San Diego Nov 4, 2015 (Thomson StreetEvents) -- Edited Transcript of Sempra Energy earnings conference call or presentation Tuesday, November 3, 2015 at 6:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Rick Vaccari Sempra Energy - VP of IR * Debbie Reed Sempra Energy - Chairman & CEO * Joe Householder Sempra Energy - CFO * Mark Snell Sempra Energy - President * Jeff Martin San Diego Gas & Electric Company - CEO * Trevor Mihalik Sempra Energy - CAO ================================================================================ Conference Call Participants ================================================================================ * Neel Mitra Tudor, Pickering, Holt & Co. Securities - Analyst * Julien Dumoulin-Smith UBS - Analyst * Stephen Byrd Morgan Stanley - Analyst * Greg Gordon Evercore ISI - Analyst * Chris Turnure JPMorgan - Analyst * Steve Fleishman Wolfe Research - Analyst * Faisel Khan Citigroup - Analyst * Michael Lapides Goldman Sachs - Analyst * Mark Barnett Morningstar - Analyst * Michael Goldenberg Luminus Management - Analyst * Verdula Murti CDP Capital - Analyst * Paul Patterson Glenrock Associates - Analyst * Ashar Khan Visium Asset Management - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Welcome to the Sempra Energy's third-quarter earnings results conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Rick Vaccari. Please, go ahead. -------------------------------------------------------------------------------- Rick Vaccari, Sempra Energy - VP of IR [2] -------------------------------------------------------------------------------- Welcome to Sempra Energy's third-quarter 2015 financial presentation. A webcast of this teleconference and slide presentation is available on our website under the Investor section. Here in San Diego are several members of our management team: Debbie Reed, Chairman and Chief Executive Officer; Mark Snell, President; Joe Householder, Chief Financial Officer; Martha Wyrsch, General Counsel; Trevor Mihalik, Chief Accounting Officer; Dennis Arriola, Chief Executive Officer of Southern California Gas; and Jeff Martin, Chief Executive Officer of San Diego Gas & Electric. Before starting, I would like to remind everyone that we will be discussing forward-looking statements on this call within the meaning of the Private Securities Litigation Reform Act. Actual results may differ materially from those discussed today. The factors that could cause our actual results to differ materially are discussed in the Company's most recent 10-K and 10-Q. It's important to note that all of the earnings per share amounts in our presentation are shown on a diluted basis and that we will be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call and to Table A in our third-quarter 2015 earnings press release for a reconciliation to GAAP measures. I would also like to note that the forward-looking statements contained in this presentation speak only as of today, November 3. The Company does not assume any obligation to update or revise any of these forward-looking statements in the future. Please turn to slide 4 and I will hand the call over to Debbie. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [3] -------------------------------------------------------------------------------- Thanks, Rick. During the third quarter, our solid operating and financial performance across the Company continued. With strong year-to-date results, we are now raising our 2015 adjusted earnings guidance range to $4.95 per share to $5.15 per share. In addition, we continue to execute on our five-year base plan and are on track to meet or exceed our approximate 11% adjusted base plan EPS CAGR for 2015 to 2019. Since providing those projections at our March analyst conference, we have announced more than $2 billion of investment opportunities that are incremental to our base plan. We have also filed for Commission approval of our GRC settlement agreement for SDG&E and SoCalGas. I am very pleased with our progress this year. I'm optimistic as we move into 2016. Let's begin with an operational update. Then Joe will provide more detail on our financial results. Please turn to slide 5. With regard to our base plan, I would like to first revisit the visibility of our 11% adjusted EPS CAGR. On this slide, we provide key base plan assumptions. I will mention just a few points. First, the almost $20 billion of investments included in our five-year base plan reflect projects that were essentially approved, contracted or under construction as of March 2015. For earnings associated with these projects, we have risk mitigation strategies in place that limit our exposure to changes in interest rates, foreign currency rates or commodity prices. We provide additional information in the appendix to this presentation. Second, our base plan projections do not include impacts from the proposed GRC settlement, the $2 billion of new projects or acquisitions announced since March 2015 or any earnings from our three potential LNG development projects. Third, we do not need to issue Sempra equity nor any potential MLP equity in order to finance the base plans. In light of the planned IEnova equity offering we discussed last quarter, we do not need to issue Sempra equity to finance the PEMEX acquisition or any of the announced renewable projects that are incremental to our base plan. Further, we did not include any earnings impacts from a potential MLP in our base plan. Altogether, our five-year plan was built on conservative assumptions. We are on track to meet or exceed our base plan earnings projections. Now, let's go to slide 6 for an update on our growth and development opportunities. Beginning with the California utilities, we filed a multi-party GRC settlement agreement for both SDG&E and SoCalGas in September. The settlement agreement is subject to CPUC approval. Under the agreement, SDG&E and SoCalGas would be allowed revenues sufficient to operate their businesses safely and reliable and to provide excellent customer service. For 2016 through 2018, the agreement provides annual revenue increases for operations of approximately 3.5%. When including costs subject to balancing accounts, this equates to a total revenue requirement increase in 2016 of $17 million for SDG&E and $122 million for SoCalGas. Both utilities have also reached a second settlement agreement with the Office of Rate Payer Advocates for a four-year GRC term. The four-year term agreement is contingent on approval of our 2016 to 2018 GRC settlement and on the Commission approving a four-year term for all California utilities. If approved, the annual revenue increase in 2019 for SDG&E and SoCalGas would be 4.3%. Recall that our base plan projections assume utility revenues grow annually at the current 2.75% rate of attrition throughout the five-year plan period. Moving to Mexico. In July, we announced that IEnova agreed to purchase PEMEX's 50% equity interest in their shared joint venture for approximately $1.3 billion. The acquisition is expected to be about $0.05 accretive to Sempra's EPS in 2016, growing to about $0.10 per share by 2019. We currently expect the Mexican Competition Commission to rule on the transaction this month and for the equity offering to occur before year end. In Mexico, IEnova also submitted a bid for the latest CFE pipeline auction, with awards scheduled for this week. Together with five other pipeline projects in Mexico that are currently being tendered, the total near-term investment opportunity exceeds $6 billion. I also want to mention that the Ministry of Energy has published the long-term plan for development of the national electric system. The plan outlines significant needs for new generation in electric transmission. We expect the initial transmission projects to be bid during the first half of 2016 under new rules of energy reform. IEnova plans to participate in these new markets. We provide more detail in the appendix to this presentation. Lastly, I would like to take a moment to comment on the status of Sempra Partners. In June, we announced that our Board authorized us to pursue the formation of an MLP. The primary reason to form an MLP is to create a source of competitively priced capital to support Sempra's growth. As you are aware, current MLP market conditions are not ideal. We will not go forward at this time. We are watching market conditions and will reevaluate our position in the middle of next year. In order to preserve this optionality about whether to pursue an MLP, we did submit a confidential S-1 with the SEC. As I stated earlier, we do not require equity from MLP markets in order to finance our base plan. We have flexibility in how we move forward. If we proceed, we will be convinced that the size and sustainability of the long-term value proposition for the Sempra shareholder is intact. Now please turn to slide 7. With regard to investment opportunities post-2019 that are beyond our base plan period, we continue to make good progress. For Cameron expansion, we filed our FERC application in September and expect to receive FERC approval mid-2016. We received EPC pricing for Train 4 with per train costs that are lower than Trains 1 through 3. We believe Train 4 could be one of the lowest cost LNG development projects worldwide and competitive in the marketplace. Now that we have firm EPC pricing, we can conduct focused discussions with customers. We continue to target announcing customer agreements prior to the end of the first quarter of next year. For our Port Arthur project, we have received our DOE FTA authorization and are continuing our project assessment. We are targeting the first half of next year to execute a joint development agreement with Woodside. For our ECA Liquefaction project, we continue to work on regulatory and other project development issues with PEMEX. We view both the Port Arthur and ECA Liquefaction projects as potentially providing LNG post-2020. With that, let's turn to slide 8 for a discussion of the quarterly earnings. Joe? -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [4] -------------------------------------------------------------------------------- Thanks, Debbie. Earlier this morning, we reported third-quarter earnings of $248 million or $0.99 per share. On an adjusted basis, we reported third-quarter earnings of $250 million or $1 per share. Third-quarter earnings in 2014 were $348 million or $1.39 per share. Adjusted earnings this quarter exclude expenses related to the development of our three proposed LNG Liquefaction projects. Similar to last quarter, we only recorded $2 million of after-tax expense. This number reflects the fact that a substantial portion of the costs are either being capitalized or shared with our Cameron joint venture partners and PEMEX. Earnings this quarter include reduced tax expense associated with repatriation. As I mentioned on last quarter's call, we intend to participate in the planned IEnova equity offering and now expect to use about two years worth of dividends from Mexico that we had originally planned to repatriate. As a result, we expect an approximate $0.10 per share benefit in both 2015 and 2016 from lower than expected tax expense. Our current plan is to resume repatriation from Mexico in 2017 and 2018. I also want to reiterate that third-quarter earnings continue to reflect the impact of seasonality in SoCalGas' revenues. This impact resulted in $113 million of lower earnings this quarter and $48 million of lower earnings year-to-date. Applying seasonality will have no impact on full-year earnings. We will see a $48 million after-tax benefit in the fourth quarter due to seasonality. You can refer to the appendix for additional detail, where we illustrate 2014 SoCalGas earnings at seasonality in revenues been applied. Excluding the impact of seasonality in SoCalGas revenues, Sempra's third-quarter adjusted earnings increased by $15 million compared to the same period last year. Looking forward, we are now raising our 2015 adjusted earnings guidance range to $4.95 per share to $5.15 per share. With regard to 2016 earnings and dividends, we anticipate updating our guidance in February on our fourth-quarter call. Our new five-year EPS and dividend projections will be updated at our 2016 analyst conference. I will note two additional matters. As a result of IEnova's anticipated purchase of PEMEX's interest in their shared joint venture, we expect to record a non-cash gain in the fourth quarter from the step up of our own investment to fair value. This gain is not included in our 2015 adjusted earnings guidance. Finally, as Debbie mentioned earlier, our GRC settlement agreement excludes an issue proposed in the proceeding regarding certain intra-rate case income tax benefits relating to repair allowances. The proposal, recommended by one of the interveners, would require reducing rate base by $93 million for SDG&E and $92 million for SoCalGas. In addition, the proposal seeks to reduce pretax revenue requirements related to the 2015 year benefits in the amount of $46 million for SoCalGas and $34 million for SDG&E through the third quarter of 2015. Our current expectation is that the CPUC will rule in our favor and do so on the same timeline as our GRC proceedings. That is because the proposed treatment would violate and contradict longstanding rate making and income tax policy. It would also represent a material departure from historical Commission practice. Please turn to slide 9. Individual financial results for each of our businesses can be found in the section of our presentation entitled, Business Unit Earnings. Key drivers for our consolidated earnings this quarter include: $20 million of higher net operating earnings in Sempra International, including foreign exchange impacts; $14 million of higher earnings at SDG&E from higher CPUC based margin net of expenses and higher electric transmission earnings; and $14 million of lower tax expense at the parent related to reduced repatriation of dividends from Mexico. Offsetting factors include, the $113 million seasonality impact that lowered SoCalGas' third-quarter earnings and two earnings items that occurred in the third quarter of 2014: one, the $25 million tax benefit for Sempra Natural Gas from the release of estate tax valuation allowance; and secondly, the $14 million gain on the sale of a 50% equity interest in the first phase of ESJ in Mexico. Now, let me conclude with slide 10. Overall, our financial and operating results for the third quarter continued to be strong. They positioned us to raise our 2015 adjusted earnings guidance range. Increased operating earnings at both the California utilities and Sempra International underpinned our solid year-to-date results. Across the Company, we continue to capture development opportunities that are incremental to our base plan and look forward to providing you new projections early next year. With that, we will conclude our prepared remarks and stop to take any questions you may have. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Neel Mitra, Tudor Pickering. -------------------------------------------------------------------------------- Neel Mitra, Tudor, Pickering, Holt & Co. Securities - Analyst [2] -------------------------------------------------------------------------------- First question was on the pipeline award expected this week. There's been some articles with some bids submitted or published and it looks like you guys are a close second. Are those apples-to-apples comparisons? Does that reflect how the ultimate auction will come out? Or is the CFE still ruling on it? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [3] -------------------------------------------------------------------------------- Well, first let me say that they just changed the date when we will be notified on the bid to November 10, which is next Tuesday. If you've looked at any of these bids before, the capital costs are not really reflective of who wins the bid. It's one component of the total bid. The real bid decision is based upon the tariff amount that you are agreeing to provide over the 20 or 25 years of the contract in all of these pipeline bids. That's what will be analyzed and looked at next week and announced. Capital is a component. Your return is a component. What your gas costs for operating the facilities is a component. What you think in terms of additional capacity sales that you might get off of the pipeline, those all factor into the creation of a tariff rate. That's what they will be announcing next week. So we feel good that we're in a close second, only $4 million behind the low capital. But there's a lot of other factors that will come into the final decision. -------------------------------------------------------------------------------- Neel Mitra, Tudor, Pickering, Holt & Co. Securities - Analyst [4] -------------------------------------------------------------------------------- Okay, great. Second question on Cameron Train 4. Has the timeline been pushed out as far as negotiating customer contracts or MOU's? Because I think previously you guys mentioned end of the year and I think in your prepared remarks, you said you'd have something maybe by Q1 2016. Can you just remind us of the timeline going forward? The market conditions for additional LNG? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [5] -------------------------------------------------------------------------------- Sure. I'll start and then I'll have maybe Mark add some additional color to it. But I've been saying in meetings with investors for some time that we were looking at the end of the first quarter of next year. That was because we really could not even begin negotiating MOU's until we had the EPC contract. We just got that this month. So now, we have the information that we can get a firm price. We're very pleased that knowing that and getting a firm price, we think Cameron will be one of the, if not the, lowest cost facility in the United States for LNG export. So that allows us to really negotiate a firm MOU. We followed the same process when we did Trains 1 through 3. We really needed to know what the cost was going to be in order to have a firm MOU negotiated. Mark, do you want to add anything? -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [6] -------------------------------------------------------------------------------- Yes. I would just say that we've been having substantive discussions with a lot of potential customers. Now we've been able to sort of give them some hard data to work with. We do expect to show some results. They won't all come at once, so we expect to have some towards the end of the year and in the first part of next year. But our firm decision to move forward on this would be late in the first quarter. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [7] -------------------------------------------------------------------------------- You might also comment, Mark, on what we see in the contracting area there. Because I know that there's been a lot of articles and all. What we've seen is that there are still a lot of parties out there contracting. -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [8] -------------------------------------------------------------------------------- Yes. I think there's always -- there's speculation in the press and rightfully so, picking up that LNG is over supplied up through 2018. But when you start looking at the needs beyond that, when you get into 2020 and 2021, there's definitely a need for additional capacity. We're seeing that. Just to remind the audience, just in 2015 alone, we had 27 contracts signed and 17 of those were 20-year contracts, 4 were 10-year and the rest were shorter term contracts. But so there's plenty of activity going on. We're certainly seeing that. We remain very confident that we will move forward on Train 4. -------------------------------------------------------------------------------- Neel Mitra, Tudor, Pickering, Holt & Co. Securities - Analyst [9] -------------------------------------------------------------------------------- Mark, just to quickly follow-up on the comment that off takers will need LNG in 2021. How late can they wait before they sign contracts in order to procure that supply? Do they have another year? Or is it necessary to make that decision in 2016? -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [10] -------------------------------------------------------------------------------- I think they've really got to start making those decisions in 2016, especially for new projects. Because otherwise, they just won't be online in time. We have probably -- as far as a new train goes, Train 4 can probably come on line as probably as quickly or quicker than any other train in the market. But that's starting anew. You've got to really kind of make that decision in 2016. -------------------------------------------------------------------------------- Neel Mitra, Tudor, Pickering, Holt & Co. Securities - Analyst [11] -------------------------------------------------------------------------------- Got it. Thank you very much. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [12] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS. -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS - Analyst [14] -------------------------------------------------------------------------------- So perhaps firstly on Mexico. Can you elaborate a little bit on opportunities down there? I suppose, principally focusing on non-oil and gas? Obviously, there's transmission. There's talk of electric capacity market like procurements, et cetera. What are you guys ranging to do down there at present? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [15] -------------------------------------------------------------------------------- Yes, I mean, that's the great thing about Mexico -- I think it's one of our wonderful growth platforms where we see layers of opportunities for our Company there. Certainly, there's more bids coming out on pipelines. We'll see $6 billion worth of pipeline bids occur over the next several months. We will be actively involved in that. Following that, they are finalizing the market rules for electric transmission. In our slides, we showed you some of the projects that would be up for competition probably within the first half of next year. We're very interested in participating in that market. Further, now, some of the oil properties are beginning to be taken over and produced. We see some great opportunities to do liquids pipelines, that will have takeaway capacity from some of those PEMEX properties that are now being developed and also potentially gathering and processing in those areas. Then the generation market will be opening. We have -- as you know, the ESJ land property that we could add about another 1,000 megawatts or more to that area to do wind production. So we see some great opportunities there. We also see some opportunities to really get some greater value out of our TDM plant. So I think that -- I would also add, I should say, that looking at our existing assets and the great pipeline backbone that we have, we can also add capacity with industrial customers to that. We're working on that right now. So we just see a great worth of opportunities -- wealth of opportunities in Mexico and are very excited about it. -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS - Analyst [16] -------------------------------------------------------------------------------- Perhaps, just a quick follow-up there. TDM obviously you've been looking for contracts for awhile. Is there an opportunity to recontract that back into Mexico now, because of the opening up of this market? Is this sort of quote, finally going to happen? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [17] -------------------------------------------------------------------------------- Yes. Those are the things that we're working on right now. We think that those rules are getting put in place that would allow us to do it. Mark, do you want to? -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [18] -------------------------------------------------------------------------------- Yes. I was just going to say that the procurement for electricity along the Baja border haven't been let out yet. So the CFE is working on that. But we fully expect that there will be opportunities to contract that plant into Mexico. We'll have to weigh that against the opportunities on the US side. -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS - Analyst [19] -------------------------------------------------------------------------------- Great. Then lastly, a bigger picture if you would. In terms of the US, obviously, we just talked about Mexico and the range of opportunities. But you all have been pretty active both on gas pipelines and renewables in the US. As you think about CPP, California's own 50% RPS, is there anything bigger picture we should pay attention to, any observation? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [20] -------------------------------------------------------------------------------- Well, I would think -- there's two sides of opportunity that we certainly see there. As you know, we do the renewable development. We have the potential to add additional solar projects that can sell into the California market. As you know since our analyst conference, we already got two additional solar projects sold into the California market. That was before the 50% was adopted. So we see great opportunities to expand our existing solar facilities. Then in terms of our utilities, that the integration of 50% renewables is going to require both gas & electric investment. The reason it requires gas investment is the type of generation that's going to be needed to support renewables in the area is different. The location of that may be different. So we're looking at major investments to our gas system to support the future. The North/South pipeline, which we have before the Commission right now, would not only reinforce the system for reliability, but also help provide for that 50% renewable future. Then of course, on our utility side, we're going to have to make investments that would allow us to integrate all of the additional renewables then. So, I think, there are some investments that are not part of our current plan right now. North/South pipeline is not part of our base plan nor are our additional solar projects, nor are any of the distributed energy resource planning. None of that is part of our base 11% growth plan. So we see that as all potential upside. -------------------------------------------------------------------------------- Julien Dumoulin-Smith, UBS - Analyst [21] -------------------------------------------------------------------------------- Great, thank you. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- Stephen Byrd, Morgan Stanley. -------------------------------------------------------------------------------- Stephen Byrd, Morgan Stanley - Analyst [23] -------------------------------------------------------------------------------- I just wanted to talk about dividends from Mexico. It makes perfect sense to use that cash to further invest in the business. As you look out longer term, do you think it's likely you're going to want to think about try to eat more of that cash within Mexico, rather than bringing it back in the US? It sounds like it's efficient in some ways to do that. I'm just wondering whether you think this is more of a near term phenomenon? Or something that we could see you extending out, given the excellent growth opportunities in the country? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [24] -------------------------------------------------------------------------------- Yes. I'll start and then I'm going to turn it over to Joe. I think when we were looking at doing the dividending, it was because we had the net operating losses that we could benefit from. But when we looked at the PEMEX deal, it made a lot more sense for us to keep the cash in Mexico for that major project. So I think to the degree that we continue to have major projects in Mexico, that would drive some of our decisions there. But why don't you talk about our plans, Joe? -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [25] -------------------------------------------------------------------------------- Sure. Thanks, Debbie. Hi, Stephen. It's a great question. I'll just go back -- I'll remind you all that we essentially built all the equity in Mexico from our profits from international operations over the last decade or more and basically doubled the value of that as we took IEnova public. So its been a really good investment for Sempra. We will continue to want to invest in it. We do have public shareholders now, so we will pay a good dividend from IEnova. Sempra will receive some of that cash. We don't need to bring it all the way to the US. Our current repatriation plan has us doing that through 2018, but as we just said, we're going to hold off on that for two years, so we can use that money effectively in this offering. I expect IEnova to keep growing. I would expect us to want to continue to participate in offerings as we go along, so that we don't dilute our ownership so much. So I think what you're suggesting is probably the way it will play out over time. That's been a really good thing for us. -------------------------------------------------------------------------------- Stephen Byrd, Morgan Stanley - Analyst [26] -------------------------------------------------------------------------------- That makes sense, great. Thank you. Just on your DRP, overall shifting gears. Any feedback or reaction that you've had to the different elements? It sounds like obviously the grid overall needs to change, which you mentioned just a minute ago. But just curious, if -- any color on the kind of feedback that you've received so far? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [27] -------------------------------------------------------------------------------- I'm sorry. I wasn't quite sure -- you were talking about? -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [28] -------------------------------------------------------------------------------- Distributed resource plan. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [29] -------------------------------------------------------------------------------- Oh, the distributed resource plan. Okay. -------------------------------------------------------------------------------- Jeff Martin, San Diego Gas & Electric Company - CEO [30] -------------------------------------------------------------------------------- I'll try it. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [31] -------------------------------------------------------------------------------- I'm going to have Jeff talk about that. Jeff, do you want to -- -------------------------------------------------------------------------------- Jeff Martin, San Diego Gas & Electric Company - CEO [32] -------------------------------------------------------------------------------- Sure. Good morning, Stephen. You'll recall that the focus of that program is really intended to make sure that all the investor-owned utilities are making investments, which are necessary to make sure that distributed resources like solar and other resources continue to penetrate the system. Then when you compare that to some of the other things we talked about like 350 -- SB-350, that's designed to make sure there's a lot more central station renewables. So as you have more participation on the central clean energy side and on the distributed side, it really sets up a pretty interesting dynamic for the electric utilities to make more investments around transmission & distribution to accommodate those resources and particularly, the unique characteristics of the fact that they are so intermittent. But I think that one of the things we keep falling back on is, we've got about a $5.8 billion capital program through 2019. We continue to think of the DRP opportunities, Stephen, as kind of a longer term opportunity. Part of this may be definitional in the way some of the different utilities in the state talk about it. But for us, anything that comes out of the DRP, whether it's greater use of batteries, synchronous condensers, more solid state switches, more investments around electric vehicle charging, all that we would view as being additive to the plan that we already have from a capital program standpoint. -------------------------------------------------------------------------------- Stephen Byrd, Morgan Stanley - Analyst [33] -------------------------------------------------------------------------------- That's great. Thank you very much. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [35] -------------------------------------------------------------------------------- Just a couple questions on clarification. I apologize if I missed it. But what was the assumed annual repatriation from Mexico for 2015 through 2018 in the last five-year plan? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [36] -------------------------------------------------------------------------------- I'll have Joe cover that. -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [37] -------------------------------------------------------------------------------- We basically said back in 2012 when we started, Greg, that we were going to do approximately $300 million a year. We didn't break it down between Mexico and Peru, but we kind of said roughly $300 million a year for that period 2012 through 2018. So we're pulling back on the Mexico piece for this two-year period. So you can see, we're talking roughly around $300 million investment in the IEnova -- $300 million to $325 million maybe something like that. So if you think about that, cut that in half and you'll see what the Mexico piece was per year. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [38] -------------------------------------------------------------------------------- Okay. So you're going to basically keep -- so you're telling us that $325 million is the amount that you're now not going to repatriate and instead, use to help finance -- -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [39] -------------------------------------------------------------------------------- Yes. Over the two-year period, 2015 and 2016. We already have the 2015 dividend. It's already in a Mexican holding company above IEnova. We'll use that. Then we'll borrow some money for a short-term until we get the dividend next year, usually in the summertime. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [40] -------------------------------------------------------------------------------- Okay. So you answered my question without me having to try to figure it out on my own; $325 million. Thank you. (laughter) -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [41] -------------------------------------------------------------------------------- Roughly, right around that. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [42] -------------------------------------------------------------------------------- Then the second question -- it might entail a longer answer is, I know you told us in the five-year plan what your assumptions were with regard to the general rate case outcome in terms of attrition. It was 2.75%. The repair allowance benefits would be flowed through to customers beginning in 2016. If this deal is approved, I know the attrition adjustments are modestly better. But can you explain the repair allowance -- the prospective repair allowance framework? Then also go back and maybe explain a little bit more what your exposure is, perhaps the retroactive look at repair allowance closed against you? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [43] -------------------------------------------------------------------------------- Sure. Let me start this, because having been in this business for 37 years, I can't help but make comments on how flawed I think the proposal is. It was only raised in our case by one of the interveners. What they were basically trying to do is recoup what had been decided in the last rate case. So we think it's a legal case of retroactive rate making. We will fight it as a legal case of retroactive rate making. What -- in our case, I just want to talk about our set of facts. Because I think our set of facts is really important. The record in our case was officially closed in July. We did not even file with the IRS for any consideration of a change of tax treatment until after the record had been closed. In the case of SoCalGas, it was more than a year after the record had been closed. So we think that to try to retrade this and to go back and recoup those dollars is fully inappropriate. So we think we have a very good legal standing in our case, with our set of facts. We will fight that. As Joe mentioned in his prepared remarks, the dollars that we're talking about for the SDG&E for 2011 to 2014 is $93 million and for SoCalGas is $92 million. Then in a memo account for 2015, because they were all concerned about the retroactive rate making effect, so they tried to cover it with a memo account, there's SDG&E $46 million pretax and SoCalGas $34 million pretax through September. We will fight all of this, because the history has been very, very clear that it's to the benefit of the customers to have the utilities pursue efficiencies and tax benefits and everything and that the shareholders have to pay for all the research and work that was done to accumulate these benefits and that the shareholder has always been able to keep those benefits in between rate cases and then the customer gets them at the next rate case. When we did our 2016 plan and beyond, we did incorporate in that $40 million reduction at SoCalGas and $19 million reduction at SDG&E, starting in 2016 forward. For that now going to the customer, which has been the regulatory history of how these things have been dealt with for decades, at least since I've been here. So we think that we will prevail on this issue with our good set of facts. We will continue to fight this because we think it is a retroactive rate making situation. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [44] -------------------------------------------------------------------------------- Okay. So that sums it up. The worst case scenario would be you lose on your legal position. That goes as a reduction to rate base? But prospectively, you've sort of worked out how you're going to flow back the benefits? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [45] -------------------------------------------------------------------------------- Right. That's the way it's always been, is that the customer gets the benefits flowed through to them at the next rate case. We assume that in our base plan. Dennis and Jeff went through that in March, because we've always had that assumption that come 2016, those would become benefits that would go to the customer. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [46] -------------------------------------------------------------------------------- Okay, great. Then a final question, amongst the many things you guys have talked about, two of the biggest building blocks for earnings as we go into next year that were not in the base plan are the $0.05 of accretion from the PEMEX, which rises to $0.10 in 2019 and then also the continuation of sort of this $0.10 benefit from not having repatriated cash from Mexico. Then you've got all these other things on the checklist that you've won that weren't in the plan that you delineated earlier as well; correct? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [47] -------------------------------------------------------------------------------- Yes. Some of those don't happen next year. They begin construction, but they're not in service next year. So -- -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [48] -------------------------------------------------------------------------------- Got it. Thank you, guys. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [49] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [50] -------------------------------------------------------------------------------- Chris Turnure, JPMorgan. -------------------------------------------------------------------------------- Chris Turnure, JPMorgan - Analyst [51] -------------------------------------------------------------------------------- I wanted to just follow-up back on Trains 4 and 5 here. Could you maybe give a little bit more color to the extent there's anything different from what you said earlier on the call about the potential for getting a Train 5 contract signed in addition to just Train 4? Then could you kind of comment on whether the EPC contract preliminary agreements there were not just good but better than your expectations at all? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [52] -------------------------------------------------------------------------------- Sure. I'm going to ask Mark to comment on that because he's smiling. So -- -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [53] -------------------------------------------------------------------------------- Well, I would say that -- I'll answer the second question first, which is with respect to the EPC contracts, I think we were pleased with the way the numbers came out. I won't say we were terribly surprised. We suspected that continual construction would lead to a very low cost. We were -- I think, we were proven correct. So we do believe that it will be beneficial to continue the construction into Train 4. That will actually reduce the costs for all of the trains in the facility. So I think it will make Cameron a very competitive facility. With respect to any change in the way that we're looking at it, with -- as to Trains 4 and 5, I think we've said numerous times in the past that the decision to go forward with Train 4 is really a Sempra decision that we've made in conjunction with our partners. For Train 5, that will be a decision that's made by our partners. They are still contemplating that and whether they go forward at the same time or not is really not -- is their call and really not ours. Frankly, not that relevant to our investment decision or our financial outcome. -------------------------------------------------------------------------------- Chris Turnure, JPMorgan - Analyst [54] -------------------------------------------------------------------------------- Okay. That's helpful. Then shifting gears to the total returned vehicle, you mentioned you're going to revisit the idea in the middle of next year. Is there a kind of a reason for that timing specifically? Maybe you could give a little bit more color as to what you would view as a constructive MLP environment out there for you guys to have a low cost of capital? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [55] -------------------------------------------------------------------------------- Yes. Let me just say that the middle of next year is kind of arbitrary. It's more that, we want to see sustained markets that can make us feel that the cost of capital that we would receive by doing it is better than what we would receive at Sempra. So we didn't not want to give you a view that we're going to look at it again the next month and the month after. It's going to be -- we're going to have to see really sustained improvements in the market that cause us to want to launch something on the basis of allowing our growth, this wonderful growth that we have to occur at a lower cost of capital. If it doesn't deliver that value proposition, then it doesn't make a lot of sense for us to go forward. So that's kind of how we're looking at it. -------------------------------------------------------------------------------- Chris Turnure, JPMorgan - Analyst [56] -------------------------------------------------------------------------------- Okay, great. Thanks. -------------------------------------------------------------------------------- Operator [57] -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research. -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research - Analyst [58] -------------------------------------------------------------------------------- Just first to follow-up on that. So is the registration still live for the MLP in the meantime? Or is it no longer kind of - live? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [59] -------------------------------------------------------------------------------- Yes. The registration has stayed live for a period of time. What we did is, we wanted to have whole optionality. So we kind of did this with IEnova. We did a lot of pre-work to be ready to launch if the markets were right. We ended up actually launching IEnova faster than we thought we would have because we saw a Mexican reform coming. We'd won some pipeline bids. It made sense for us as a way to raise both debt and equity. But that -- we would have to see the same kind of thing for the MLP. So that's kind of how we're looking at it. -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research - Analyst [60] -------------------------------------------------------------------------------- Okay. Then apologize to move to this -- back to the repair issue, but just to kind of clarify, if we looked at the forward revenue requirement of the utilities, what would be the impact to that beyond what's currently in your plan, if this is upheld? (multiple speakers) Is it just a lost return on that rate base? -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [61] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [62] -------------------------------------------------------------------------------- Well, there hasn't been a decision in our case. So it's kind of hard to say what it would be. I will say, our set of facts is not exactly the same as another utility's set of facts. So I wouldn't want to speculate. I told you the amounts of what the tax was over the period of time, but how it ultimately gets treated and everything, that will be litigated in our case. So I couldn't really speculate on that. -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research - Analyst [63] -------------------------------------------------------------------------------- Okay. Then finally, the $2 billion of upsides -- investment upsides to the plan, which I guess that's also separate on top of kind of the rate settlement separately, but just the $2 billion of investments, could we just go through those one more time? I know we have -- PEMEX's investment is a big one. Is it the two renewable projects? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [64] -------------------------------------------------------------------------------- Right. PEMEX. Yes. There's three renewable projects and then the PEMEX -- the PEMEX was about, a little over $1.3 billion and then the three renewable projects equate to the remainder. So -- -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [65] -------------------------------------------------------------------------------- They're in the slide, Steve, on page 19. -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research - Analyst [66] -------------------------------------------------------------------------------- Okay. Just at a high level, has anything gotten worse than when you gave the plan? Any key drivers or is generally the rest the same? -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [67] -------------------------------------------------------------------------------- I would say that the only thing that is down from the original plans is, natural gas prices are down. So that's a factor -- you're looking at 2016. Is that what we're talking about? Or are you talking about 2015? -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research - Analyst [68] -------------------------------------------------------------------------------- No, the whole -- the full five-year plan, the 3% to 11% growth. -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [69] -------------------------------------------------------------------------------- Yes. So the whole five-year plan? I mean, natural gas prices are clearly down almost $2 from when that plan was put together a year ago. FX, clearly, the dollar has strengthened against all the currencies. That has actually been in our favor right now because the Mexico effect is bigger than the South America effect. So it's a little bit hard to see how that will play out over the five-year plan period, because it depends on what the US dollar does against those three currencies. I think those are the really the two main factors. Everything else is very consistent. We have a very long-term contracted business with a good regulatory model. We just got this proposed decision -- or I'm sorry, the proposed settlement, so it feels pretty good. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [70] -------------------------------------------------------------------------------- Yes. The only other thing that I would mention that I didn't mention in terms of the upsides to the plan is that we did get the additional pipeline in Mexico, that's about $110 million. But they are all listed on slide 19. -------------------------------------------------------------------------------- Steve Fleishman, Wolfe Research - Analyst [71] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [72] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [73] -------------------------------------------------------------------------------- Faisel Khan, Citi. -------------------------------------------------------------------------------- Faisel Khan, Citigroup - Analyst [74] -------------------------------------------------------------------------------- Can you remind us also as what the dividend growth rate is, along with the base plan for 11% EPS growth from 2015 to 2019? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [75] -------------------------------------------------------------------------------- Yes. Well we have talked about a dividend growth rate that was around 5% to 6%. But that -- our Board considers that every February. The great thing that we have is that we have all of these projects that are long-term contracted and then we will get our GRC decision by February. We will see the progress on construction of Cameron, which is going really well. We'll see if we're getting some contracts on Cameron 4 at that time. So there will be a lot of visibility to things that may cause our Board to reconsider, is that the appropriate growth rate over the time through 2019. So that happens in the February timeframe. We have targeted a 45% to 55% payout ratio at 2019. But -- that I think there's been no change in that type of a thought process. But what we do in the interim, I think, we're going to be looking at again in February. -------------------------------------------------------------------------------- Faisel Khan, Citigroup - Analyst [76] -------------------------------------------------------------------------------- Okay. Any change in your thought process around M&A? Certainly, the midstream and MLP sector has been hit pretty hard. I'm not sure if that changes your calculus around how you look at assets and opportunities? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [77] -------------------------------------------------------------------------------- Well, we always look at -- we've looked at a lot of the MLPs. We looked at -- we're -- I think our interest would lie, as we haven't seen anything that is greatly attracted to us in terms of the composite in an MLP. But there are some assets there that if they need the cash and they need to start liquidating some assets that we may be very interested in. So we have identified things that would be of interest to us. We continue to monitor those and have discussions as appropriate. -------------------------------------------------------------------------------- Faisel Khan, Citigroup - Analyst [78] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [79] -------------------------------------------------------------------------------- But let me just add -- if I could just add to that. I see these transactions and the wonderful thing we have at Sempra is that we have such high organic growth that we don't have to do those kinds of transactions to get our growth. So I would just tell you all, we're really picky about what we would acquire because we've had such success in doing greenfield projects that -- our returns tend to be higher on all the greenfield projects than the acquisitions. So we're pretty -- we're very disciplined when we make acquisitions. I think hopefully, you see that from the PEMEX acquisition. We think it's a very good acquisition for us. It's accretive. It allows us to have a more robust pipeline system that we can grow from. So that's what we really look at. -------------------------------------------------------------------------------- Faisel Khan, Citigroup - Analyst [80] -------------------------------------------------------------------------------- Okay. Understood. Then just on the potential assets in Mexico, I was wondering, have you guys looked at exporting LPG, propane and butane, out of Mexico? I know a number of people have been trying to figure out how to export LPG on the West Coast. It's been a difficult process. I'm just trying to see if you guys have looked at that opportunity? If you think it's a viable option? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [81] -------------------------------------------------------------------------------- Yes. I'll have Mark talk about that. We have the ethane pipeline. That -- we look at all opportunities. We also have the joint venture that we'll continue with PEMEX. So these are some of the kinds of things that we would see as being potential out of that JV. Mark? -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [82] -------------------------------------------------------------------------------- Yes. I would say both in the US and in Mexico, we've studied opportunities to export various kinds of natural gas liquids. We haven't put a project together or announced anything, but it's something that we study all the time. I do think there's some interesting opportunities. So it's definitely top of mind. There's a real need to move some of these liquids out of the producing areas. To the extent that we find an opportunity that works for us, I think we would be willing to capitalize on it. -------------------------------------------------------------------------------- Faisel Khan, Citigroup - Analyst [83] -------------------------------------------------------------------------------- Okay. Last question for me. Any impact from the hurricane on the West Coast of Mexico to your operations or assets? -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [84] -------------------------------------------------------------------------------- No. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [85] -------------------------------------------------------------------------------- No. -------------------------------------------------------------------------------- Faisel Khan, Citigroup - Analyst [86] -------------------------------------------------------------------------------- Okay, got it. Thanks. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [87] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [88] -------------------------------------------------------------------------------- Michael Lapides, Goldman Sachs. -------------------------------------------------------------------------------- Michael Lapides, Goldman Sachs - Analyst [89] -------------------------------------------------------------------------------- Real quick question -- on the US renewable business, can you talk about how much incremental room you have for the development of solar projects, whether it's Mesquite, Copper Mountain -- really can you just talk about it fleetwide? Like almost how much excess room do you have in the backyard? How many megawatts would that potentially create over a long period of time? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [90] -------------------------------------------------------------------------------- Sure. I'm going to have Mark address that. -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [91] -------------------------------------------------------------------------------- Yes. Hi, Michael. We've got about 420 megawatts under construction. With respect to solar, we have about 280 megawatts of property that's still available for development. Then we're actually in the process of trying to acquire a little bit more to increase that. Then with respect on the wind side, we have just at Flat Ridge, we have over 200 megawatts, that's potentially developable there. Then of course at ESJ, we have -- I won't say unlimited, but it's a very, very large amount of capacity that's potentially over 1,000 megawatts. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [92] -------------------------------------------------------------------------------- That can sell both into the US or into Mexico. -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [93] -------------------------------------------------------------------------------- Correct. Yes. So we do have -- we currently have developable properties that we can and obviously, we're looking at new ones all the time. -------------------------------------------------------------------------------- Michael Lapides, Goldman Sachs - Analyst [94] -------------------------------------------------------------------------------- How should we think about contract prices and the economics of the projects you announced at the second quarter call versus ones you started development on three or four years ago? -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [95] -------------------------------------------------------------------------------- I would say that the economics are very similar or sort of within 75 basis points of each other on returns. We don't really announce what the returns are, but the prices are cheaper because of the cost of the product of -- both in wind and in solar has dropped dramatically. That's made a big difference. -------------------------------------------------------------------------------- Michael Lapides, Goldman Sachs - Analyst [96] -------------------------------------------------------------------------------- Got it. Thanks, Mark. Much appreciated. -------------------------------------------------------------------------------- Operator [97] -------------------------------------------------------------------------------- Mark Barnett, Morningstar. -------------------------------------------------------------------------------- Mark Barnett, Morningstar - Analyst [98] -------------------------------------------------------------------------------- Thanks for all of the details today. Its been a really helpful call. A couple of just quick questions. Just one on clarification for the extra $0.10 in guidance. That was assuming approval of the PEMEX buyout this year? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [99] -------------------------------------------------------------------------------- Yes. I'll have Joe answer that. Go ahead, Joe. -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [100] -------------------------------------------------------------------------------- Yes, Mark. No, that was our reassessment of our desire to make the investment of the two years worth of dividends -- 2015 and 2016 dividends. So we have recast our tax expense to assume that we will only repatriate this year and next year from Peru and not Mexico. So that's locked in. We are doing that. -------------------------------------------------------------------------------- Mark Barnett, Morningstar - Analyst [101] -------------------------------------------------------------------------------- Okay. So that decision was certainly not then contingent on approval? -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [102] -------------------------------------------------------------------------------- It not contingent on the closing. No. We're just not going to repatriate those monies for 2015 or 2016. We believe that the deal will close and we will fund it. So there's no contingency there. We've already adjusted in the third quarter tax expense for that. So you'll see also lower tax expense in the fourth quarter, combined that will be the $0.10. -------------------------------------------------------------------------------- Mark Barnett, Morningstar - Analyst [103] -------------------------------------------------------------------------------- Okay, great. Sorry, I was a little confused on that. More of just a big picture question, since it's sort of a new development. With the transmission bids that will be beginning in 2016, now, how do you view your competitive position there given that your existing relationships in gas it's sort of a different ballgame I guess on the electric side? Can you maybe talk about sort of the competition? The clarity that you've seen around the bid structure is obviously something that took some time to develop with the gas? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [104] -------------------------------------------------------------------------------- Yes. I think a couple of things. We have some outstanding experience building major transmission projects in difficult areas. Sunrise is probably one of the most difficult transmission projects to get done. It got done on time on budget. So -- I think our Company has shown our ability to work through regulatory agencies and get all of that done. When you go to Mexico then and you take some of those skills and you transfer them that rights-of-way will be a key issue. It's very similar on the gas & electric side. In fact, there may be cases where the transmission could use some existing rights-of-ways that we've already acquired. Then sighting of a line, the ability to work with the agencies. CFE would be the agency that would be bidding these out. We have good experience working with CFE. I think having a workforce of several hundred people headquartered in Mexico City that know how to work through these processes, I think that we're in a really good place to enter that area of the business with the experience that we have in Sempra and do quite well in it. -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [105] -------------------------------------------------------------------------------- I would just add too that we have developed transmission lines outside of the US as well. We've been one of the -- we've done a good job of building transmission in Chile. We've built some things in Peru. So we're not without experience outside of the US as well. So I think that given the combination of experience that we have and our relationship with the CFE, I think we should be in very good standing to be competitive in that market. -------------------------------------------------------------------------------- Mark Barnett, Morningstar - Analyst [106] -------------------------------------------------------------------------------- All right. Thanks for your thoughts, guys. -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [107] -------------------------------------------------------------------------------- Sure. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [108] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [109] -------------------------------------------------------------------------------- Michael Goldenberg, Luminus Management. -------------------------------------------------------------------------------- Michael Goldenberg, Luminus Management - Analyst [110] -------------------------------------------------------------------------------- I wanted to get more understanding on the guidance in the $0.15. So you increased the midpoint by $0.25 of which $0.10 is taxes. Can you maybe help me understand the other $0.15, since it's not PEMEX? And it's not -- -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [111] -------------------------------------------------------------------------------- Well, I think if you look at the strength of our business so far this year, you look at how our performance is in all of our businesses and then you adjust for seasonality at SoCalGas, our utilities are having very strong years. Our other businesses are having very strong years. So we kind of look at where we are to date and where we think that we will be at the end of the year across all of our businesses. I think everything is doing very well. So there's not like one thing that's behind it. There's $0.10 for the tax or the repatriation issue, but the rest of it is kind of across our businesses. -------------------------------------------------------------------------------- Michael Goldenberg, Luminus Management - Analyst [112] -------------------------------------------------------------------------------- So, it's not one specific thing. It's not GRC and it's not PEMEX, right? There's just -- -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [113] -------------------------------------------------------------------------------- The GRC doesn't take effect until next year. PEMEX will not close until later this year, so it won't be until 2016 earnings. So you won't see the GRC effect until 2016 nor will you see the effect of PEMEX until 2016, so it's neither of those. It's just the strength of our base operations across the board. -------------------------------------------------------------------------------- Michael Goldenberg, Luminus Management - Analyst [114] -------------------------------------------------------------------------------- Then the other part that I'm trying to understand, since you were raised 2015 but you kept CAGR as the same, is the starting point now higher? Is the ending point also higher? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [115] -------------------------------------------------------------------------------- I'm not sure I understood -- -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [116] -------------------------------------------------------------------------------- He's saying, we're raising 2015 but keeping the CAGR the same. We're not setting a new CAGR. Debbie was talking about our approximate 11% CAGR that was in the analyst conference. We're not telling you a new number yet. We'll give you new guidance when we have the conference for what our 2016 to 2020 number is, but we've already said, we already know that the numbers are all getting higher because we have $2 billion more of projects. We have a number of positive things going for us. So I think you can glean from that, it wasn't lifting up the front and keeping the end smaller. That's not our intent of this conversation. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [117] -------------------------------------------------------------------------------- Yes. But I will also say that's a 2015 to 2019 CAGR. One of the reasons it has some -- a big effect is at the end of the period. What's been great is that we've been able to produce strong results at the beginning of the period. So Cameron adds a lot in 2018 and 2019 to that growth rate. But we're also growing our business in a lot of other areas. We've had exceptional performance and safety, reliability, customer and financial performance from our utilities as well as our other businesses. -------------------------------------------------------------------------------- Michael Goldenberg, Luminus Management - Analyst [118] -------------------------------------------------------------------------------- So what I'm hearing is, both conceptually things are going great and mathematically as well, if just crunch the numbers (inaudible) -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [119] -------------------------------------------------------------------------------- (laughter) We just won't tell you what number to forecast, that's it. -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [120] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Michael Goldenberg, Luminus Management - Analyst [121] -------------------------------------------------------------------------------- Got it. Okay, thank you. -------------------------------------------------------------------------------- Operator [122] -------------------------------------------------------------------------------- Vedula Murti, CDP Capital. -------------------------------------------------------------------------------- Verdula Murti, CDP Capital - Analyst [123] -------------------------------------------------------------------------------- I'm wondering now given the status of the MLP market and everything like that -- I'm sure -- I would suspect you'd have experi -- at least some inventory of very mature assets where the EBITDA and everything like is on full run rate and everything like that. There and there are other entities that are going to be needing to feed the machine, so to speak. So can you give me a sense as to -- you guys have always bring very, very good in recycling capital, so can you give us unless I missed this earlier, I did show up a little bit late. I showed up in the Q&A, can you give a sense as to what might be available in terms of either in some gross EBITDA value or something like that? Or certain types of assets that you think that will be able to recycle capital during this period while you're waiting to see things stabilize, if they are all on their optimal run rates? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [124] -------------------------------------------------------------------------------- Yes. If your question is like what is our capital allocation methodology in our enterprise, is that what you were trying to get at? -------------------------------------------------------------------------------- Verdula Murti, CDP Capital - Analyst [125] -------------------------------------------------------------------------------- Well, I'm trying to get at -- the fact is, is that you probably have certain plants or assets or whatever that are already at regular run rates and their contracts (inaudible). The fact is that those in theory would have probably been appropriate for holding on to for an MLP. But if the MLP is going to be pushed off and you have MLPs and yieldcos that are going to need to acquire in order to justify their own cost of capital, the question is whether you have an inventory of assets that you can recycle capital perhaps at better rates than sitting on them right now and just waiting for the MLP market or whatever to turn around. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [126] -------------------------------------------------------------------------------- I would say that we always look at our assets every day as if we've just bought the Company. So everything we look at, if it makes sense for us to sell it and to exit that, we're willing to do it. The same thing in terms of looking at acquisitions. We're very disciplined on that. I know that -- I will give you examples of what we've done in the past. I can't tell you what we might do in the future. It depends on what the market is, what kind of pricing we could get. But we decided to exit merchant generation because it didn't fit our model. We sold our power plants as an example. So those are the kinds of things that we do on a regular basis. A lot depends on what the market conditions are and what kind of premiums would be paid and whether or not it would make sense for us to exit that and then redeploy capital into some future growth. We always think that way but I'm not going to list any kind of assets that are for sale. -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [127] -------------------------------------------------------------------------------- Again, I would just add to that too is that all of our large assets that we expect to be essentially fully contracted and moving forward. If you look at our pipelines in Mexico, our LNG facilities, all of those we believe have expansion capability. So it not like even though they're fully contracted for their current size, we think all of them especially in Mexico we're in the process of expanding capacity on some of our existing pipelines and adding additional revenue. We're looking obviously at Train 4 to Cameron, we're looking at additional facilities. So I think we've got a lot of growth left and a lot of our major assets so we wouldn't really be looking at that at this time. We want to be completely sure that we capture all of that growth and all of that additional revenue. But I think for more mature assets down the road, as Debbie said, we always look at that stuff. -------------------------------------------------------------------------------- Verdula Murti, CDP Capital - Analyst [128] -------------------------------------------------------------------------------- Well maybe that's the point, I was trying to distinguish between legacy fully-mature assets that are at their full EBITDA run rates or whatever, where there is not it's obviously contributing but there is not necessarily that's not the growth component. I'm trying to distinguish that between Mexico expansions or Cameron or whatever. I just don't know what the pot might be that because you guys have been one of the best in our industry in terms of recycling capital. So I'm just curious if you can kind of give a sense of what that -- assuming this is the way you're thinking about it whether there's a pot of recyclable capital that is sitting there that depending on giving the other market participants. That's what I'm trying to get a sense of. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [129] -------------------------------------------------------------------------------- Yes. I think that when we look at what we've had, all I can tell you is what we've done historically. We did that with coal plants that we bought and then we sold out of when we thought the market was changing. We did that when our generation plants came off the DWR contracts and that they no longer fit our model because we go for long-term contracted. So they always look at the market and we always look at what's left in our contracts, what we think is a chance of recontracting, is there more value there to ask that we could get out of the asset. I mean that's the way we look at it. So I'm not going to go through how we would look at specific assets, but I can tell you that's the methodology we use. -------------------------------------------------------------------------------- Verdula Murti, CDP Capital - Analyst [130] -------------------------------------------------------------------------------- Well, one last question and I'll let someone else go. Then given that history and the way you describe it, what starts fitting that type of thing to be examined? For instance, gas storage, what is it? Mid-South or something like that. I'm just curious, if what -- there's -- I'm sure not everything is perfect. So the fact is you guys have always been very, very good at identifying that. So I just want the essence of what might be available just to recycle and optimize. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [131] -------------------------------------------------------------------------------- Yes. I just don't think I can answer what we would plan to look at selling. I think I can tell you what the methodology is and when we look at an asset like storage, I can tell you that it's very low values right now in comparison to what its been in the past. But you see what's happening in the gas market. You see what's happening relative to coal to gas conversion and the need for storage by utilities and then all of the LNG plants in the Gulf So the way we would look at an asset like that is, do we think it could have greater value to our shareholders in the future? Are there ways to optimize that? How much could we get to sell it in a market? That's the way we would always look at those kinds of assets. So I really don't think I can give you a list of what we would be considering. That wouldn't even be a good thing to do for our shareholders in terms of any kind of negotiation. So I think that's all I can really say. -------------------------------------------------------------------------------- Verdula Murti, CDP Capital - Analyst [132] -------------------------------------------------------------------------------- Okay, fair enough. I'll let other people ask questions. Thank you. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [133] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [134] -------------------------------------------------------------------------------- Paul Patterson, Glenrock Associates. -------------------------------------------------------------------------------- Paul Patterson, Glenrock Associates - Analyst [135] -------------------------------------------------------------------------------- Just to -- I know you've been asked this by Greg and Steve, but I just want to make sure I have a better understanding. With respect to the repairs deduction rate base potential impact, you mentioned a couple of different numbers. You mentioned memorandum account numbers. I just wasn't sure what -- on a corporatewide basis, what kind of rate base is actually sort of being challenged here retroactively? Which you guys don't plan on -- I understand you guys don't feel a valid challenge. But I just wanted to know what were quantitatively roughly speaking about? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [136] -------------------------------------------------------------------------------- Okay. Joe, I'm going to ask you to cover it. -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [137] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [138] -------------------------------------------------------------------------------- See if you can explain it better than I did. -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [139] -------------------------------------------------------------------------------- No. You explained it well. I think that the proposal suggested that we took the 2011 to 2014 savings. That added up to $185 million on a Sempra-wide basis, roughly split between the two utilities. That would be what they suggested should be reduced from rate base going forward. So you can do the math and figure out what that would mean to a revenue requirement. Again, we don't believe that's going to be sustained. The memorandum account really dealt with 2015. They treated that separately. They are trying to get around retroactive rate making, as Debbie suggested. So the sum of the two numbers that she gave you and they were in my remarks as well, totaled $80 million on a pretax basis through September, less than $50 million after-tax. That would be a 2015 impact that wouldn't go to rate base. It would just be a direct impact that they were requesting. This is what they requested as a way to get around the retroactive rate making. We don't think they will be able to sustain it. But that's the way it would work. So the rate base is only that $92 million and $93 million. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [140] -------------------------------------------------------------------------------- Yes. Let me further say though who the they is, because what I want to stress is that we don't have a proposed decision that does this. The they is [TURN], one of the interveners in the case. This is their proposal in the case. So we have not yet received a proposed decision. We will make a very strong case that the record was closed -- officially closed by the ALJ before we even filed with the IRS to make these changes. So I just want to be sure that the facts are really clear on this. -------------------------------------------------------------------------------- Paul Patterson, Glenrock Associates - Analyst [141] -------------------------------------------------------------------------------- No, absolutely. I apologize for having just to -- there were a few numbers running around that I wanted to make sure I understood them. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [142] -------------------------------------------------------------------------------- No. That was -- it was a good question. I'm glad you clarified. -------------------------------------------------------------------------------- Paul Patterson, Glenrock Associates - Analyst [143] -------------------------------------------------------------------------------- Then with respect to the masters limited partnership vehicle and what have you, it seems to me that people -- the Street what have you, sort of wanted you guys to move faster on this awhile ago. I don't know -- you guys didn't and the situation has changed. You guys are looking at what the opportunities might be on a sustained basis. I'm just sort of wondering strategically when you see something like what's happened in the markets and what have you, whether or not it makes sort of the bar higher? Or you think more about how you might want to unwind something if it ends up that -- because obviously, these are not really short-term financing plans. These are supposed to be vehicles that last for a period of time. I'm just wondering when you have something that we just recently experienced, what does that make you think about in terms of, does it make the bar higher? What do you guys think about it, I guess is what I'm asking? Does more -- a little bit more elaboration in terms of obviously, if it doesn't make sense you're not going to do it but not only that, if it quote-unquote, does make sense, for a period of time -- what would give you, do you need more confidence in terms of that? Or just how do you think about that? Do you follow what I'm saying? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [144] -------------------------------------------------------------------------------- Yes. I'll start a little bit and then I'm going to ask Mark to add to that. I think that one of the things that became apparent was that there's limited liquidity in that market and that the effects were great when people needed to change portfolios and clear out of that market. That creates a sense of discomfort for us because that's not what we see in the Sempra stock. So what we want to be able to see is that there's the ability to have -- and that you can differentiate. I think you still do see that in a market. You can differentiate quality from things that are not quality. Quality continues to trade well even if that whole market segment is not trading as well. Because -- that's always been what we've been after is, if we're going to do this, it's going to be all about quality. That, if we can't get the value for that quality then it doesn't make sense for us to go forward. So Mark, do you want to add? -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [145] -------------------------------------------------------------------------------- Yes. I guess my only add to that would be is, I think when we looked at this, we -- in the beginning, we -- I think, we had some skepticism. Then as we watched these things progress over the last few years, it was clear to us that there was a cost to capital advantage to these entities. That was worth taking advantage of. We had ideal assets and we still do have ideal assets for that kind of vehicle, that was valuing cash flows at very high multiples or very low yields. But I think to your point, Paul, and it's a very good one, which is, does this disruption in the market give us some pause to think that this was something like a passing fad. I think at the end of the day, I think there's a high probability that these long, sustainable cash flows will continue to garner a yield that makes the capital look really -- that makes the capital -- the cost of the capital look really attractive. But I do think that we have to kind of think -- make sure that we're in a market that supports that for the long haul and that there's enough liquidity in that market that, as Debbie said, the ones that have that truly aren't tainted by underlying commodity prices can shine and can still garner that low cost. We haven't -- that's got to be proven. Whether that can happen in the next six months or a year, we don't know. But I think we're going to keep our options open and look at it and take advantage of it if it makes sense. If it doesn't, we're perfectly okay to keep -- just to do the course that we're on, which is just as a C Corp. We have -- I think we can be very competitive with cost to capital. We've got a great business here. So it's -- the good news is our underlying assets and business are super -- are just really sound. We don't have to do, we don't have to do -- avail ourselves of any one particular mechanism to raise capital. We have lots of opportunities for that. We can meet our capital needs without any -- really problem. -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [146] -------------------------------------------------------------------------------- Let me just add-on one more thing. Mark just alluded to it. But you guys may or may not have seen this, but in the last several months including last week, we got an affirmation of our credit ratings. S&P just moved us to a stronger business risk profile from strong to excellent. We have a very strong business. We can finance our growth. This was an opportunity to maybe do something that was really cheap and good. So to everything Mark and Debbie said, I just want to add that. We have very strong credit ratings. We can finance our growth. We don't need it. -------------------------------------------------------------------------------- Paul Patterson, Glenrock Associates - Analyst [147] -------------------------------------------------------------------------------- Great. I appreciate it. Thanks so much. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [148] -------------------------------------------------------------------------------- Thank you, Paul. -------------------------------------------------------------------------------- Operator [149] -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [150] -------------------------------------------------------------------------------- A quick follow-up question. Can you just go through in a little more detail, what your net exposure is to currency with Mexico offsetting the exposure to Chile and Peru? Then sort of a secondary question on that is, in the places where your dollar denominated, I know that functionally inflates you. But if we continue to have a strong dollar, doesn't that put pressure on the regulatory construct? How do we think about risk in that framework? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [151] -------------------------------------------------------------------------------- Joe, do you want to take that? Or Trevor? -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [152] -------------------------------------------------------------------------------- Yes. I'll speak first. Then I'll let Trevor go through all of the numbers of the net exposure and so forth. But as you know, we have kind of a natural hedge here because we have -- when the dollar strengthens on all three of the currencies in Chile and Peru, we have a reduction of our growth because of the translation of the two currencies in South America to the dollar. But offsetting that is the fact that we do have dollar functional currency in Mexico, because fundamentally most of the business is all in dollars. But we pay our taxes in Pesos. We have some other adjustments in the income tax expense as a function of their income tax rules that impact us in the opposite direction when all three currencies decline. So that's what we've seen over time. So I'll let Trevor walk through what the numbers were for the quarter and year-to-date maybe. -------------------------------------------------------------------------------- Trevor Mihalik, Sempra Energy - CAO [153] -------------------------------------------------------------------------------- Sure, Greg. Yes. So for the quarter, we had a total decline in earnings from translation of the earnings of about $6 million for the quarter between Chile and Peru. That is more than offset by a $17 million pick-up in Mexico. As Joe said, that's primarily from the revaluation of the taxes. So the net benefit in the quarter was $11 million. Then year-to-date, it's not much different. It's about $14 million of a benefit year-to-date. That was driven by $13 million that the P&L hurt that we took in the translation of the earnings from Chile and Peru offset by $27 million net of NCI from Mexico, giving us a net benefit year-to-date of $14 million. -------------------------------------------------------------------------------- Mark Snell, Sempra Energy - President [154] -------------------------------------------------------------------------------- Greg, let me just add to, that in South America, you're on-pointe. In fact, we do get adjustments in our tariff, primarily from inflation but also FX too. But what we have seen in South America this year, which is a little bit unusual. We've seen currency devaluation without underlying inflation in those countries. So we're not getting the inflation adjustment to our tariff. So it's not -- it's really not putting as much rate pressure on as you might expect. I'm not sure that's a good thing. We would like to get the adjustment, but we're not -- we're just not seeing high inflation in those countries. What we are seeing is just strengthening of the dollar. It's probably more has to do with more US policy and the strength of the dollar worldwide than it has to do with really underlying weakness in those economies. -------------------------------------------------------------------------------- Trevor Mihalik, Sempra Energy - CAO [155] -------------------------------------------------------------------------------- Go ahead, Greg. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [156] -------------------------------------------------------------------------------- I was going to say, moving to next year when you update your five-year plan, to the extent that currencies have moved dramatically that would be reflected in your update on expected earnings from those jurisdictions; right? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [157] -------------------------------------------------------------------------------- Yes. What we will do and why we don't give you numbers until February is, we look at the forwards at that time for currency and natural gas prices and we adjust our plans for those things, as well as the additional growth that we've had in our businesses, outcomes like the GRC and all. So that's why we wait to give you our 2016 forecast in February. Then at the analyst meeting in March, we'll give you additional information for the next five years. -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [158] -------------------------------------------------------------------------------- But in your opening comments, you didn't seem like you're too concerned that this one factor would knock you off the aspirations that you currently have? -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [159] -------------------------------------------------------------------------------- Well, we wouldn't -- based upon what we see in currencies now, we wouldn't see that. Then gas prices are so low now, they've already been reflected to a great degree in this year's performance. So I guess they can always go lower. You can never say they won't go lower, but we have pretty low gas prices now. So -- -------------------------------------------------------------------------------- Greg Gordon, Evercore ISI - Analyst [160] -------------------------------------------------------------------------------- Okay, thank you. Have a good afternoon. -------------------------------------------------------------------------------- Joe Householder, Sempra Energy - CFO [161] -------------------------------------------------------------------------------- Thanks, Greg. -------------------------------------------------------------------------------- Operator [162] -------------------------------------------------------------------------------- Felix Carmen, Visium Asset Management. -------------------------------------------------------------------------------- Ashar Khan, Visium Asset Management - Analyst [163] -------------------------------------------------------------------------------- Hi, this is Ashar Khan. How are you guys doing? Great results. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [164] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Ashar Khan, Visium Asset Management - Analyst [165] -------------------------------------------------------------------------------- One thing, which I picked up on the remarks, is that we have a settlement with the Commission that we might get a fourth year of the rate case with an attrition mechanism, if I heard that correctly? Could you just go over that? I might have heard it wrongly. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [166] -------------------------------------------------------------------------------- Sure. No, you heard it correctly, that with the ORA, the Office of Rate Payer Advocates, we have a settlement for a fourth year that would give us a 4.3% attrition for that fourth year. That will be looked at by the Commission separate from our other settlement. So we have a settlement with eight parties for the three years and then we have a settlement with one party for the fourth year. That party being the Office of Rate Payer Advocates. -------------------------------------------------------------------------------- Ashar Khan, Visium Asset Management - Analyst [167] -------------------------------------------------------------------------------- Okay, I appreciate it. Thank you so much. Great results. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [168] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [169] -------------------------------------------------------------------------------- It appears there are no further questions at this time. Ms Reed, I'd like to turn the conference back to you for any additional or closing remarks. -------------------------------------------------------------------------------- Debbie Reed, Sempra Energy - Chairman & CEO [170] -------------------------------------------------------------------------------- Well, thank you all for your great questions. You kept us really busy this morning. We appreciate that. If you have any follow-up, please contact our Investor Relations team. Have a great day. -------------------------------------------------------------------------------- Operator [171] -------------------------------------------------------------------------------- This does conclude today's conference. Thank you for your participation.
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