and 2023 to bolster electric reliability in our service area. We believe this is a solid plan, and we welcome the opportunity to increase our commitment to the transmission business. Now I would like to briefly discuss some of the conditions we agreed to as we worked our way through the regulatory approvals for the acquisition. In Wisconsin, we committed to an earnings cap for our Wisconsin Electric and Wisconsin Gas subsidiaries. Starting in 2016, next year, we will share with our customers any earnings in excess of our allowed rate of return. The first 50 basis points of earnings above our authorized return will be split equally between the company and our customers. Then any earnings above that level will go exclusively to customers. This sharing mechanism will be in effect through 2018. We also agreed to develop an integrated resource plan detailing the joint capacity needs of Wisconsin Electric and Wisconsin Public Service. We expect to file the resource plan with the Wisconsin Commission later this quarter. In Michigan, as we’ve discussed on previous calls, we expect to pursue the formation of a Michigan-only utility. Our customers in the Upper Peninsula of Michigan would be served by this entity. And we expressed a willingness, if requested, to invest in a new generating plant in the Upper Peninsula and/or purchase power from a new facility. This would allow for the eventual retirement of the Presque Isle Power Plant. In Illinois, we agreed to retain a minimum level of jobs in the State of Illinois for the next two years. We also committed to a two-year base rate freeze and a capital spending floor from 2015 through 2017. In a recent development this past Friday, the Citizens Utility Board, the City of Chicago and the State Attorney General’s Office asked the Illinois Commerce Commission to rehear our merger order. These parties are seeking additional conditions, conditions that they previously requested during the year-long approval process. The Illinois Commission now has until August 13 to accept or deny the request. We believe the Commission’s June 24 decision was correct and is supported by sound principles and by an extensive body of evidence. Now let’s touch on some of the key financial metrics for the new company. For starters, as you may recall we issued $1.5 billion of parent company debt to help finance the transaction. The all-in interest cost for the debt is approximately 2.2% annually, an excellent result and clearly lower than we anticipated. So for 2016 we now project our growth in earnings per share to be in the range of 6% to 8%. The 6% to 8% growth for next year assumes that Wisconsin Energy standalone achieves earnings of $2.72 a share this year, which is the midpoint of our current 2015 guidance. So, just to clarify, we start with a base of $2.72 a share for our standalone earnings this year, and we expect the combined company to grow earnings per share in the 6% to 8% range next year. For the longer term, after 2016 we see earnings per share growth of 5% to 7% annually, driven by operating efficiency, financial discipline, and infrastructure investments that the region needs for reliability and for improved environmental performance. We look forward to providing you with additional details on our capital investment plans at the EEI Finance Conference coming up in November. Regarding our dividend policy, in June, the Wisconsin Energy Board of Directors raised the quarterly dividend to $0.4575 a share. That’s an increase of 8.3% over the previous quarterly rate. This is equivalent to an annual rate of $1.83 a share. Going forward we will target a payout ratio of 65% to 70% of earnings. And we expect dividend growth to be in line with growth in earnings per share. Switching gears now, I’d like to update you on several of our major construction projects. On the generation side of our business, as you may recall, we’re working to add fuel flexibility at our Oak Creek expansion units as part of our ongoing Power the Future initiative. These units were initially permitted to burn bituminous coal; however, given the current cost differential between bituminous coal and Powder River Basin coal, blending the two types of fuel could save our customers between $25 million and $50 million a year depending upon the blend. During extensive testing, we identified operational and equipment-related improvements that will be needed to sustain the higher blends of PRB coal on a long-term basis. In May, the Wisconsin Commission approved our requests for additional capital spending for plant modifications, expansion of all of our coal storage capacity, and additional coal handling equipment. We’ve already started work to expand our coal storage capability, and the first in-plant capital improvements are expected to be made on the first unit at Oak Creek, the Oak Creek expansion, during a planned outage this September. We plan to upgrade the second unit during the first quarter of 2016. Our share of these investments is targeted at approximately $80 million. Next, the conversion of our Valley Power Plant from coal to natural gas. That conversion is now more than 80% complete. Total conversion costs are expected to be in the $60 million to $65 million range, excluding allowance for funds used during construction. We expect to complete the project on time and on budget before the end of this year. Our Western Wisconsin natural gas expansion project, which will address natural gas reliability concerns in the western part of the state, is now more than 75% complete and is running on time and better than budget. We expect to complete this new 85-mile natural gas pipeline in the fourth quarter of this year at a cost actually well below the $175 million budget, a budget that again excludes allowance for funds used during construction. Looking forward, we continue to see significant investment opportunities in Wisconsin Energy’s traditional business as we upgrade our aging distribution networks and focus on Delivering the Future. Just to remind you, Wisconsin Energy’s standalone capital budget calls for spending $3.3 billion to $3.5 billion over the five-year period 2015 through 2019, and our 10-year standalone capital budget calls for investing between $6.6 billion and $7.2 billion over the period 2015 through 2024. Now before I turn the call over to Pat, I would also like to discuss our plans for the accelerated main replacement program at Peoples Gas in Chicago. Just to refresh your memory, this is one of the largest infrastructure modernization programs in the country. The program calls for the replacement of approximately 2,000 miles of Chicago’s aging gas pipeline system over the next 20 years. Some of these pipes, ladies and gentlemen, literally date back to the time of the Civil War. One of our immediate and most important goals is to improve the management and performance of this project. Our first step was to appoint a new senior management team at Peoples: a new President, a new Vice President for construction, a new operations Vice President, and a new Vice President for customer service. All of them are proven, experienced leaders from the Wisconsin Energy system. Over the past three weeks, our team has conducted a thorough evaluation of the accelerated main replacement program. They have determined that the best approach is a fresh start. We have begun transitioning the management of the project to in-house personnel; previously the project was managed by an outside contractor. Going forward, we also plan to engage a nationally recognized firm to help conduct an independent, bottom-up review of the cost, scope, and schedule for the program. This past Monday we notified the Illinois Commerce Commission of our decisions, and we will incorporate these decisions into a broader transition plan. This broader transition plan will address the recommendations made by Liberty Consulting Group in their audit of the program. The Liberty audit was completed earlier this year at the request of the Illinois Commerce Commission. I am confident that the steps we are taking will ensure that Chicagoans get the safe, modern natural gas delivery system that they deserve. In conclusion, these are exciting times, filled with opportunity for our new combined company and we believe we have a very bright future ahead. We will build an enduring enterprise by focusing on the fundamentals: world-class reliability, operating efficiency, financial discipline, and exceptional customer care. And now for more details on our second quarter performance and our outlook for the remainder of 2015, here’s our Chief Financial Officer, Pat Keyes. Pat. J. Patrick Keyes – Chief Financial Officer, Director & Executive VP, WEC Energy Group, Inc. Thank you, Gale. As Gale mentioned, our 2015 second quarter adjusted earnings were $0.59 a share. That’s the same as our adjusted earnings for the corresponding quarter in 2014. Costs related to the acquisition of Integrys Energy reduced earnings by $0.24 per share in the second quarter of 2015 and $0.01 per share in the second quarter of 2014. Because of the timing of the acquisition, earnings results this quarter are exclusively from Wisconsin Energy. Going forward, our consolidated earnings will include the operating results of the Integrys companies. Please note that the balance sheet included in this quarter’s earnings package does incorporate the Integrys balance sheet. Consistent with past practice, I will discuss operating income for Wisconsin Energy’s two business segments, and then discuss other income, interest expense, and income taxes. Excluding acquisition related costs, second quarter consolidated operating income was $232.5 million, as compared with $245.8 million in 2014. That’s a decline of $13.3 million. Starting with the utility energy segment, operating income in the second quarter totaled $140.4 million for 2015, a decline of $14.8 million from the second quarter of 2014. On a quarter-over-quarter basis, our earnings were helped by $9.5 million because of the impacts of the 2015 rate case and by $3.4 million related to improved fuel recoveries. On the downside, we saw an increase in utility operations and maintenance costs of $18.5 million, primarily driven by increased regulatory amortizations, the timing of projects, and certain benefit costs. We estimate that weather reduced our margins by $4.8 million and we also saw increased depreciation expense of $4.2 million. Combining these and other factors results in the $14.8 million decline in utility operating income in the second quarter of 2015, compared with the same quarter in the prior year. Operating income in our non-utility energy segment was $93.5 million, which is $1.8 million higher than the prior year. Our corporate and other segment, which includes corporate costs of smaller affiliates, was essentially flat with last year’s second quarter. Taking the changes for these segments together, you arrive at the second-quarter operating income before acquisition-related costs of $232.5 million, a $13.3 million decline as compared to the second quarter of 2014. In addition, for the second quarter of 2015 we recognized $66.7 million of acquisition-related costs associated with benefit plan agreements, legal and banking fees, and other costs. Overall these costs were in line with our expectations. During the second quarter of 2015, earnings from our investment in American Transmission Company totaled $14.3 million, a decline of $3.2 million from the same period in the prior year. As we mentioned in the first quarter, ATC has established reserves in light of recent appeals to the FERC related to authorized returns for regional transmission organizations. Our earnings reflect Wisconsin Energy’s share of ATC’s results. Our other income net increased by $18 million. During the second quarter of 2015, we recognized an incremental gain of $15.2 million on the sale of the legacy asset. The purchase and sale of assets is a regular part of our business. In fact, we have a real estate development subsidiary, and this quarter’s sale was part of our financial plan for the year. Our net interest expense increased by $3.1 million, primarily because of higher debt levels. Consolidated income tax expense fell by $11.1 million for the quarter. Going forward, WEC Energy Group’s annual effective income tax rate, driven by a one-time adjustment related to the acquisition of Integrys, is expected to be between 38% and 39% in 2015. We expect that Wisconsin Energy’s standalone effective tax rate for 2015 will be between 37% 38%. Combining all of these items brings you to the adjusted net income of $0.59 per share for the second quarter of 2015. During the first six months of 2015, our operating cash flows totaled $715.9 million, which is a $5.4 million decrease from the first six months of 2014. During 2015, we contributed $100 million to our pension plans; no such contributions were made during 2014. Operating cash flows were helped by improved working capital. For example, lower natural gas prices dropped accounts receivable balances and reduced the cost of gas and storage. Our capital expenditures totaled $356.5 million in the first six months of 2015, a $51 million increase compared to 2014. The increase was primarily driven by the increased expenditures related to the western gas lateral. Our adjusted debt to capital ratio as of June 30th, 2015 was 50.7%. This ratio reflects the Integrys acquisition, treating half of WEC Energy Group’s hybrid securities as common equity, which is consistent with past presentations. We continue to use cash to satisfy any shares required for our 401(k) plan, options, and other programs. Going forward, we do not expect to issue any additional shares. We paid $190.5 million in common dividends in the first six months of 2015. That’s an increase of $14.5 million over the same period last year. Weather normalized retail deliveries of electricity fell by 1.3% in the second quarter of 2015 as compared to the second quarter of 2014. Actual second quarter deliveries fell by 1.6%. Looking now at the individual customer segments, we saw weather-normalized residential deliveries drop by 3.8%. Actual residential deliveries fell 5%. Across our small commercial industrial group, weather-normal quarterly deliveries rose by 2.4%. Actual deliveries rose by 2.3%. In the large commercial industrial segment, deliveries for the second quarter of 2015 fell by 2.5%. Excluding the iron ore mines, large commercial and industrial deliveries fell by 1.4%. Our year-to-date weather-normalized retail gas deliveries, excluding the gas used for power generation, were flat compared to the same period in 2014. Our actual gas deliveries, again excluding the gas used for power generation, were down 7.2% compared to the polar vortex driven gas sales last year. Our overall results for gas and electric sales in the first six months of 2015 are slightly behind our expectations for the year. Turning now to our earnings forecasts, for the remainder of 2015 we will continue to guide based on standalone Wisconsin Energy earnings. As Gale mentioned, our long-term earnings per share growth rate is based upon these standalone earnings. We will therefore make the following adjustments to the WEC Energy Group GAAP earnings. Number one, remove the impact of Integrys; number two, remove the impact of acquisition debt. As Gale noted previously, we funded the 1.5 billion cash portion of the acquisition with $1.2 billion of long-term debt and $300 million of commercial paper. This long-term debt included 3, 5, and 10-year tranches. Overall, our debt has an approximate interest cost of 2.2% annually. Number three, remove the impact of acquisition and other one-time costs such as banking and legal fees. Number four, modify effective tax rates to remove the impact of the one-time adjustment I just referred to earlier. And finally, number five, remove the impact of the additional shares issued as part of the acquisition. With that, we’ll move to our 2015 guidance. We are reaffirming our 2015 standalone adjusted guidance of $2.67 a share to $2.77 a share. We are off to a strong start, but still have six months of weather ahead of us. Again, we are reaffirming our standalone adjusted guidance of $2.67 a share to $2.77 a share. And finally let’s take a look at third quarter guidance. Last year’s third quarter adjusted earnings were $0.57 a share, which excludes $0.01 a share related to our acquisition of Integrys. Similar to last year, our summer got off to a very slow start this year, with temperatures significantly below normal during the first 10 days of July. So taking this July weather into account, we expect our third quarter 2015 adjusted earnings to be in a range of $0.56 to $0.58 a share. That assumes normal weather for the rest of the quarter and excludes any remaining transition-related costs. Once again, our third quarter 2015 adjusted guidance is $0.56 to $0.58 a share. And with that I will turn things back to Gale. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Pat, thank you very much. Appreciate the detail and the clarity. And overall, folks, we’re solidly on track and focused on delivering value for our customers and our stockholders. Question-and-Answer Session Operator And now we would like to take your questions. Your first question comes from the line of Julien Dumoulin-Smith with UBS. Please go ahead. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Good afternoon, Julien. Julien Dumoulin-Smith – UBS Securities LLC Afternoon to you. Congrats on closing the deal finally, not too bad. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. All right, we’ll see later this week. Julien Dumoulin-Smith – UBS Securities LLC Indeed we will. So perhaps the first question here out of the gate, the 5% to 7% earnings growth rate, when you are thinking about that in the context of this transaction being closed, how are you thinking about the trajectory in 2016 and reflecting some of the improvement, hopefully, in the earned ROEs across the legacy Integrys platform? And perhaps maybe could you remind us or refresh our memory of where the earned ROEs stand today, just for some background if you will. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Sure, I’d be happy to. Let me first start with the initial part of your question. How do we think about the trajectory of earnings going forward here now that we have closed the acquisition? As you may have heard me say on the script, given everything we see today and given the terrific result that we got in terms of the annual interest cost on the parent company debt, we are projecting 2016 to have a growth rate over our standalone 2015 guidance, the midpoint of that guidance. So we are projecting 2016 to grow 6% to 8%. And then post 2016 we still see a 5% to 7% growth rate. There are a couple of important underlying assumptions that we are making and that we really feel very good about delivering related to the growth rate. The first is that we believe we can through best practices, through cost reduction, through financial discipline, and through on-time and on-budget investing in the infrastructure upgrades that are needed, we believe we can move all of the utilities that are the former Integrys utilities at or near the allowed rates of return in Illinois, Michigan, and Minnesota, and of course WPS in Wisconsin. So that’s a pretty important underlying assumption. And to your question of, well, where were the allowed rates of return for those utilities? Just a reminder that We Energies and Wisconsin Gas have historically earned at or very close to and in some years slightly above the allowed rates of return. With that, Pat has the specific numbers on where the other Integrys utilities have been from an ROE standpoint. Pat? J. Patrick Keyes – Chief Financial Officer, Director & Executive VP, WEC Energy Group, Inc. So, Julien, let’s start with the two biggest ones. Wisconsin Public Service last year earned just above 10%; and as a reminder its authorized was 10.2%, so just underneath allowed. The second biggest or the other big one would be Peoples Gas. That last year was about 5%, and that’s out of an allowed 9%. Then the other three utilities last year – that would be North Shore, Minnesota, and Michigan, two of the three hit; one was beneath, but the year before, the one that missed hit and another one didn’t. So they’re more or less maybe slightly underneath on average is probably the simplest way to state that. Does that help? Julien Dumoulin-Smith – UBS Securities LLC Absolutely, that’s great. And perhaps just getting back to my question a little bit more broadly, as you think about 2016 to 2017, are you earning a full year earned ROE? Just I’m trying to think about some of the continued benefits as you flow that forward, right. So thinking about the 5% to 7% in conjunction with what is likely – I don’t want to put words in your mouth too much – but what is likely still an annualizing factor into that higher level, I would imagine. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. I’m not sure I exactly followed you, but perhaps I can answer. Julien Dumoulin-Smith – UBS Securities LLC Or are you expecting to earn a full year at or near the ROEs in 2016 already, just to be clear about that, or is there an annualizing factor? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Starting in 2016 we are expecting to earn a full-year annualized rate of return, yes. And let me help with that one piece, because you’re probably wondering like, well, how do you go from 5% to 9% at Peoples Gas? That’s a very good question, Julien. I’m glad you asked it. Peoples Gas did get a resolution of a rate case in January of this year, and I believe the allowed increase was $71 million. A lot of that, Julien, was for catch-up capital that had already been invested in the infrastructure in Chicago. So the fact that a rate case has been adjudicated and they are seeing the benefit of the $71 million increase is helpful on that front. I hope that’s helpful to you. Julien Dumoulin-Smith – UBS Securities LLC It is indeed. And sorry to belabor it, just one last one in terms of the integrated resource plan. How are you thinking about that now? Obviously there was some shifts in the gas generation plans earlier. What is the current expectation vis-à-vis load growth as you stand today, as you close the deal? Would you expect a shift back in generation resources meaningfully from what has been discussed through the course of this merger approval? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Let me try the first piece and then we’re going to let Allen give you the detail on the integrated resource plan that we’ll be filing later this quarter with the Wisconsin Commission. Long story short, there is no change in terms of our long-term demand growth projection. Wisconsin Public Service and our company have pretty similar demand growth projections going forward, roughly 0.05% a year basically in electricity demand growth. Our belief, though, when you look at the portfolio of generation that the two companies have together, our belief is there can be some real synergies there. Allen? Allen L. Leverett – President & Director, WEC Energy Group, Inc. Right, and just review for everyone, Julien, who might not know the Fox Energy Center, which is a plant that’s owned by Wisconsin Public Service, before agreeing to the merger with Wisconsin Energy they had planned to build a facility called Fox 3, which was going to be a natural gas fired combined-cycle unit. And then as Gale mentioned in the script, essentially what the Commission said is: Well, all right, look at the resources at both of your Wisconsin utilities and tell us overall whether that unit is still needed. So, Julien, what we’ve been able to do to date, we’ve looked just simply at what I guess I would call the capacity demand balance between the two utilities. If we look solely at the capacity demand balance, my expectation would be that you can easily defer Fox unit 3 for a number of years. The analysis that we are doing to go in addition to that capacity and demand is a bit of an energy analysis, if you will. If you look at the energy mix of the two utilities, my expectation is that it will confirm the capacity demand balance and that the unit will be deferred. But that’s what we’re in the process of doing. And then as Gale mentioned in the third quarter we’ll do a formal filing to the Wisconsin Commission along those lines. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. And Julien, the Fox 3 was estimated to be about a $600 million capital investment, which again based on our preliminary look we believe can be deferred. Julien Dumoulin-Smith – UBS Securities LLC Great. Thank you for all the color. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. You are more than welcome. Good questions Julien. Julien Dumoulin-Smith – UBS Securities LLC Appreciate it. Operator Your next question comes from the line of Greg Gordon with Evercore ISI. Please go ahead. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. All right, Greg. I want to give you a shot here. Are the Jets going to be above .500? Greg Gordon – Evercore ISI Based on the strength of schedule, I’m going to say yes. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. All right. Greg Gordon – Evercore ISI Not necessarily based on the talent, on the team, but based on the strength of the schedule. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. And any kind of playoff expectations, Greg? Greg Gordon – Evercore ISI Well, there’s always hope. Jets are used to having a lot of that. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Well, I hope it’s a good season for you. How are you doing, Greg? Greg Gordon – Evercore ISI Good. I just want to cut to the chase and just make sure I hear you clearly. Making all the adjustments you guys laid out, you were very articulate. We should expect you to still be inside the guidance range pre-Integrys. And then we should expect on a full run rate, merger-integrated basis for fiscal year 2016 that you will grow 6% to 8% earnings off that number? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. That is correct. You’ve nailed it. Greg Gordon – Evercore ISI Okay, perfect. So you’ve taken into account everything that’s going on including the one-time impact of this legacy asset sale. You think that everything in the stewpot, that’s a number you can hit? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. We’re certainly expecting to do so. But let me mention this one-time thing you mentioned about the one-time legacy asset sale. We have with the combined company like $29 billion of assets. I think every year, Greg, since I’ve been here we’ve had some type of asset sale. And remember we also have a real estate subsidiary that develops and sells property. So it’s part of our ongoing, it’s just part of what we do. And I would suspect you want us to do this, because it’s part of maximizing the value of our assets. Greg Gordon – Evercore ISI No, completely understand. I just wanted to be clear on it. My second question is as we think about your cash flow profile, pro forma for the deal, still superior and differentiating factor about your investment thesis relative to almost any other utility, given the robust cash flow nature of the Power the Future assets. How should we think about the cash flow deployment priorities of the company as they are built into that 6% to 8%, going to 5% to 7%, expectation? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. In terms of the cash flow priorities, number 1 through 10 is obviously investing in infrastructure upgrades that are very much needed for customers across the four states. And as I mentioned at the EEI Fall Finance Conference, we’ll give you a lot more granular detail particularly about our next three- to five-year capital investment program. But we see tremendous need and tremendous opportunity for the use of that cash flow to upgrade the electric and natural gas infrastructures in the region. So that’s priority number 1, 2, 3, 4, 5, 6, 7, and 10 for the cash flow. And then obviously we want to maintain the 65% to 70% target for dividend payouts. And if there’s any cash left over, well, we’ve got three doors we can go through. One is debt reduction. One would be if we can find, legitimately, additional investment opportunities and additional infrastructure projects. And then the third would be where we were before, which is a share buyback. But I would hope that and really am very hopeful that there will be additional investment opportunities that are really needed and that we can put that cash to really good use through infrastructure upgrades. Greg Gordon – Evercore ISI Okay, great. Just to be clear, are there any specific commitments vis-à-vis the current rating and the discussions you’ve had with the rating agencies on how you’re going to manage the parent debt balance over the next few years? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Pat? I’ll let Pat answer that. J. Patrick Keyes – Chief Financial Officer, Director & Executive VP, WEC Energy Group, Inc. What we talked about, Greg, was the reason we tranched the acquisition debt is that our expectation is that as each tranche matures or comes to its end, we will have sufficient cash flow to be able to not renew that tranche. So in other words we plan to take it out. In addition to that I might add that we’re also looking at what I’m just going to call balance sheet cleanup or looking at some of the other debt that is sitting out there at the Holding Company and what opportunities we’ve got to clean some of that up as well. Greg Gordon – Evercore ISI Perfect. Thanks, guys. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Great, questions. Thank you, Greg. Operator Your next question comes from the line of Jonathan Arnold with Deutsche Bank. Please go ahead. Jonathan P. Arnold – Deutsche Bank Securities, Inc. Good afternoon, guys. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. How are you doing, Jonathan? Jonathan P. Arnold – Deutsche Bank Securities, Inc. You just reiterated the 65% to 75% dividend payout target, Gale. And you obviously bumped it a little bit more than you were committed to post the merger. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Yes. We thought you would like that, Jonathan. Jonathan P. Arnold – Deutsche Bank Securities, Inc. Right. My question is it looks like the payout of the midpoint of the 2016 guidance is going to be 63%. How soon do you want to get in the range? You’ve typically done December increases. How should we think about that range versus what you’ve just been discussing around investment priorities? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Well, it’s a question we will continue to look at between now and the end of the year. But certainly in the relatively near term, we very much want to be at least in the bottom end of the 65% to 70% range. Jonathan P. Arnold – Deutsche Bank Securities, Inc. Okay. Then what would push you I guess broadly as you look at the earnings for the quarter, into (39:27) to the higher end of that long-term growth rate? Do you have a line of sight on what kind of things we should be looking for you to announce? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Very good question. Let me frame the answer; if Pat or Allen would like to add, I would certainly welcome them to do so. Let me frame the answer for you. There is not one single thing that could pop us to the top end of the range on a permanent basis. But if you think about our business and where we’re headed, there are several factors, the biggest of which would be increased investment opportunity or increased investment requirement that we build on time and on budget and get cost recovery for. That would be the single biggest thing. In between rate cases, if you have an economic pickup and there’s stronger sales growth, there are a number of things that can happen in between rate periods. But the single biggest factor that could drive us to the top end would be additional investment opportunities in infrastructure upgrades. Pat, Allen, anything you would like to add? J. Patrick Keyes – Chief Financial Officer, Director & Executive VP, WEC Energy Group, Inc. Well, I got just a couple things I could throw in, Jonathan. I think Gale hit the main one, but other things I would think about would be opportunity sales that would help us on the fuel recovery, to the extent that our fleet is called more by the MISO. And the other would be hitting some, we talked about our ATC 10 year capital plan and the range it could be in. You are also familiar with our joint venture with Duke, the DATC. To the extent that some of those projects hit or we get to the top higher end of that capital plan, that would also help. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. That’s a good point, Pat. So it all comes down – well, it doesn’t all, but a lot of it comes down to: are there additional investment opportunities as we go forward beyond the plan that we’ll be pretty granular about with you at EEI in the fall. Jonathan P. Arnold – Deutsche Bank Securities, Inc. Great. If I may, just on one other point, you talked about having filed with the ICC to tell them you’re going to have a rethink around the main replacement program. Does that include some proposal for how to resolve the ongoing investigation? Or is that a separate issue? Any perspective on how we bring that to closure? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. It’s a very good question. Let me be clear about the ongoing dockets. There’s one very helpful ongoing docket. And let me back up and explain that. The commission, before we got involved with the potential acquisition, the commission brought in an outside consulting group by the name of Liberty Consulting to basically do a review of the management, the physical on-the-ground management of the gas main replacement project. Liberty has come back with 95 specific recommendations, most of which are very practical and all of which we agree with. So what the commission has done is they’ve kept that docket open and they’ve asked us by September, early September, to file a transition plan that in part lays out how we plan to incorporate those recommendations into our management of the program. So, I think a lot of what you’re asking about has a schedule and has a definite plan for resolution. But I view the Liberty Consulting report as very helpful and certainly I know the commission has a good bit of faith in the recommendations. The recommendations are very practical. They are recommendations that we would automatically have put into our transition plan anyway. And so I think that’s the way, as we take a step back and re-look the entire project from soup to nuts, from scope to schedule, to logistics, we will be incorporating the Liberty audits along the way and Liberty will also have input along the way. So, again, a schedule and a date has been set for us telling the commission how we plan to incorporate the Liberty recommendations and I think that will go a long way, in addition to the expertise that we’re going to bring to this project. Jonathan P. Arnold – Deutsche Bank Securities, Inc. Okay, great. Thank you, Gale. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. You’re welcome. Operator The next question comes from the line of Michael Lapides with Goldman Sachs. Please go ahead. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Hi, Michael. Michael J. Lapides – Goldman Sachs & Co. Hey, Gale, congrats on the deal. Congrats on getting everything closed and rolling out new guidance. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Thank you. Michael J. Lapides – Goldman Sachs & Co. One question, though. I know you are starting from the base of a $2.72 midpoint for WEC standalone. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Right. Michael J. Lapides – Goldman Sachs & Co. I’m just trying to put apples – I’m worried we are comparing apples and oranges here. Because Integrys has a large gas utility presence; that means it generates or delivers a decent amount of its annual earnings in the fourth quarter. And just are you thinking that the second half of this year that Integrys would actually have contributed to our EPS? Or would it have detracted from EPS from the original standalone entity? Because a lot will depend on what your starting point is and the starting point here is a little confusing. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. No, I’m glad you asked the question. Let us answer it very directly. First of all, yes, we’re picking up a lot of gas, gas delivery companies. And yes, they generally have a pretty good fourth quarter. They also have a lousy third quarter simply because of lack of gas demand. But let’s step back here. A couple factors. First of all, the financial logic for the acquisition was that an acquisition that we would want to make, like the Integrys acquisition, would add to our earnings per share growth in the first full calendar year after closing. So, that’s 2016. So, I think the logical starting point is okay; well, what would you have done standalone 2015? What would your growth rate standalone have been 2016? And is this better than that? And the answer is yes, it’s better than that. So, I think if it’s making any sense to you, Michael, I think we’re starting with the correct starting point. But I would like to add one other factor and that is in the second half of this year there will be significant accounting adjustments. A lot of accounting noise around the acquisition, as you even saw in our second quarter adjustments. So really the GAAP numbers for Integrys, the Integrys utilities for the second half of 2015 are really going to be irrelevant to the long-run earnings capability of Integrys utilities going forward. Does that help, Michael? Michael J. Lapides – Goldman Sachs & Co. It helps. Let me ask another follow-on question, and I can catch up with your IR team or Pat offline. When you think about how far you are in the process of evaluating things like synergy opportunities or other opportunities to benefit – I mean, merger has only been closed for not quite 30 days, actually right at 30 days. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Right. Michael J. Lapides – Goldman Sachs & Co. How early in the process do you think you are? And do you think there is upside to whatever it is you are assuming today in potential long run, multiyear benefits from the merger? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Very good question, Michael. Let me just say this. We are less than 30 days in. Right now we are very much on target in terms of our plan for follow-on integration. Everybody understands where they report. Everyone has budget targets for 2016. And we are in the process of working through every single functional area to determine where we go and what the shape of their organizations look like. So it’s a little early to give you much more granular detail, but let me back up. There’s nothing that we’ve seen that would indicate that our earlier thinking and information we’ve said publicly, there’s nothing to indicate that that’s off-track. I would expect that over the 10 years there will be a minimum of $1 billion of savings for Wisconsin customers alone in a combination of capital and operating costs. And that to me still stands as a good preliminary early estimate. So we’ll keep working on it, but right now I feel very good about where we are. And let me back-up to your earlier question again. Remember the $2.72 that we’re talking about as the base for 2015 is Wisconsin Energy standalone. So we’re basically taking out either a positive or negative impact of Integrys utilities for the second half of the year, to give you a clean starting point, if you will that was basically the foundation for the logic of the acquisition. Michael J. Lapides – Goldman Sachs & Co. Understood. I appreciate the help, guys. I may follow up offline. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Okay, great. Thank you, Michael. Michael J. Lapides – Goldman Sachs & Co. Thanks, Gale. Operator Your next question comes from the line of Jim von Riesemann with Mizuho Securities. Please go ahead. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Welcome, Jim. How are you? James von Riesemann – Mizuho Securities USA, Inc. I’m tired. How are you? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Tired? What, you’ve been listening to the Southern call too long? James von Riesemann – Mizuho Securities USA, Inc. Yep, that’s and I’m on an airplane back from Tokyo. Hey, I have a couple questions for you. I’m confused and I’m having a little translation issue. Can you translate how much the operating efficiencies mean on a dollar basis? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. I’m sorry, one more time? James von Riesemann – Mizuho Securities USA, Inc. I tried to avoid the S word. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Thank you. Have we translated how much the operating efficiencies mean on a dollar basis? James von Riesemann – Mizuho Securities USA, Inc. Yeah. You talk about robust operating efficiencies. What does that mean on a dollar basis? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. That means basically getting to our allowed rates of return and staying there for 2016 and beyond. James von Riesemann – Mizuho Securities USA, Inc. Okay. I get it, I get it. Second question, totally different is, with all the noise that’s going on in the State of Illinois, can you talk about the legal precedent for changing conditions once a merger has been actually, you have an order and it has been consummated? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Well, generally in all past cases, for the Illinois Commerce Commission to change its order, there generally would need to be new facts or some demonstration of an error in the facts that form the basis for the merger order. In this case, none of us see new facts or errors in fact. As a matter of fact, the Attorney General’s Office, CUB and the City of Chicago really didn’t indicate in any way, shape, or form that there were any new facts or that there were any facts in error. So again we believe the Commission’s decision was very sound, well thought through, and supported by a significant body of evidence. James von Riesemann – Mizuho Securities USA, Inc. Okay. And are you guys going to give out any 2015 consolidated guidance? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. No. Nope. I really think it’s kind of meaningless, to be honest with you. And the accounting noise around the second half of 2015 with the adjustments, et cetera, I think it would just make your head swim. To me the most important thing is: are we delivering what we said we would from the acquisition, which is growth over and above our 4% to 6% standalone growth. And what was our basis for starting? And that’s the 2015 midpoint of $2.72 a share standalone. James von Riesemann – Mizuho Securities USA, Inc. Okay. Well, then let me ask you this question. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Okay. James von Riesemann – Mizuho Securities USA, Inc. If you raise the number 6% to 8% 2016 versus standalone, what prevents you from going 6% to 8% in say, 2017 and beyond? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Well, what would prevent us from doing that? First of all we’d have to have a plan that we would be comfortable with that would produce a 6% to 8%. And at this point in time, 29 days in, this is what we feel comfortable with and what we believe we can deliver. James von Riesemann – Mizuho Securities USA, Inc. Okay. So wait for EEI is what you’re saying? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. I wouldn’t expect that you’re going to see an earnings guidance change at EEI. What you will see, though, is much more granular detail on our capital spending plans that drive the earnings growth. James von Riesemann – Mizuho Securities USA, Inc. Great, okay. Thank you. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. You are welcome Jim. Operator Your next question comes from the line of Brian Russo with Ladenburg Thalmann. Please go ahead. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Hi, Brian. Brian J. Russo – Ladenburg Thalmann & Co., Inc. (Broker) Hi, good afternoon. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Good afternoon. How are you today? Brian J. Russo – Ladenburg Thalmann & Co., Inc. (Broker) Good thanks. A lot of my questions were asked. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. I’ve gotten you from bad the last time to good. Next time you will be wonderful and award-winning. Brian J. Russo – Ladenburg Thalmann & Co., Inc. (Broker) Right, right. Just real quickly, what is the upcoming general rate case strategy and timing for the Wisconsin utility subs? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Okay. Well, for Wisconsin Electric if you recall we just completed our rate case last December, so our rates with future looking test years are set for 2015 and 2016. So under the normal course with the Wisconsin Commission really liking its utilities to file for a case every two years, under the normal course we would file for Wisconsin Electric in the spring of 2016 for rates that would go into effect January 1 of 2017. So that is Wisconsin Electric. Same thing applies for Wisconsin Gas. For Wisconsin Public Service, they are actually in the midst of a rate case right now, and we would expect a rate case decision as usual from the Wisconsin Commission by November or December of this year. Brian J. Russo – Ladenburg Thalmann & Co., Inc. (Broker) Got it. Okay. That’s all I had. Thank you. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Okay. Thank you, Brian. Operator Your next question comes from the line of Andy Bischof with Morningstar. Please go ahead. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Hello, Andy, how are you? Andrew Bischof – Morningstar Research Wonderful and award-winning. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. All right. Rock ‘n roll. You haven’t seen the lion down there, have you? Andrew Bischof – Morningstar Research No, not yet. We are in Chicago so he hasn’t come down our way yet. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Okay. Well be careful. Andrew Bischof – Morningstar Research Just a real quick maintenance question. In terms of rate case earnings benefits in the latter half of the year, should they be similar to the $24 million in the first half? Or first quarter was a little bit higher than the second quarter? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. In terms of the Wisconsin Electric rate case benefits, guys, no? Okay, Steve, we will ask you to cover that. Stephen P. Dickson – VP & Controller, WEC Energy Group, Inc. Yeah. So you are referring during the earnings package we’ve got for the quarter rate case netted to $9.5 million. And what that represents is going into the rate case last year when the rates were set effective January 1, the Wisconsin Commission assumed a certain level of SSR revenues. And what has happened is that the SSR, we reached an agreement with the State of Michigan and those stopped. But in the Wisconsin rate case we are allowed to have the incremental revenues associated with that. So if you remember last year in the SSRs, the first half of the year the SSRs were based on the suspension. And then later in the year it went to the retirement SSRs. And so the dollar amount was greater in the latter part of the year. So the short answer is you will not see this big a benefit in the last part of the year, but you’ll see a little bit of benefit. Does that make sense? Andrew Bischof – Morningstar Research Yeah, I think so. I might follow-up off-line, but that’s all I had. Thank you. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. All right. Thank you. Operator Your next question comes from the line of Paul Ridzon with KeyBanc. Please go ahead. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Greetings, Paul. Paul T. Ridzon – KeyBanc Capital Markets, Inc. Greetings, Gale. How are you? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. We are good. We’d like it a little hotter, a little more humid, but we are good. Paul T. Ridzon – KeyBanc Capital Markets, Inc. I will work on that. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. All right. Thank you. Paul T. Ridzon – KeyBanc Capital Markets, Inc. What’s the rate base at Peoples Gas? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. I’m sorry, one more time with the question? Paul T. Ridzon – KeyBanc Capital Markets, Inc. What is rate base at Peoples Gas? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Rate base at Peoples Gas? I’m looking at Pat. I think it’s $1.8 billion. J. Patrick Keyes – Chief Financial Officer, Director & Executive VP, WEC Energy Group, Inc. Yes. Paul T. Ridzon – KeyBanc Capital Markets, Inc. Okay. And about a 50-50 cap structure? J. Patrick Keyes – Chief Financial Officer, Director & Executive VP, WEC Energy Group, Inc. Yes. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Yes, that is correct. Paul T. Ridzon – KeyBanc Capital Markets, Inc. Then just to make sure I understand it, combined 2016 earnings should be 6% to 8% growth off of standalone $2.72? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. You’ve got it. Paul T. Ridzon – KeyBanc Capital Markets, Inc. Those were all my questions. Thank you very much. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. You’re more than welcome. J. Patrick Keyes – Chief Financial Officer, Director & Executive VP, WEC Energy Group, Inc. Thank you. Operator Your last question comes from the line of Paul Patterson with Glenrock Associates. Please go ahead. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Last but not least, Paul. Paul Patterson – Glenrock Associates LLC How you doing? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Good. How are you? Paul Patterson – Glenrock Associates LLC All right. You mentioned that there were going to be some substantial accounting adjustments in the second half of the year. I was just wondering if you could just give us a little bit of a preview what you are expecting to happen there? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Sure. And I will ask Steve Dickson, our controller, and Scott Lauber, our treasurer, if they have anything to add. But essentially as you know, in any acquisition – we’re not immune from this – one of the things that has to be done is purchase price adjustments. Generally you get a year to do that. But when you close this early in the year the SEC would like you to button down many of the purchase price adjustments of the time of the filing of the 10-K, which would be early, early next year. So one of the major amount of accounting work that has to be done is all the purchase price adjustment work. Then I’m certain there will be some one-time transition type costs, and there’s a whole slew of different types of costs that would be one-time costs that we would incur in the second half of this year. For example, we want to get an improvement in call center responsiveness for a number of the Integrys utilities; there will be some one-time costs to that. Pat tells me that there are software licensing costs that we will incur that would be one-time nonrecurring in the second half of this year. We could go on with a list of 30 or 40 of these things that are all transition costs that would be non-recurring. But that gives you a flavor. Steve, would you like to add anything? Stephen P. Dickson – VP & Controller, WEC Energy Group, Inc. Yeah. The only thing I’ll add, I think you nailed the transition related costs. And I’ll go back to the previous question, is we will report GAAP costs at the end of the year; but then as Pat mentioned, we’re going to strip out. We’re going to make an accounting adjustment to strip off the Integ (58:22) earnings, we’re going to strip off the acquisition debt, we’re going to strip off the additional shares associated with that to get back to the WEC standalone. Paul Patterson – Glenrock Associates LLC Okay. Just to follow-up on this, though, so it sounds like there’s going to be a lot of charges. Do we have any sense as to what the quantity of those one-timers is going to be? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Not yet. Paul Patterson – Glenrock Associates LLC Okay. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. We’ll certainly have a much better feel for that when we see you at the EEI Conference, but not yet. We are, again, 29 days into this. We know there will probably be a number of charges, and we will be working on it. Paul Patterson – Glenrock Associates LLC Okay. Then in terms of purchase accounting, sometimes that has an impact going forward, and some companies strip out those impacts depending on how they are, and sometimes they aren’t. Do you guys have any feel as to how the purchase accounting might affect growth going forward? And is there any impact associated with purchase accounting that’s in your 2016 and beyond expectations for earnings growth? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Well, first of all, I don’t think we know the answer to that completely yet. But there is one element, because we have regulated operations and more than 99% of our earnings are coming from regulated operations, but in general terms when you value regulated assets they come over onto your balance sheet at carrying value, at rate based value, if I’m making any sense to you. So that actually simplifies a great deal the purchase accounting. However, there are other things that we have to take a hard look at, like the value of some of the solar assets that Integrys has retained; like the value of a company called Trillium, which is a compressed natural gas fueling station company. So there are other assets. I think there’s a waste-to-energy plant in Texas that they had. There are several of these assets that we’re going to have to take a hard look at and give an appropriate value to. But in terms of major impact on 2016 earnings growth and beyond, Steve, I don’t see any, do you? Stephen P. Dickson – VP & Controller, WEC Energy Group, Inc. No, you nailed it. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Okay. Paul Patterson – Glenrock Associates LLC No, I would’ve thought it until you guys brought it up. And I mean, I think it probably would have been different if Integrys had kept the retail business. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. Oh, gosh, very different, very different. Remember, that was part of the announcement, that that did not fit with our model going forward. Paul Patterson – Glenrock Associates LLC Right. So just to make sure I understand, basically your earnings growth doesn’t have really any major assumptions associated with purchase accounting one way or the other in it? Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. You are correct. You are absolutely correct. Paul Patterson – Glenrock Associates LLC Thanks a lot. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. You’re welcome. Gale E. Klappa – Chairman & Chief Executive Officer, WEC Energy Group, Inc. All right. Well, ladies and gentlemen, that concludes our conference call for today. Thank you so much for participating. If you have any questions, now we have both Colleen and Beth and they are available in our Investor Relations office, 414-221-2592. Thanks everybody.