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When Is A "7% Return" Not A 7% Return? Answer: Most Of The Time

By Gregg S. Fisher Let’s say you make a $100,000 investment in stocks that compounds at 7% per year (which is not far from what US equities have historically returned), and you hold onto that portfolio for 25 years without adding or withdrawing funds. For the sake of argument, let’s assume the return is constant, never deviating from 7% every year. As the Constant 7% line in Exhibit 1 demonstrates, at the end of a quarter-century holding period, the value of that $100,000 sum would have more than quintupled to $542,700. For most investors, this would be a very satisfying outcome. Click to enlarge The catch, of course, is that the assumptions we have made above are unrealistic. Aside from certain cash equivalents, no investment will grow at exactly the same rate every year, and the riskier the asset (e.g., stocks), the greater the volatility. To simulate the real world, we ran five randomized trials (all depicted in Exhibit 1), all with an “average return” of 7% a year, but now adding the additional element of 14% per year volatility, or standard deviation, which is also close to the historical experience for a stock proxy such as the S&P 500 Index. Since 14% volatility, or risk, can manifest itself in many different patterns, that “average 7% return” can take vastly different paths with entirely different outcomes. Allow me to explain what I mean. Terminal Value of $900,000, $500,000, or $200,000? How can the ending portfolio value after 25 years vary from a little more than $200,000 to almost $900,000? It’s because volatility can be the investor’s friend or foe, depending on when , and how many , losses and gains occur. For instance, if large losses are encountered early in an investment’s lifecycle (as in Trial 1, where the ending value is just $228,000), they pull down the amount of funds available for growth in later years. This scenario reminds me, in a slightly different context, of a retiree led to believe that there’s little risk in the sustainability of a 4% portfolio withdrawal rate in retirement. If the investment portfolio suffers significant losses in his first few years of retirement, then he’s behind the eight ball if he intends to keep pulling out 4% of initial portfolio value (adjusted for inflation) each year to meet his cost of living. On the other hand, if large gains build up early on, there’s that much more money to compound and to absorb future losses. Trial 2 shows such a case, with a final portfolio value of $869,000 that significantly outperforms the 7% compound return. In the three other trials, two outcomes significantly underperformed the 7% compound return (Trials 3 and 4), and one (Trial 5), despite some wicked cycles, ended with almost identical wealth. The point is that the total amount of an investor’s gains and losses can vary widely since that 14% volatility, which can dramatically affect the compounding rate, can move returns either up or down (remember, in theory volatility can work in an investor’s favor every year, just as it can also work against you). Thus, a “7% average annual return” doesn’t mean much when it comes to measuring actual long-term investment returns. Harry Markowitz, a Nobel Prize winner who’s considered the father of modern portfolio theory, suggested a rule-of-thumb method to evaluate the relationship between average performance and compound return: compound returns equal the average return minus half of the variance, and that increasing the variance of returns without increasing the average return will hurt investment performance. How Much Risk Can You Tolerate? Let’s shift gears now and apply the implications of the math that I’ve just described to real-life investment portfolios. I have worked with investors now for nearly a quarter of a century. From that vantage point, I can say that there are some investors out there who would be comfortable with a portfolio comprised entirely of high-risk assets, hoping for that $900,000 outcome described in Trial 2. But I can also state that such intrepid investors are relatively few. For the great majority of our clients at Gerstein Fisher, fear of a dismal outcome overwhelms the hope for a spectacular one. Most would be content with a smooth ride that achieves the constant 7% result, rather than reaching for the $900,000 outcome fraught with risk. We understand and respect this mindset, which is why we make risk mitigation front and center for most of the portfolios that we manage. Probably the most important such strategy-a classic-is diversification . Since many different asset classes tend to move up and down at different times, holding a collection of them tends to smooth the ride for a portfolio (i.e., reduces volatility). That’s why for most investors it’s an advantage to own both stocks and bonds, both US and international stocks, both bargain-priced “value” stocks and high-flying “growth” stocks, as well as some alternative asset classes such as REITs (we prefer both domestic and foreign ones), and perhaps some gold and commodity futures. The market movements in 2016 are a case in point. For example, year-to-date through May 2, while both domestic and international large growth stocks were down nearly 1%, value stocks and bonds were up, and global REITs and gold jumped 8% and 21%, respectively. Of course, there’s a limit to how far you should take diversification, since if you owned every investable asset on earth, the returns would probably cancel one another out and you’d be left with zero. But few investors have to worry about excessive diversification; in our experience, most are not diversified enough . How much diversification you should strive for, and with what assets, very much depends on your individual financial goals (both long- and short-term), time horizon, and ability to live through trying investment times without being tempted to bail out of the markets. If you work with an investment advisor such as Gerstein Fisher, we can help you construct such an individually tailored, diversified portfolio, and coach you through the inevitable market cycles. Conclusion Long-term portfolios with the same average annual return can produce astonishingly different final wealth sums due to volatility and differing patterns of gains and losses along the way. A well-diversified global portfolio can help to reduce volatility levels and make for a smoother ride for investors. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Gerstein, Fisher & Associates, Inc.), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Gerstein, Fisher & Associates, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Gerstein, Fisher & Associates, Inc. is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Gerstein, Fisher & Associates, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Alliant Energy’s (LNT) CEO Pat Kampling on Q1 2016 Results – Earnings Call Transcript

Alliant Energy Corporation (NYSE: LNT ) Q1 2016 Earnings Conference Call May 5, 2016 10:00 ET Executives Susan Gille – IR Pat Kampling – Chairman, President & CEO Tom Hanson – SVP & CFO Analysts Andrew Levi – Avon Capital Brian Russo – Ladenburg Thalmann Andrew Weisel – Macquarie Research Operator Thank you for holding, ladies and gentlemen, and welcome to Alliant Energy’s First Quarter 2016 Earnings Conference Call. At this time, all lines are in a listen-only mode and today’s conference is being recorded. I would now like to turn the call over to your host, Susan Gille, Manager of Investor Relations at Alliant Energy. Susan Gille Good morning. I would like to thank all of you on the call and the webcast for joining us today. We appreciate your participation. With me here today are Pat Kampling, Chairman, President and Chief Executive Officer; Tom Hanson, Senior Vice President and CFO; and Robert Durian, Vice President, Chief Accounting Officer and Controller; as well as other members of the Senior Management Team. Following prepared remarks by Pat and Tom, we will have time to take questions from the investment community. We issued a news release last night announcing Alliant Energy’s first quarter 2016 earnings, re-affirmed 2016 earnings guidance. This release, as well as supplemental slides that will be referenced during today’s call, are available on the investor page of our website at alliantenergy.com. Before we begin, I need to remind you the remarks we make on this call and our answers to your questions include forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters discussed in Alliant Energy’s press release issued last night and in our filings with the Securities and Exchange Commission. We disclaim any obligation to update these forward-looking statements. In addition, this presentation contains non-GAAP financial measures. The reconciliation between non-GAAP and GAAP measures are provided in the earnings release, which are available on our website at alliantenergy.com. At this point I’ll turn the call over to Pat. Pat Kampling Thank you, Su. Good morning and thank you for joining us on the first quarter 2016 earnings call. I will begin with an overview of our first quarter performance. I will now review the progress made and transforming our generation fleet creating a smarter energy infrastructure and expanding our natural gas system. I will then turn the call over to Tom to provide details on our first quarter results as well review our regulatory calendar. Like the utilities in the region mild with the temperatures reduced first quarter results, ours by $0.05 per share. This is quite the opposite from first quarter 2015 where we experienced a positive temperature impact to earnings therefore temperature swings led to a significant quarter-over-quarter variance of $0.09 per share. During the past few years we have been executing on our plan for the orderly transition of our generating fleet and economic manner to serve our customers. We made progress in building a generation portfolio that has lower emissions, greater fuel diversity, is more cost efficient. The transition includes increasing levels of natural gas fired and renewable energy generation, lower levels of coal generation through coal unit retirements and installing emission controls on performance upgrades on largest coal fired facilities. We have also started water and ash program at our facilities to meet current and expected future environmental requirements. Now let me brief you on our construction activities. 2016 is another very active construction year with 4 investments of over $1.1 billion. Our investments are projected to include approximately $300 million for our elective distribution systems. These investments are driven by customer expectations to make our systems more robust, reliable and resilient. This year’s plan also includes $200 million for improvements in expansion of our natural gas distribution business almost double our year spending. The electric and gas distribution business will continue to be a focus for future investments as we create a smarter energy infrastructure. Now I will provide an over view of our drilling, investments and gas power generation. As you are aware the Public Sewage Commission of Wisconsin approved the certificate of public convenience and necessity for the river side expansion. And we expect to receive the written order today. We have already received the air permits and are awaiting approval for the water permits. We expect the asset from the new river side units to be approximately 700 MW and the total anticipated capital expenditure for river side remains at approximately $700 million excluding AFUDC and transmission. The targeted in service state is by early 2020. Later this month we plan to announce the engineering procurement and construction firms selected for this project. In Iowa the Marshalltown natural gas fired generating facility is progressing well and is now approximately 73% complete. Total CapEx is anticipated to be approximately $700 million excluding AFUDC and transmission. Marshalltown is on time and on budget and is expected to go in service in spring 2017. Riverside and Emery are two primary existing gas generating facilities, had another quarter of significant increase in dispatch when compared to prior years. During the first quarter of 2016 Riverside’s and Emery’s were more than double their five year averages. The ability to lean on our gas generation during periods of low gas prices results in fuel savings of our customers and shows the importance of a balanced energy mix. Moving on to our existing coal field, we are getting towards the end of our successful construction program to reduce emissions at our largest facility. At Edgewater Unified, we continue on the installation of backhouse. This project is approximately 97% complete and is on time and below budget and should be in service later this year. Total CapEx for these projects are anticipated to be $270 million. And last month construction of the Columbia Unit II SCR began. EPL’s total CapEx anticipated to be approximately $50 million and is expected to go in service in 2018. There are several new order and ash regulations being developed by the environmental protection agency which we anticipate will impact 9 of our generating facilities both located across Iowa and Wisconsin. Our water and ash program was designed according to EPA and DNR rules and regulations. We have ash plant closers and bottom ash conversions underway in Iowa as IPLs filed commission plan and budget. In Wisconsin we filed an application for the certificate of authority for bottom ash conversion for Edgewater. The total expenditures for our water and ash programs are anticipated to be over $200 million over the next 7 years. The estimates provided in our investor release presentation include the near term expenditures for this program. As we plan for future generation needs we aim to minimize impacts while providing safe, reliable and affordable energy for our customers. We believe that our current emissions will continue to decrease due to the transition of our generating fleet, the availability of lower natural gas prices and increase of renewable energy. We have continued to invest in and purchase renewable energy. We currently own 568MW of wind generation and purchased approximately 470MW of energy from renewable sources. Our 10 year capital plan includes additional investments to meet customer energy needs. Also we have several solar projects from which we anticipate gathering valuable experience on our best to integrate solar in a cost effective manner into our electric system. At our headquarters over 1300 solar panels have been installed and they are now generating power for the building. Construction has also started on Wisconsin largest solar farm on our Rock River landfill which is adjacent to riverside. In Iowa construction has started on the Indian Creek Nature Center in Cedar Rapids. We will own and operate the solar panels there. We also anticipate collecting additional solar investment opportunities in the near future. Listen to our customers and understand their evolving needs is shaping the path for the future. We have replaced our decade old customer information and billing system which is now providing customers of now many more online self service offerings and robust customer communication options. And we have plans to ramp up additional offerings with this new platform. We are managed our company well and have made great strides growing for our company on behalf of our investors, customers and employees. In fact, our stock price doubled between yearend 2010 and into the first quarter of this year. As recognition of this progress and the growth prospects going forward the Board of Director’s announced a two form stock split last month. Each share on record on the close of business on May 4 will receive one additional share for every outstanding common share held on that date. The additional shares will be distributed on May 19 and May 20 shares will be sold at the post-split price. This is a significant milestone that our company and investors should be proud of. Let me summarize today, we will work to deliver 2016 operating objectives. Our plan continues to provide for 5% to 7% earnings growth and a 60% to 70% common dividend payout target. Our target 2016 dividend increased by 7% over the 2015 dividend. Successful execution of our major construction projects include completing projects on time and at a below budget in a very safe manner, working with the regulators and customers and utilities in a collaborative manner, reshaping the organization to be leaner and faster while keeping our focus on our customers and being good partners in the community. We will continue to manage the company to strike a balance between capital investments, operational and financial discipline and impacts to customers. You are invited to join us at our annual meeting next week which will be held on May 13 in Wisconsin. Thank you for your interest in Alliant Energy and I will now turn the call over to Tom. Tom Hanson Good morning everyone, we released first quarter 2016 earnings last evening with our earnings from continuing operations of $0.86 per share which was $0.01 per share lower than 2015 earnings. a summary of the quarter over quarter earning’s drivers may be found on Slide 3. Consistent with our growth assumed in our 2016 earning’s guidance retail electric and temperature normalized sales for Iowa, Wisconsin increased to approximately 1% between first quarter 2015 and 2016. The commercial and industrial sectors continued to be the largest hales growth drivers quarter-over-quarter. Now let’s briefly review our 2016 guidance. In November we issued our consolidated 2016 earnings guidance range of $3.60 – $3.90 on a pre-stock split basis. The key drivers for the 5% growth in earnings led to infrastructure investments such as the Edgewater and the Lansing emission control equipment. And hire AFUDC related to the Marshalltown generating station. The earing’s guidance is based upon the impacts of IPLs and WPLs previously announced retail based rate settlement. In 2016 IPL expects to credit customer builds by approximately $10 million. By comparison the building credits in 2015 were $24 million. IPL expects to provide tax driver billing credits to electric and gas customers of approximately $62 million compared to $72 million in 2015. Over the years the tax benefit riders may have a timing impact but are not anticipated to impact full year results. The WPL settlement reflected electric growth for the Edgewater house projected to be place in service this year. The increase in requirements in 2016 for this and other base additions completely offset by lower energy efficiency recovery amortization. Slide 4 has been provided to assist you in modeling the assisted tax rates in IPL and WPL and AEC. Turning to our forecasted capital expenditures. In March, the pipeline and hazardous materials safety administration announced proposed regulations to update the safer requirements for gas pipeline. We currently anticipate final regulations will be issued in 2017. The forecasted capital expenditures provided during our year-end call include estimated amounts for this expected regulations. Now turning to our financing plans. Our current forecast incorporates the extension bonus depreciation deduction through 2019. As a result of the 5 year bonus depreciation Alliant Energy does not expect to make any significant federal income tax payments through 2021. This forecast is based on current federal net operating losses and credit carry forward positions as well as future mounted bonus depreciation expected to be taken under federal income tax returns over the next 5 years. Cash flows from operations are expected to be strong. Given their earnings generated by business. We believe that with strong cash flows and financing plan we will maintain our target liquidity and capitalization ratios as well as high quality credit rating. 2016 financing plans will soon be issued in approximately $25 million of our new common equity through our share to direct plan. The 2016 financing plan also anticipates issuing the long term debt of up to $300 million of IPL and approximately $400 million of parent Alliant Energy resources. We added $10 million to the proceeds at the energy resources are expected to be used to refinance the maturity of term loans. As we look beyond 2016 our equity needs will be driven by riverside expansion project, our forecast assumes that Capital expenditures for 2017 would be financed primarily by a combination of debt and new common equity. Our 2017 financing plan currently assumes issuing up to $150 million of common activity. We may adjust our financing plans as deemed prudent if market conditions warrant and our debt needs continue to be reassessed. We have several current and planned regulatory redactors of note of 2016 and 2017 which we have summarized in Slide 5. During the second quarter this year we anticipate filing a WPL retail electric and gas case for the 2017 and 2018 rates. For IPL we expect decision regarding permit application for approximately $60 million in natural gas pipeline. Iowa and retail electric and gas based cases are expected to be filed in the first half of 2017. We very much appreciate the continued support of your company. At this time I will turn the call back over to the operator to facilitate the question-and-answer session. Question-and-Answer Session Operator Thank you, Mr. Hanson. At this time the company will open the call for question for members of the investment community. Alliant Energy’s management team will take as many questions as they can within the one hour timeframe for this morning’s call. [Operator Instructions] We will go first to Andrew Levi at Avon Capital. Andrew Levi Hi, first question. Susan Gille Good morning Andy, congratulations. Andrew Levi Thank you. What do I get for anything or? Pat Thompson Nothing. Andrew Levi Just a quick question. Just on the non-reg, where was the breakdown on the earnings on the non-reg on the quarter? Pat Thompson Yes, the railroad and train facility. Tom Hanson I think the transportation $0.01 and our non-reg generation was another $0.01. Franklin County was a drag of about $0.01 and then we had activity of about another penny. Last time it was a positive in terms of the other benefits of the parent. Andrew Levi Okay and how did the Franklin, the non-reg generation and the railroad, how did that compare to last year? Tom Hanson I would say it’s fairly consistent. Andrew Levi Okay and then just in general on Franklin and the railroads. What’s kind of the thinking of the outlook this year relative to last year? Tom Hanson I think with Franklin last November when we gave guidance we said it would probably be a drag on earnings of about $0.04 to $0.05. And that is still reasonable, yes. Andrew Levi And on the railroad? Tom Hanson And assume $0.07 was our current outlook, current forecast we are assuming the same expectations for 2016. Andrew Levi $0.07 to the railroad. Is that what the railroad earned in 2015 or was it higher or lower? Tom Hanson No it was $0.07 last year as well. Andrew Levi Got it, that’s all I needed. Thank you very much. Operator We move next to Brian Russo with Ladenburg Thalmann. Brian Russo Hi, good morning. You reaffirmed your 5% to 7%, does that run through a particular year or through a particular planning periods? Maybe you could just talk about that just a little bit. Pat Thompson Yes, Brian we actually based it on last year’s weather normalized sales and it goes on for 5 years so till 2019. Brian Russo Okay and what was last year’s weather normalized sales? Pat Thompson $3.57 Brian Russo Okay. And just remind us the Riverside settlement and options from communities to grow up and energy, just remind us of the timing of that? Susan Gille Yes, Brian we updated our Investor Deck so if you got to Slide 9 on the Deck, basically the Wisconsin public service has the option for up to 200 MW in the 2024 timeframe. MG&E has up to 50 MW from the 2020 to 2025 timeframe and the co-op have up to 60 MW and they will determine that in the quarter this year. Brian Russo And how is that priced? Susan Gille Current book value at the time. Brian Russo Okay. Thank you. Operator Moving next to Andrew Weisel with Macquarie Capital. Andrew Weisel Good morning, appreciate the commentary on potential equity meets for next year. Just want to understand is that sort of a run rate we should assume for all years in 2017 and beyond or is it sort of a onetime thing? Obviously there’s other variables that could make the need go up and down but should we think of that as the number for the next several years or 2017 and there could be more 2018? Tom Hanson Assume that as the initial estimate for 2017 and in terms of the outer years. It’s going to be somewhat depended on the some of the parties just made reference to, in terms of the Riverside expansion so if and when MG&E might step into Riverside so for now assume up to $150 million applies to only till 2017. Andrew Weisel Okay. Great and the other one there was some change to the effective tax rate forecast in the Slide Deck, I believe and want to confirm. That’s earning as neutral and that offsets right to revenue line or is that something that could effectively shake out within the guidance range? Tom Hanson There will be some movement with the income statements. What has changed is principally an IPL which will have a less low through benefit. But that could not be impacting earnings. That will be offset someplace else. Andrew Weisel Okay. That cancelled the effect of tax rate so both IPL and corporation, I should think of it as neutral? Tom Hanson No, think of it as lien adjustment tax and something else will be offsetting it so the earnings guidance will remain consistent with previous estimates. Andrew Weisel Okay. So the $0.09 benefit in the full year guidance is still a good number to think about? Tom Hanson A little bit high but it is not going to be significantly high and will be offset by something else so far, guidance for 2016 is unchanged. Pat Thompson We know how carefully you guys track the tax rate so we want to provide the update this quarter. Andrew Weisel Yes, appreciate it was just trying to understand the potential impact of the bottom line. Thank you. Pat Thompson And Tom counts every penny also. Operator Ms. Gille, there are no further questions at this time. Susan Gille With no more questions, this concludes our call. A replay will be available through May 12, 2016 at 888-203-1112 for U.S. & Canada or 719-457-0820 for international. Callers should reference conference ID 8244179. In addition an archive of the conference call and the prepared remarks made on the call will be available on the Investor sections of the company’s website later today. we thank you for your continued support of Alliant Energy and feel free to contact me with any follow-up questions. Operator And that concludes today’s presentation. Thank you for your participation. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. 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WEC Energy Group (WEC) Allen L. Leverett on Q1 2016 Results – Earnings Call Transcript

WEC Energy Group, Inc. (NYSE: WEC ) Q1 2016 Earnings Call May 03, 2016 2:00 pm ET Executives Allen L. Leverett – President and Chief Executive Officer Scott J. Lauber – Executive Vice President and Chief Financial Officer Analysts Greg Gordon – Evercore Group LLC Steve Fleishman – Wolfe Research LLC Jonathan Philip Arnold – Deutsche Bank Securities, Inc. Michael Lapides – Goldman Sachs & Co. Paul Patterson – Glenrock Associates LLC Julien Dumoulin-Smith – UBS Securities LLC James von Riesemann – Mizuho Securities USA, Inc. Vedula Murti – CDP Capital US, Inc. Operator Good afternoon, and welcome to WEC Energy Group’s Conference Call for First Quarter 2016 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 remind you that 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 statements, factors described in WEC Energy Group’s latest Form 10-K and subsequent reports filed with the Securities and Exchange Commission 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 Allen Leverett, President and Chief Executive Officer of WEC Energy Group. Allen L. Leverett – President and Chief Executive Officer Thank you, Charlene. Good afternoon, everyone, and thank you for joining us today as we review our results for the first quarter of the year. But before I do that, I want to introduce the members of our team who are here with me today. I’m pleased to welcome Scott Lauber as our new Chief Financial Officer. Many of you know Scott from his previous role as our Treasurer, but before that he had a number of other roles in our accounting and finance organization. Now Scott is taking over from Pat Keyes. Pat is now responsible for our operations in Michigan and Minnesota, as well as supply chain, information technology and strategy for WEC Energy Group as a whole. I also welcome Jim Schubilske as our new Treasurer. Like Scott, Jim has held numerous positions in our accounting and finance organization and he was most recently responsible for our State Regulatory area. Susan Martin, our General Counsel; Bill Guc, our Controller; and Beth Straka, who is Senior Vice President, leads our Corporate Communications and Investor Relations Groups are also here with me. So with that, let me now turn to our first quarter 2016 results. WEC Energy Group was formed in conjunction with the closing of our acquisition of Integrys in June of last year. Until now, we have focused our discussion on Legacy Wisconsin Energy standalone results. Starting today, our focus shifts to the entire company’s results. We reported first quarter earnings of $1.09 a share that compares with adjusted earnings of $0.90 a share in the first quarter of 2015. Scott will be reviewing the most significant drivers for the quarter with you in a moment. Now taking a look at the state of the economy for our largest segment, Wisconsin’s unemployment rate stands at 4.5%, which is well below the national average. The state’s labor force participation rate also rose to 68.7%, which is more than 5 points above the national rate. Also worthy of note, Wisconsin led the nation in adding manufacturing jobs in March. Electricity used by our large commercial and industrial customers moderated a bit. Our electric utility’s large customers, excluding the iron ore mines consumed approximately 0.8% less electricity in the first quarter compared to 2015. However, we continue to see improvement in several important sectors of the state’s economy including plastics, food processing and paper production. In addition, we are continuing to see customer growth across our system. At the end of March, our Wisconsin utilities were serving approximately 8,000 more electric customers, and nearly 11,000 more natural gas customers compared to a year ago. Our natural gas utilities in Illinois, Michigan and Minnesota added nearly 16,000 customers in the past year. This increase includes the acquisition of approximately 10,000 natural gas customers in Minnesota from Alliant Energy in April of 2015. We are achieving the results we expected from the Integrys acquisition. Our focus on cost controls and the tangible benefits from the acquisition have allowed us to freeze base rates for customers of We Energies and Wisconsin Public Service through 2017. Subject to Public Service Commission of Wisconsin action, which is not expected, we will not file 2017 test year base rate cases this year for our Wisconsin utilities. As we have discussed on previous calls, our long-term goal is to grow earnings per share at a compound annual growth rate of 5% to 7% of a base of $2.72 per share in 2015. Here of course to delivering this growth is executing our capital investment plan and addressing the impact of bonus tax depreciation. I want to give you a brief update on where we stand with our capital plan. Last December, Congress passed a tax bill that extends and modifies bonus depreciation for property placed in service from 2015 to 2019. At this point, we estimate that we will receive approximately $1 billion in cash tax benefits from the bonus depreciation extension, about two-thirds of this benefit will occur this year and in 2017. Although, we do not expect bonus depreciation to have any significant impact on earnings in 2016, we are taking steps to modify our capital plan to minimize any impacts in 2017 and following years. We have advanced a number of beneficial projects into 2016 and 2017. The estimated investment associated with these projects is $500 million, which includes the $100 million that we previously identified in the February call. As a result, we now forecast our 2016 and 2017 capital budgets at $1.55 billion and $1.9 billion respectively. I expect that we will continue to identify projects that can be advanced into our current five-year forecast. We plan to provide a complete update to our five-year capital forecast no later than the November EEI Financial Conference. Turning now to our operations in Illinois, we’re moving forward on the Accelerated Main Replacement Program or AMRP at Peoples Gas, one of the largest natural gas infrastructure projects in the country. The program calls for replacement of approximately 2,000 miles of Chicago’s aging natural gas infrastructure. Over the past nine months, we’ve improved management and execution of the project, which is approximately 18% complete. We filed a plan with the Illinois Commerce Commission or ICC late last year that describes our top priorities for the next three years. The plan’s key components include removal and replacement of more than 250 miles of aging cast-iron pipes in the neighborhoods most at risk, projected investment of $250 million to $280 million a year, and regular updates to the ICC and other stakeholders to keep them informed of our progress. While the engineering, fieldwork, and cost recovery of AMRP continued, the ICC held six workshops to assess our plan. These recently concluded workshops brought together key stakeholders to review the planned scope, schedule and long-term cost with a focus on safety and reliability. We expect that the ICC staff will issue its report late in May and that the ICC will reach its conclusions by the end of the year. However, in the interim, the AMRP work will continue. Next, a brief reminder on our dividend. On January 21, our board declared a quarterly cash dividend of $0.495 a share, an increase of 8.2% over the previous quarterly dividend. Our annual dividend rate stands at $1.98 a share and our yield is now at approximately the industry average. We continue to target a payout ratio of 65% to 70% of earnings, and we expect our dividend growth to be in line with our earnings per share growth. Before I ask Scott to review the details of our first quarter earnings, I want to cover one last item. I met with quite a number of investors and analysts, and including many of you over the last few months after our management transition was announced. Quite often I’ve been asked, Allen what will be different when you are a CEO. Now it’s really easier for me to tell all of you what will be the same. Our company will continue to focus on the fundamentals, safety, customer satisfaction, reliability and financial discipline. I believe this focus has served us well since I joined the company in 2003, and will continue to do so. So, now for more details on our first quarter results, here’s our Chief Financial Officer, Scott Lauber. Scott J. Lauber – Executive Vice President and Chief Financial Officer Thank you, Allen. Our 2016 first quarter GAAP earnings were $1.09 a share compared with $0.86 a share in the first quarter of 2015. First quarter results in 2016 included the positive impact of the Integrys acquisition. Excluding $0.04 of acquisition cost in 2015, our adjusted earnings per share increased by $0.19 a share from $0.90 in the first quarter of 2015 to $1.09 a share in the first quarter of 2016. The earnings packet placed on our website this morning includes the results of the Integrys companies and has a full GAAP to adjusted reconciliation. First, I’ll focus on operating income by segment and then discuss other income, interest expense and income taxes. Our consolidated operating income for the first quarter was $589.3 million as compared to an adjusted $367.6 million in 2015, an increase of $221.7 million. Starting with Wisconsin, operating income in the first quarter totaled $327.5 million for 2016, an increase of $50 million from the adjusted first quarter of 2015. On the favorable side, we realized $76.9 million contribution from Wisconsin Public Service. This was offset by lower operating income from Wisconsin Electric and Wisconsin Gas related to the mild winter temperatures. We estimate that electric and gas margins of these two utilities decreased by $29 million because of the warmer weather. In the first quarter of 2016, our Illinois segment added $137 million of operating income and our other state segment added $31.8 million of operating income. We did not have operations in these segments until our acquisition of Integrys. Operating income in the We Power segment was up $800,000 when compared to 2015. This increase reflects additional investments at our Power the Future plants. Our Corporate and other segment showed an operating loss of $300,000 this quarter as compared to an adjusted operating loss of $2.4 million in the first quarter of 2015. Taking the changes for these segments together, we arrive at the $221.7 million increase in operating income on an adjusted basis. During the first quarter of 2016, earnings from our investment in American Transmission Company totaled $38.5 million, an increase of $22.4 million from the same period last year. This increase is directly related to the increase on our ownership interest from about 26% to just over 60% as a result of the acquisition of Integrys. Our other net increased $29.7 million, largely due to repurchase of $155 million of Integrys’ 6.11% Junior Subordinated Notes at a discount in February 2016, as well as higher AFUDC due to the inclusion of the AFUDC from the Integrys companies. Our net interest expense increased $41.5 million, driven by $34.8 million of interest expense from Integrys companies in 2016. In addition, we incurred about $8 million of interest expense related to the $1.5 billion of debt issued in June 2015 to complete the Integrys acquisition. Earnings from the Integrys company drove an increase in our consolidated income tax expense of $90.2 million. There were no significant changes in our effective income tax rate. We expect our annual effective tax rate for 2016 to be between 37.5% and 38.5%. Combining all of these items brings us to $346.2 million of net income for the first quarter of 2016 or earnings of $1.09 per share. Net cash provided by operating activities increased $365.9 million in the first quarter of 2016. This increase was driven by $307.8 million of net cash flow from operating activities of Integrys during the first quarter of 2016. The remaining difference was driven by a decrease in contributions to employee benefit plans partially offset by changes in working capital. You may recall that we contributed a $100 million to our qualified pension trust in 2015, and we did not make a contribution in 2016. Our capital expenditures totaled $312 million in the first quarter, a $158.8 million increase compared to 2015. The largest increase was related to the Integrys companies. Our adjusted debt to capital ratio was 50.4% at the end of March. Our calculation treats half of the hybrid securities as common equity, which is consistent with past presentations. We’re using cash to satisfy any shares required for our 401(k) plans, options and other programs. Going forward, we do not expect to issue any additional shares. We also paid $156.2 million in common dividends in the first quarter of 2016, an increase of $60.9 billion over the first quarter last year. This is driven by the increase in shares with the Integrys acquisition, and a 17.2% increase in the dividend rate compared to the first quarter in 2015. For comparative purposes, the electric sales information I’ll discuss next reflects for both Wisconsin Electric and Wisconsin Public Service in the first quarter. Weather-normalized sales are adjusted for the effects of weather and factoring out the effect of leap year. On a weather-normalized basis, retail sales of electricity, excluding the iron ore mines, were down slightly by 0.2% compared to the first quarter of 2015. Actual first quarter deliveries fell by 1.6%. Now looking at the individual customer segments. Weather-normalized residential deliveries dropped 0.3% while actual residential deliveries fell 4.2%. Across our small and commercial industrial group, weather-normalized quarterly deliveries increased 1.5%, actual deliveries decreased 0.2%. In the large commercial and industrial segment, deliveries for the first quarter of 2016 decreased 0.9%. Excluding the iron ore mines, large commercial and industrial deliveries decreased 0.8%. Now an update on our natural gas deliveries. As you recall, our Illinois segment has a decoupling mechanism and our margins are less affected by weather. Looking at Wisconsin, our largest segment, first quarter weather-normalized retail gas deliveries, excluding gas used for power generation, decreased 1% compared to the same period in 2015. Actual gas deliveries, again excluding gas for power generation, were down 10.7% compared to gas sales in last year’s first quarter due to warmer weather. On a weather-normalized basis, our overall results for gas and electric sales in the first quarter were slightly below our expectations. Turning now to our earnings forecasts. We are reaffirming our 2016 earnings guidance of $2.88 a share to $2.94 a share, which represents 6% to 8% growth. This projection assumes normal weather and excludes any potential remaining acquisition-related cost. We are off to a strong start, but still have nine months of weather ahead of us. Again, we are reaffirming our 2016 earnings guidance of $2.88 a share to $2.94 a share. Finally, let’s look at the outlook for quarterly earnings for the remainder of the year. If we take a step back, we see new a quarterly pattern to earnings per share. The Integrys acquisition brings a larger gas component to the combined company. This means we expect to see relatively higher earnings per share in the first and fourth quarter due to gas heating margins and relatively lower earnings per share in the second and third quarter when compared to past years. This brings us to our second quarter earnings per share guidance. Taking into account this new quarterly earnings pattern and April being a little cooler than last year, we expect our second quarter 2016 earnings per share to be in the range of $0.51 to $0.55. That assumes normal weather for the rest of the quarter and excludes any remaining acquisition-related cost. Again, the second quarter earnings guidance is $0.51 to $0.55 per share. With that, I will turn things back to Allen. Allen L. Leverett – President and Chief Executive Officer Thank you, Scott. I think, overall, we’re solidly on track and focused on delivering value for our customers and our stockholders. Question-and-Answer Session Operator Your first question comes from the line of Greg Gordon with Evercore ISI. Please go ahead. Allen L. Leverett – President and Chief Executive Officer Hello, Greg. Greg Gordon – Evercore Group LLC Hey, guys. Congratulations, Allen. Allen L. Leverett – President and Chief Executive Officer Thank you, Greg. Greg Gordon – Evercore Group LLC So thanks for the update on the CapEx. I’m looking at slide 14 from your April business update. Allen L. Leverett – President and Chief Executive Officer Yes. Greg Gordon – Evercore Group LLC And so you’ve taken your CapEx for 2016 to $1.55 billion versus $1.499 billion and you’ve taken your 2017 CapEx to $1.9 billion from $1.553 billion. Can you just review again what capital projects you’ve brought forward and if we should assume that that capital comes out of the 2018 to 2020 budget? Or are you also reevaluating customer beneficial projects that you could put in, move forward such that those would stay relatively level? Allen L. Leverett – President and Chief Executive Officer Okay. Greg, so, if I could, let me answer your second question, and then Scott, I’m going to ask you maybe to give Greg a little bit of color about the types of projects that we’re advancing. So, Greg, on your second question, you should not assume that the increases that we’re making in the 2016 and 2017 spending would result in a corresponding decrease in the later years, because we’re also revaluating those later years. So, Scott, if you could, maybe just give Greg a little more background about some of the things that we’re advancing. Scott J. Lauber – Executive Vice President and Chief Financial Officer Sure. Just to give you a few examples, over these last couple of months, we looked across the enterprise. And for example, we are looking and we are going to implement a neat – updating our ERP system, the general ledger, consolidations, so that part of the general ledger and that could be up to $100 million. Another example is, we looked at Wisconsin, the gas and electric distribution system, and we’re increasing that about $150 million on value-added customer projects. And then, another area when we look at, in Illinois, we have a large gas storage facility, underground storage in Illinois, and we’re going to spend about $35 million over the next couple of years, looking at safety reliability within that storage field. So, basically across the enterprise found some good projects to bring up and move forward into this period. Greg Gordon – Evercore Group LLC Great. And because of the impact of bonus depreciation, that doesn’t really have a net – it’s a net-neutral impact on what the customer would otherwise see in terms of bill impacts, correct? Allen L. Leverett – President and Chief Executive Officer That’s correct. Greg Gordon – Evercore Group LLC The capital costs? Allen L. Leverett – President and Chief Executive Officer That’s correct. Greg Gordon – Evercore Group LLC Fantastic. And can you give us what a comparable pro forma theoretical quarterly earnings number would have been last year in the second quarter had you owned Integrys, so we could compare the $0.51 to $0.55 to that? Scott J. Lauber – Executive Vice President and Chief Financial Officer We looked at this at a very, very high level trying to take out all the acquisition adjustments and adjusting really just for the shares outstanding. It was about $0.53 – $0.52, $0.53. Greg Gordon – Evercore Group LLC Okay. So it’s going to be a little bit difficult for us as we roll through the year to get our minds around the new base of earnings. But would it be fair to say that as you stand today, if you were to assume normal weather and you were spot on your load growth forecast for the year that you are at the high end, low end, above, below your current guidance range for the year? Allen L. Leverett – President and Chief Executive Officer Well, I would say at this point, I mean, if you take it sort of – if you look at what happened with the hybrids in the first quarter, that was in our annual plan. It was just uncertain as to when in the year it would occur. So that certainly would not represent a pickup versus the financial plan. I think another significant driver, Scott, was related to fuel recoveries in Wisconsin where we had positive fuel recoveries in the first quarter. But our assumption for the year, Greg, would be that we would just be fully recovered. So I think given those two things, I would say that we’re sort of more at the middle of our range. And as I look at it, we’re sort of neutral against our financial plan. If you adjust for the items in the first quarter that I either expect would reverse in the case of the fuel recoveries or I had already included in the annual plan, it was just an uncertainty about the timing. Greg Gordon – Evercore Group LLC Fantastic. Thank you, gentlemen. Operator Your next question comes from the line of Steve Fleishman with Wolfe Research. Please go ahead. Allen L. Leverett – President and Chief Executive Officer Good afternoon, Steve. Steve Fleishman – Wolfe Research LLC Hey, Allen. Congrats again. So just on the rate case delay, can you give us a sense of whether kind of staff is supportive of that, if other parties have had a view, and when will we know when the commission is kind of okay with it? Allen L. Leverett – President and Chief Executive Officer Well, I think it in terms of the Public Service Commission of Wisconsin staff, they’re okay with it, and they’ve indicated that to us in writing that they’re in agreement with it. So, at this point, Steve, the commission itself, they don’t have to take any action at all for there not to be a rate case. So, my expectation at this point, as I was saying in the prepared remarks, my expectation would be, we wouldn’t file a case for base rates in 2017 – for 2017. However, I would expect, Steve, that in August, we would do a fuel filing for 2017 rates, and say more likely than not we might see a slight reduction in the fuel rate, but we’ll have to look at our numbers when we file in August. Steve Fleishman – Wolfe Research LLC Okay. I thought you said in your prepared remarks not file 2017 subject to PSC approval. Allen L. Leverett – President and Chief Executive Officer No. I didn’t say subject to approval. I said subject to any PSC action. And so, just to be clear, they don’t have to take any affirmative action here. So, if they do nothing, which would be my expectation, they wouldn’t take an action, we wouldn’t have a rate case. Steve Fleishman – Wolfe Research LLC Okay. And I assume what you are doing is utilizing merger synergies to help mitigate what would have been the rate needs. Allen L. Leverett – President and Chief Executive Officer Right. So, when we went through the process with the merger approval, we talked about the ability to get what we felt would be reasonably significant cost savings and we’re seeing those materialize. And so that allows us to freeze base rates, which we think is a benefit to customers. Steve Fleishman – Wolfe Research LLC Okay. Great. Thank you. Operator Your next question comes from the line of Jonathan Arnold with Deutsche Bank. Please go ahead. Allen L. Leverett – President and Chief Executive Officer Hi, Jonathan. Jonathan Philip Arnold – Deutsche Bank Securities, Inc. Good afternoon, guys. Could I just ask you to give us a little bit of a bridge between the $130-odd-million that Integrys booked in the first quarter of last year and the $160-odd-million that you have this quarter? Just what were the moving pieces? Allen L. Leverett – President and Chief Executive Officer So, Scott, I think I’ll let you, maybe based on the earnings package just give Jonathan a little bit of background. But I will say this, Jonathan, if you look across the Integrys companies, I think we really have these companies on track to all earn their allowed rates of return. So that’s part of the difference that you saw as compared to the first quarter of 2015. Scott J. Lauber – Executive Vice President and Chief Financial Officer Yeah. Allen L. Leverett – President and Chief Executive Officer Scott, do you want to fill in a little bit on that? Scott J. Lauber – Executive Vice President and Chief Financial Officer So, also when we look at it, we had a full-year rate case at PGL. So, at our Illinois utility, there was a rate case that was effective I think in February of last year. So, we had a full rate earnings in there. We also had a rate case at Wisconsin Public Service, so that was also an increase. And remember, there’s two pieces to the Wisconsin Public Service there was an overall it looked flat, but one of that was a fuel, but there was a base rate increase, so that came through. Once again, Allen talked about the fuel – the positive recovery in fuel and some of that was in the Wisconsin Public Service area too compared to prior year. We also had rate cases that were implemented at our smaller gas utilities in Michigan and Minnesota, both of those had rate increases this last year. So, basically getting the rate increases in, getting the cost control in, and getting on a path to get to the full return at all the utilities. Jonathan Philip Arnold – Deutsche Bank Securities, Inc. Okay. Great, thank you. And then just on – I think that when you gave the second quarter guidance, I think I heard you right, you said that April had been a little cooler than normal in the context of the new gas year business mix. So is that a help or a hurt versus normal? Scott J. Lauber – Executive Vice President and Chief Financial Officer That’s a great question. April is a transition month and so, in April, we’re not really getting a lot of gas sales. It does help the gas a little bit. But on the electric side, April is a month when you get that commercial industrial buildings that actually uses some air conditioning. So, having a mile month here, we really don’t – we see that little more of a down on our earnings more from the electric side not picking in yet than the gas side picking up the offset. Jonathan Philip Arnold – Deutsche Bank Securities, Inc. I mean, you called it out, but I’m guessing it’s not that significant given it’s April. Scott J. Lauber – Executive Vice President and Chief Financial Officer Yeah. No, it’s $2 million to $3 million, maybe. Jonathan Philip Arnold – Deutsche Bank Securities, Inc. Okay. Great. Thank you. Scott J. Lauber – Executive Vice President and Chief Financial Officer Thank you, Jon. Operator Your next question comes from the line of Michael Lapides with Goldman Sachs. Please go ahead. Allen L. Leverett – President and Chief Executive Officer Hi, Michael. Michael Lapides – Goldman Sachs & Co. Hey, guys. Hey, Allen. Couple of things. First of all, on a cents-per-share basis, the increase in other income related to the early pay-down at a discount of some of the Integrys debt, that’s worth, what, roughly $0.05 to $0.06 in EPS? Allen L. Leverett – President and Chief Executive Officer Well, let me maybe talk about it in two pieces, Michael. Of course, we bought the securities I think at approximately 83% of par, so that resulted in a $0.04 per share impact in the first quarter. And they were repurchased, say, mid February, so there was a tiny bit of interest savings, Michael, in the first quarter, but very little, probably less than a tenth of a cent, but if you look forward to the rest of the year, we would expect to see another $0.01 per share benefit because of the – of the reduction in interest expense. So about $0.04 in the first quarter from the being below par, and then $0.01 in the remainder of the year for interest. And Scott, anything to add to that? Scott J. Lauber – Executive Vice President and Chief Financial Officer No, that’s it. That’s right on. Michael Lapides – Goldman Sachs & Co. Got it. And can you talk about if you were to look at just the Integrys O&M in first quarter of 2015, and WEC – Legacy WEC O&M in that same period, and then combined, what was the O&M decline rate or O&M savings that you’ve realized so far year-to-date in 2016? And what do you – what’s embedded in guidance? Scott J. Lauber – Executive Vice President and Chief Financial Officer So, as we look at that in the O&M, and remember when you look at the O&M line, there’s a lot more than just the O&M that’s in the – what I would say, into the operations, there is O&M as it relates to regulatory amortizations, O&M that’s related to the different riders. So, overall when we look at the O&M, we did have the savings that we had forecasted in with our – with the acquisition. When you look at – break back the different pieces, I would say on Wisconsin Electric, the O&M was up just a tad as it relates to a couple of storms we had in the area, and we accelerate a little bit of our forestry program because of the mild temperatures. We haven’t specifically said what our O&M guidance is in the acquisition savings but overall when you look at it, it’s probably O&M when you factored all the different stuff about 2% to 3% less than if you look at the combined adding up the simple O&M from the prior companies… Michael Lapides – Goldman Sachs & Co. Got it. And do you think you are in the early innings of realizing O&M savings or do you think you’re at a pretty good run rate, meaning, do you still think, you have significant opportunity to takeout significantly more cost around the consolidated system from here? Allen L. Leverett – President and Chief Executive Officer Well, I guess, you used the baseball analogy. So, I’d say we are probably in the third inning, and I think there is a fair amount of additional work that we can do. Michael Lapides – Goldman Sachs & Co. Got it. Thank you Allen, much appreciate it. Operator Your next question comes from the line of Paul Patterson with Glenrock Associates. Please go ahead. Allen L. Leverett – President and Chief Executive Officer Hi, Paul. Paul Patterson – Glenrock Associates LLC Hi. How you doing? Allen L. Leverett – President and Chief Executive Officer I’m good. How are you? Paul Patterson – Glenrock Associates LLC All right. Just on the rate freeze letter that came out last week, what – how was that triggered? I mean, was that just basically – was this related to the merger or what sort of triggered the – I guess, it seemed like maybe the staff, it wasn’t clear to me the letter, what actually was causing the review by the staff? Allen L. Leverett – President and Chief Executive Officer Well, typically the cycle in Wisconsin every two years, of course you do a case for the next – for the next year, and then known and significant (33:24) for the year after that. So this was our year typically to bring the companies in, and we’ve had – we had discussions with the staff. And we said look, we believe because of the benefits we’re seeing from the merger that we’re just going to freeze rates. And if we have increased cost in other areas, we’re going to offset that with the benefits of the merge and we’re just going to freeze base rates. So the – basically the avenue for the discussions was this very regular cycle to file rate cases. And so, we work through that avenue and talk with the staff and it’s something that they were agreeable. And it’s kind of interesting, Paul, as a part of when we’re doing the merger proceedings, many people talked about as a proposal doing a rate freeze. So, now we’re actually seeing the base rate freeze for 2017 in Wisconsin. Paul Patterson – Glenrock Associates LLC Okay. Great. And then there was, as I recall, some sort of accounting treatment that was part of it. Could you elaborate a little bit more this? Allen L. Leverett – President and Chief Executive Officer Sure, and let me sort of start and then I’ll let Scott or Jim fill in any detail. So I think what you’re referring to Paul is, at Wisconsin Public Service related to the ReACT project, and when Wisconsin Public Service went through their last rate case, so this was the rate case that was decided late last – late 2015 or 2016 rates. So they included in rates I believe at a $275 million level, the cost of the ReACT project. And so, we expect that the final cost of that project will be in a range of $335 million to $345 million. So, essentially what they would allow us to do with this accounting order is to differ in effect the impacts of the return off and on for that additional investment above $275 million. So, Scott.. Paul Patterson – Glenrock Associates LLC Okay. Scott J. Lauber – Executive Vice President and Chief Financial Officer Yeah. That’s correct. There’s – I think as a total, there is three of them. The ReACT is the main one. The other two were some deferrals that specifically in the order they ended in December of 2016 and we said well, if we’re going to be out for a year we just need the same accounting treatment in 2016 and in 2017, just to extend them into 2017. Paul Patterson – Glenrock Associates LLC Okay, great. And then, just finally – I’m sorry you were talking kind of quickly on the weather-adjusted sales. Did that include leap year? That wasn’t clear to me. Or I mean, was it adjusted for leap year or…? Scott J. Lauber – Executive Vice President and Chief Financial Officer Yeah… Paul Patterson – Glenrock Associates LLC Was leap year sort of left in there? Scott J. Lauber – Executive Vice President and Chief Financial Officer Yeah. We factored out leap year. Paul Patterson – Glenrock Associates LLC Okay. Scott J. Lauber – Executive Vice President and Chief Financial Officer So we adjusted as if – we adjusted it down as if leap year did not happen. Allen L. Leverett – President and Chief Executive Officer So February 29 was out. Scott J. Lauber – Executive Vice President and Chief Financial Officer It’s factored out. Correct. Paul Patterson – Glenrock Associates LLC Okay. And that was minus 0.2% for retail sales in general, right? Scott J. Lauber – Executive Vice President and Chief Financial Officer Correct. Paul Patterson – Glenrock Associates LLC Okay. Excellent. Thanks so much. Operator Your next question comes from the line of Julien Dumoulin-Smith with UBS. Please go ahead. Allen L. Leverett – President and Chief Executive Officer Hi, Julien. Julien Dumoulin-Smith – UBS Securities LLC Hey. Good afternoon. Allen L. Leverett – President and Chief Executive Officer How are you? Julien Dumoulin-Smith – UBS Securities LLC Good. Thank you very much. I wanted to follow up a little bit on some of the first questions on the CapEx, perhaps just to kick it off. Can you elaborate a little bit on the next leg of the evaluation you kind of described by the EEI timeframe this fall you’ll have the next round. What are the next layers of evaluation that you’re looking at? Is there any kind of sense as to what genre of projects or at least magnitude of capital you could potentially be looking at in maybe these baseball analogies? How deep in terms of innings are you in terms of finding those acceleration opportunities? Allen L. Leverett – President and Chief Executive Officer Right. Well, you know as I mentioned earlier, about two-thirds of the impact is the bonus depreciation. So about two-thirds of the $1 billion is in 2016 and 2017. So, other than the second order effects associated with getting bonus depreciation on this additional property, I guess, we’ve identified $500 million of roughly $670 million. So I guess that’s pretty late innings in terms of identifying offsets in 2016 and 2017. So I would say that Julien that the majority of our focus as we work through the rest of the year, up to when we have the November Finance Conference, the majority of our focus is going to be in the later years. And, Scott, I don’t know if there is any other detail. Scott J. Lauber – Executive Vice President and Chief Financial Officer Yeah. So, exactly the majority will be in the later years. We also are working on making sure we have all the resources and efficiently for 2017 spending, get everything lined up to put due to spending in. So, we will be working on those later years this summer. Allen L. Leverett – President and Chief Executive Officer Yeah. And I think one thing Julien that maybe to give you a sense for how broadly we are looking, let’s just take, for example, and this is not included in any of 2016 or 2017 numbers that we talked about, but one of the things we talked about a lot, although in Illinois and in Michigan, our gas utilities there actually own some gas storage, in Wisconsin, our gas utilities to my knowledge have never owned gas storage. They’ve always leased it. And, we think that it would make more sense to have a mix of owned storage as well as the leased storage. So I think that would be a nice opportunity – investment opportunity for the company. But we think it would also be beneficial for customers. So, we’re trying to think broadly about what those capital opportunities might be, Julien. I hope that helps. Julien Dumoulin-Smith – UBS Securities LLC Absolutely. And does that also add into the decision to push out the rate case timing, recovery of the accelerated spend in 2016 and 2017 with the slightly delayed rate case. Is that kind of aligned with the thinking as well? Allen L. Leverett – President and Chief Executive Officer Well, it certainly contributes, but I think far and away the reason why we can freeze rates is because of the cost savings that we’re seeing from the combination of the companies. But, you’re right, I mean the accelerated depreciation impact acts as a bit of an uplift if you will also. Julien Dumoulin-Smith – UBS Securities LLC Right. Great. And actually just turning back to what you just alluded to there, how much in terms of lease expense or just if you can give us a sense of how much of that PPA needs potentially acquired via any Wisconsin Gas storage opportunities? I know it’s early days there, but I figured I’d ask. Allen L. Leverett – President and Chief Executive Officer Julien, in all candor, it’s just a little early for me to throw those numbers out. Julien Dumoulin-Smith – UBS Securities LLC No worries at all. We can leave it there. Allen L. Leverett – President and Chief Executive Officer Yeah. As we know more, I mean, that’s certainly something we can chat about either on the call or a future call or at EEI. Julien Dumoulin-Smith – UBS Securities LLC Great. Thank you very much. Operator Your next question comes from the line of Jim von Riesemann with Mizuho. Please go ahead. Allen L. Leverett – President and Chief Executive Officer Hi, Jim. James von Riesemann – Mizuho Securities USA, Inc. Hey, Allen. How are you? Allen L. Leverett – President and Chief Executive Officer I am good. How about you? James von Riesemann – Mizuho Securities USA, Inc. Pretty good. Switching topics, could we just talk about the transmission opportunities out there, specifically as it relates to Alaska? Are there any updates that we need to be aware of? Allen L. Leverett – President and Chief Executive Officer No, Jim. There really aren’t any updates at this point beyond what we talked about on our call, I guess, back in February. So nothing new there in terms of updates. Scott, anything you have to add on that? Scott J. Lauber – Executive Vice President and Chief Financial Officer No. Allen L. Leverett – President and Chief Executive Officer I’m not aware of anything. Scott J. Lauber – Executive Vice President and Chief Financial Officer No. Nothing. James von Riesemann – Mizuho Securities USA, Inc. I guess, the question is, is transmission opportunities in the state of Alaska a function of the price of oil and the Alaska fiscal health? Allen L. Leverett – President and Chief Executive Officer Well, in terms of the briefing that I received from Mike Rowe who is the CEO out at ATC, what he has told me is, basically if you look at the local economy, integrating the operations of the utilities is a benefit regardless of what the price of oil is, regardless of how low or how high. There is a benefit of integrating those utilities because they’re certainly not integrated at all at the level that you would see in the continental United States. So there are big benefits with that regardless of the price of oil. And sort of, I guess, ironically, the low oil prices actually mean that the companies in Alaska might actually look a little more to ATC to provide the capital for the transmission projects. So I would say, worst case, the oil prices are sort of a neutral and although it sounds a little strange, the lower prices might actually mean that marginally ATC might be called on to make a bit more of the investment that’s required. James von Riesemann – Mizuho Securities USA, Inc. Okay. I appreciate the help. Thank you. Allen L. Leverett – President and Chief Executive Officer Thanks, Jim. Operator And your last question comes from the line of Vedula Murti with CDP. Please go ahead. Allen L. Leverett – President and Chief Executive Officer Hi, Vedula. Vedula Murti – CDP Capital US, Inc. Hey, Allen. How are you? Congratulations, and nice to hear from you. Allen L. Leverett – President and Chief Executive Officer Yeah. No, I haven’t talked to you in a long time. Glad you’re doing well. Vedula Murti – CDP Capital US, Inc. Anyways, you touched on these things kind of around the edges, but when you came in 2003 and your mission was fairly clear. You had Power the Future that had been improved, but it simply was a matter of execution and getting that done and the non-regulated businesses that you had to cleanup. So the focus was fairly clear and that gave you – that was basically a runway of about eight years from, say, 2003 until 2010, 2011, whatever. So I’m wondering today – it’s like we’re sitting here in 2016. You have the merger done and you have the big pipeline replacement program in Illinois and everything like that. I’m wondering just if you can kind of give a sense of how much runway you think you have here. And just, even if it’s not necessarily as large or as dramatic as what was sitting in front of you in 2003, can you just put it in context the way you’re thinking about it going forward over the next few years? Allen L. Leverett – President and Chief Executive Officer Right. Well, I think as you look at — of course, Power the Future, I guess, you could think of it, if you just looked at the new generation that was being built. I mean, that was sort of, as it turned out, a roughly seven to eight-year program. So, as you say, that’s in the past. As we look at sort of what’s coming up, we’ve got some programs like the AMRP program in Illinois, which we’re probably looking at decades long. I mean, you’re looking at programs that are ongoing for 20 to 25 years at least. So we’ve got some programs that we think will be around a lot longer, even longer than Power the Future. We’ve got others that were kind of shorter in nature, and we talk some about the ERP project in Wisconsin. But I would say overall, Vedula, I mean, I think we easily have a runway of 10 or more years of capital investment that we think will benefit customers, in the case of Chicago, like a huge upgrade in safety. So I would say it’s at least 10 years. But now it’s really multiple programs in multiple states as opposed to being a single program and one and only in one state. I hope that helps. Vedula Murti – CDP Capital US, Inc. Yeah. No, just to clear also I think you’ve also touched on this in terms of you talked a lot about load growth and just conservation, efficiencies, and everything like that. When you look back to 2003 or whatever, I mean, we were still seeing fairly strong growth in terms of usage and everything like that. Going forward, that’s not necessarily going to be the case. But I’m just – in terms of supporting kind of the ability to continue to grow whatever in terms of your earnings or whatever, I’m just wondering whether the things you referenced should be enough, even without any real net load growth. And also the one other thing I wanted to ask you is, in the past, you used to talk about having a couple hundred million dollars of free cash flow, net of CapEx and dividends. Can you just kind of refresh us in terms of where that kind of stands going forward as well? Allen L. Leverett – President and Chief Executive Officer Yeah. And maybe, Scott, why don’t you cover the cash flow question? But I would say, Vedula, I mean, clearly the situation with volume growth, be it electric or natural gas, it’s going to be a bit of a headwind, which is why I think having the merger is beneficial to us, because we can generate some more cost savings to help deal with those headwinds. But Scott, why don’t you give Vedula some background on the cash. Scott J. Lauber – Executive Vice President and Chief Financial Officer Yeah. In looking at our cash and remember we said in our prepared remarks and just lately, we said in our prepared remarks, we are not issuing any equity. Part of the acquisition reasons were to invest in good utility projects. So we are investing in utility projects that are very needed for the infrastructure. When you look at 2016 and 2017, we are not cash flow positive, but we also look at our consolidated debt to capital ratio and our consolidated holding company debt. And the holding company debt as a percent of total debt is about 28%, consistent with our projections, and we see that continuing to be there. So we are not cash flow positive, but we are not issuing any equity, and that’s for the 2016 and 2017 timeframe, and we’ll look at our projections as we go forward as we look at our capital plans in the future. Vedula Murti – CDP Capital US, Inc. Thank you very much. Allen L. Leverett – President and Chief Executive Officer Thanks, Vedula. Allen L. Leverett – President and Chief Executive Officer All right. Well, that concludes our conference call today. Thank you for participating. If you have any more questions, please contact Beth Straka or Colleen Henderson in our Investor Relations office. Operator Thank you. That concludes today’s conference call. You may now disconnect. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. 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