Dominion Energy Inc

NYSE:D

Earnings Call Transcript 2018-Q3

[Operator]

Good morning, and welcome to the Dominion Energy and Dominion Energy Midstream Partners Third Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Stephen Ridge, Director of Investor Relations for the Safe Harbor Statement.

[Unidentified Company Representative]

Good morning, and welcome to the Third Quarter 2018 earnings conference call for Dominion Energy and Dominion Energy Midstream Partners. I encourage you to visit the Investor Relations page on our website to view the earnings press releases and accompanying materials as well as the slide presentation that will follow this morning's prepared remarks. Schedules in the earnings release kit are intended to answer detailed questions pertaining to operating statistics and accounting, and the Investor Relations team will be available immediately after the call to answer additional questions.

The earnings releases and other matters that will be disclosed - discussed on the call today may contain forward-looking statements and estimates that are subject to various risks and uncertainties. Please refer to our SEC filings including our most recent annual reports on Form 10-K and our quarterly reports on Form 10-Q for a discussion of factors that may cause results to differ from management's projections, forecasts, estimates and expectations.

Also on this call, we will discuss some of our company's performance that differ from those recognized by GAAP. Reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measures which are able to calculate and report are contained in the earnings press release kit in the Dominion Energy Midstream Partners press release. For our prepared remarks, Jim Chapman, Chief Financial Officer will provide a financial update including quarterly earnings results, Tom Farrell, Chairman, President and Chief Executive Officer will review safety and operating performance, highlight progress on growth initiatives and provide other updates. I will now turn the call over to Jim Chapman.

[James Chapman, CFO & Treasurer]

Good morning. Dominion Energy reported operating earnings of $1.15 per share for the third quarter of 2018, which was at the top of our guidance range. Drivers relative to our guidance including - includes lower operating and maintenance expense, higher-margins and our power generation group in better and normal weather.

GAAP earnings were $1.30 per share for the quarter. The principal difference between GAAP and operating earnings is a gain on nuclear decommissioning trust funds. A reconciliation of operating earnings to reported earnings can be found on Schedule 2 of the Earnings Release Kit.

Moving to results by business segment. EBITDA for the Power Generation Group was $820 million in the third quarter, at the top end of its guidance range. Lower operating and maintenance expense, higher margins and favorable weather contributed to the outperformance. The Power Delivery Group produced EBITDA of $434 million, which was near the midpoint of the guidance range. And the Gas Infrastructure Group produced third quarter EBITDA of $598 million, which was in the top half of its guidance range.

Lower operating and maintenance expense was the primary driver for that outperformance. Overall, we're pleased with another quarter of very strong execution across our businesses. Dominion Energy Midstream Partners produced third quarter adjusted EBITDA and distributable cash flow of $76 million and $50 million respectively. On October 19, Dominion Energy Midstream's Board of Directors declared a distribution of $0.369 per common unit payable on November 15. This distribution represents a 5% increase over last quarter's distribution. On September 19, Dominion Energy announced an offer to exchange each outstanding public Dominion Energy Midstream common unit for 0.2468 of a Dominion Energy common share. The board of Dominion Energy Midstream has authorized its independent complex committee to evaluate that offer.

Given Dominion Energy's existing ownership interest in Dominion Midstream, the consent of third-party unitholders is not required to approve this transaction. We expect to complete the definitive agreement between the two companies this quarter, with closing to follow in early 2019. We also expect to recommend to the Dominion Midstream board a fourth quarter 2018 common unit distribution to be paid in early 2019 prior to or in conjunction with transaction close. Given anticipated cash flows and the existing financing mix, that final distribution is expected to be equal to the third quarter distributions that was declared on October 19.

Tom will provide some additional remarks later in the call about the rationale for our decision to eliminate Dominion Energy Midstream Partners as a financing vehicle for Dominion Energy. Moving now to our credit and improvement initiatives, we're pleased to have completed several meaningful steps for achieving our previously announced credit objectives for the year. First in September, we closed on a $3 billion [indiscernible] term loan in our Cove Point facility. Strong demand from a broad lending group drove attractive pricing in terms. Proceeds from the financing are being used to reduce parent level debt. Second, and also in September, we announced agreements to sell our interest in three merchant powergenerating facilities representing some 1.8 gigawatts of generation capacity for approximately $1.3 billion of cash consideration across two transactions.

We greatly appreciate the dedicated service of the power station employees who have served our company with distinction. Given our increased strategic focus on regulated energy infrastructure of these assets have become increasingly noncore. We are pleased with the results from this initiative and we expect both transactions to be closed before the end of the year. Cash sales proceeds are being used to reduce parent level debt. Third, as announced this morning, we have executed an agreement to divest our 50% interest in the Blue Racer midstream joint venture to first reserve and affiliated investment funds for total consideration of up to $1.5 billion, including cash consideration of $1.2 billion and up to $300 million of ongoing earning payment - earn out payment through 2021 based on Blue Racer midstreams ongoing performance. We have consistently indicated that Blue Racer while a very high quality business with an extremely capable management team is considered noncore for Dominion Energy, and the sale of our interest would be opportunistic based on a compelling valuation and structure.

This transaction represents an attractive valuation multiple range of 14x to 16x estimated 2018 EBITDA, based on book ends of potential payments to be received under the earn out structure. We expect to close by the end of the year and upfront cash sales proceeds will be used to reduce parent level debt. We wish the other Blue Racer owners, the management team and the employees for their collaboration and successfully executing the very impressive growth of this business since the partnership was created in 2012. To summarize, we have forced - we have sourced funds to reduce our parent level debt by around $8 billion, including approximately $2.3 billion of new equity, approximately $2.5 billion of proceeds from noncore unregulated asset sale agreement, with up to $300 billion of additional payment through 2021 and $3 billion from the Cove Point asset level financing.

As a result of these steps, we expect to achieve cash flow coverage metrics to support our existing credit rating and achieve our targeted parent level debt to total debt metric two years earlier than originally planned. By divesting some of our last remaining unregulated businesses, we've also improved our business risk profile. Now to earnings guidance at Dominion Energy. Operating earnings for the fourth quarter of 2018 are expected to be between $0.80 and $0.95 per share compared to $0.91 per share earned in last year's fourth quarter. Positive factors relative to the fourth quarter of 2017 include the contribution from Cove Point Liquefaction and lower tax expense due to tax reform. Negative factors include lower solar related investment tax credit, higher financing costs and higher share count.

Given where we are in the year, we are narrowing our 2018 full year guidance range to $3.10 to $4.10 per share, preserving the same midpoint as our original guidance. Assuming normal weather, we continue to expect operating earnings per share for 2018 to be above the midpoint of this narrowed guidance range. We're also affirming our 2017 to 2020 operating earnings per share compounded annual growth rate of 6% to 8%. Please note that 2019 full year guidance is expected to be provided on our fourth quarter 2018 earnings call to take place early next year.

I'll now turn the call over to Tom Farrell.

[Thomas Farrell, Chairman, President & CEO]

Thank you, Jim. I congratulate Jim on his new role as our company's Chief Financial Officer. Since joining Dominion, Jim has played a key role in our most important strategic and financing initiatives, and I'm confident that he will do very well in this new role. Also we should take a moment to recognize the transition of Mark McGettrick who has been with the company for 38 years, the last nine of which have been exemplary CFO. We wish Mark our very best.

Going into the final quarter of the year, our company is operating at the last OSHA recordable incident rate in our more than 110-year history. Exceeding our record-setting results last year and placing us ahead of 15 of the 17 peer companies operating in the southeast United States. On the job safety just does not just often. These results represent years of focus on making sure that every employee returns from in the same condition in which they arrived at work that day. We will continue to improve until we achieve the only acceptable safety statistics, zero.

Operating performance across our asset portfolio continues to be excellent. I'd like to share four examples. First, our nuclear units extended a company record by operating for 753 days and still counting without an unplanned automatic reactor shutdown. This represents the nuclear power industries best fleet performance.

Second, Hurricane Michael. Represented as the sixth-largest outage event in the company's history with over 600,000 customers without power at their peak, representing nearly 1/4 of our electric customers. Within 48 hours of Michael exiting our service territory, our crews had safely restored power to nearly 90% of the customers affected, and we've restored service to every customer within just five days. Third, the Cove Point Liquefaction facility which was the largest single capital project in both the company's and the state of Maryland's history has liquefied almost 100 billion cubic feet of gas for export by our customers since entering into commercial service.

And during the recent planned outage, the site reported no OSHA recordable injuries despite the presence of nearly 600 staff in contractors on site. Finally, in recent months, we have launched an initiative to improve our engagement with investors regarding our industry-leading track record on environmental, social and governance matters. We have enhanced our disclosures and will launch an ESG dedicated website in the coming days. At Dominion, ESG is a board level priority as evidenced by the recent creation of a sustainability and corporate prosperity for commitment. that overture performance as a sustainable organization and responsible corporate citizen.

Now, I'll turn to business updates. As the Power Generation Group, construction of the $1.3 billion Greenful Power Station continues the pace as was 98% complete at the end of September. The project is expected to achieve commercial operations on time and on budget in early December.

We filed with the Virginia State Corporation Commission for the first of what we expect will be several utility scale solar projects for inclusion in rate base. We have significantly expanded our solar fleet in recent years, and now ranked as the fourth-largest utility on our solar generation in the United States. We'll continue to regulated solar capacity and the clean energy gas power generation required to complement due solar generation, both at the urging of our states elected representatives.

Now, on October 16, we filed with the regulatory commission for subsequent license renewable for the [indiscernible] power station reactors. This is an important first step in which we expect will be a multiyear $4 billion investment program that will extend the lives of both the [indiscernible] and North Arizona nuclear stations by an additional 20 years. We expect to submit the North license suspension application in 2020. As a result of this initiative, our customers will continue to benefit from clean, reliable and low-cost generation from these best-in-class facilities. We've also filed with the [indiscernible] Corporation Commission's for approval construct two offshore wind turbines under a fixed cost construction contract.

Like the solar and nuclear relicensing investments, this pilot project has the support of government pattern in Virginia General Assembly, will provide an important early learning that we believe will lay the foundation for commercial scale offshore wind for Virginia's clean energy future. Finally, on September 14, we filed our offers in response to the Connecticut Department of Energy and environmental protections RFP for procurement of zero carbon resources. We have requested that [indiscernible] be recognized as an at risk resource where the contract to sell a portion of [indiscernible] zero carbon power starting July 1, 2019.

We are pleased that both deep and the office of consumer counsel have filed briefs asking that the Connecticut Public utilities regulatory authority grant millstone at risk designation which will allow millstone's offers to be judged on price and nonprice attributes, such as zero carbon, economic impact and fuel security. Millstone is vital to Connecticut in each of these respects. [Indiscernible] is expected to select RFP winners by the end of this year. Winning better be validated by PURA and then entering into contracts with the local electric distribution companies.

We have been cleared with Connecticut policymakers that the contract providing long-term financial assurance is the only path forward for millstone's continued operation. At the Power Delivery Group, we continue to benefit from very strong electric sales group. 2018 year-to-date weather normalized sales are 2.4% higher than the same period last year, led by strong growth across data centers, residential and industrial classics. We have placed nearly $600 million of electric transmission assets into service through the third quarter. In July, we filed a grid moderation plan with the Virginia State Corporation Commission through the first three year phase includes over $900 million of investment in grid reliability, resiliency and security.

And in October, we completed the 1,000-mile of our writer program to place 4,000 miles of overhead taplines underground. Improving our ability to respond storm events like Florence and Michael. Both of these long-lived investment programs were found to be in the public interest, in [indiscernible] and legislation signed by the government earlier this year. As the Gas Infrastructure group, we continue to make progress on the Atlantic Coast Pipeline and supply better projects. We have been constructing in West Virginia and North Carolina and on October 19, we received the final Virginia permit required to [indiscernible] underway with full mainline construction in all three states. Following approval from FERC of our notice to proceed filing, we will begin mainline construction in Virginia. We appreciate the professional manner in which all of our permitting agencies have worked collaboratively with us to ensure that this critical energy infrastructure project will meet the stringent environmental standards required by law and regulation.

The FERC stop work order in delays obtaining permits necessary for construction have impacted the cost and schedule for the project. As a result, project cost actions have increased the range of $6 billion to $6.5 billion to a range of $6.5 billion to $7 billion excluding financing costs. The Atlantic Coast Pipeline is pursuing a phase in service approach with its customers whereby we maintain a late 2019 in-service date for key segments of the project to meet peak winter demand in critically constrained regions. ACP will be pursuing a mid 2020 in-service date for the remaining segments. Abnormal weather and/or work delays may result in cost or schedule modifications in the future. We're currently working with customers to determine the rates and terms for interim service. Although we can't discuss the details of those discussions, we are confident that we will balance customers' needs and preserve the returns for HCP.

The supply inter project target in-service remains late 2019. Moving from gas transmission to gas distribution. We're making important progress on our gas utility gas pipeline replacement programs. We're investing over $300 million annually under existing rivals across our service territories to enhance the safety and reliability of the gas distribution service that we offer our customers. We are pleased with the meaningful role that Dominion Energy's playing in delivering critical energy resources to a wide variety of customers can across the spectrum of regulated energy infrastructure platforms.

We are constantly challenging the status quo to be sure we are adapting to meet the evolving desires of our customers. In fact, Dominion recently added a fifth element to our long-standing core values of safety, ethics, excellence and one Dominion Energy. Our new core value is embrace change. Which speaks to our focus on adapting our business to the accelerating pace of technological change and increased diversity in our society. This focus on innovation and change will broaden the transform to customer's experience, deliver affordable energy to our customers that is cleaner, more sustainable and more reliable.

Several years ago, when we divested our exploration of production portfolio, we set in motion the transformation of Dominion Energy from our heavily commodity exposed ENP a utility company into one of the world's finest regulated energy infrastructure companies. The offer to buy at Dominion Midstream as well as the sale of merchant power generation assets, and our interest in Blue Racer midstream will further reduce commodity exposure in several of our business model. We have identified and are actively developing the first set of regulated growth plans - growth programs across all of our operating units that will provide meaningful benefit to our customers, and aggregate to billions of dollars annually of gross capital investments which will support our earnings growth well into the next decade.

Let me turn now briefly to the offer we have made effectively to buy in Dominion Energy Midstream Partners. This decision was the result of a careful and patient evaluation of the sustainable ability of Dominion midstream to support Dominion Energy's growth capital plans at a cost of capital advantage. We took Dominion Midstream public in late 2014, since we took them public, there has been a gradual but absorbable shift in public capital market support to the MLP structure. That retreat accelerated meaningfully after March 1, 15 [ph] policy reversal on income tax recovery through cost of service rates. Public equity investment, they mastered limited partnerships this year is some 90% lower than in past years. And the outlook for recovery to historic levels is not promising.

In addition to weak capital market conditions, there has been an evolution of limited partner investor views on incentive distribution and governance rights, that erodes support for the structure that allowed Dominion Energy's general partner to exercise a level of operational control and retain an amount of financial upside that exceeded the level of our common unit ownership. For these reasons, Dominion Energy has provided Dominion midstream with an exchange offer that represents fair value or its underlying assets. Finally, I want to make a few comments on our offer to merge with SCANA Corporation. In North Carolina, we are pleased to have agreed to a settlement with the staff as credible for the commission and which we expect will be approved in December.

In South Carolina, the hearing of a number of related matters commenced this morning. Last week, we submitted an alternative customer benefit plan as an option for the PAC to consider, which provides significant customer value, while also preserving the economics of the transaction for Dominion Energy. While we prefer our original plan, we are comfortable with the new alternative and if the commission determines that the alternative plan is in the best outcome for customers we are willing to move forward with that solution. We are confident that we will complete our merger with SCANA later this year. In summary, we have successfully executed several initiatives to support our earnings and credit objectives and the sale of noncore unregulated assets which further improve our business risk profile and clarify our investment narrative.

We have delivered very strong earnings results that have been at/or above the high-end of guidance range for three straight quarters and we're continuing to expect the full year results will be above the midpoint of our narrowed guidance range. The company continued to demonstrate a culture of excellence in safety and operating performance. We are embracing enhanced reporting and disclosures around ESG matters and look forward to increased investor average on those topics. We are laying the foundation for the diverse portfolio of capital investment programs that will drive predictable growth well into the next decade.

We continue to progress towards completion of the Atlantic Coast Pipeline and supply better projects. And we are optimistic that we will complete our merger with SCANA late this year.

With that, we will be happy to take your questions.

[Operator]

[Operator Instructions]. And our first question comes from Shahriar Pourreza from securities.

[Shahriar Pourreza, Guggenheim Securities]

So very healthy transaction multiple on Blue Racer, so quick thoughts there as I'm assuming this kind of surpassed your internal assumptions but more importantly, can you just elaborate further on the earn outs and are they incremental to your current delevering timeframe assumption or do you assume the earn outs are in your plan. So what I am trying to get at is can we see a further reacceleration of your parent leverage targets?

[James Chapman, CFO & Treasurer]

It's Jim. We are very happy with that transaction. We satisfied with the value and the term. In particular, we are happy with the structure which allows us on to on the one hand derisk at 1.2, but on the other hand still participate in the growth of that business over the next three years would be up to $300 million of earn out payments. The detail - the very specific details of those earn outs are not going to be public that's between us and first reserve. But it's formally. So if Blue Racer revenues and EBITDA grow over the time period above some reasonable threshold, we participate in that every year, participate in that growth upto that $300 million maximum level. So very happy. As it relates to our credit profile, we are using the upfront proceeds this year to repay parent company debt. I think that brings us to where we need to be on a credit basis already. So the 300, the upto 300 over the next three years is just a part of the give-and-take on our overall plan of 6% to 8% earnings growth through 2020.

[Shahriar Pourreza, Guggenheim Securities]

Got it, okay. So it's incremental. Just real quick on ACP. We got the delay. We got the higher cost estimate, right? So can you elaborate a little bit further on how should we think about the impact of the projects returns versus your original estimate? Or does sort of tax reform kind of mitigate any return pressures versus what your original assumptions were? And then just real quick around sort of the delays. And it seems like your hedging yourself a little bit around potential for further delays. You know can just hit on a little of contingencies you have in place to sort of have in place to mitigate any further delays, I mean do you feel better about this updated and service date?

[Thomas Farrell, Chairman, President & CEO]

I'll answer the question on the return, Shahr, and Diane will talk about the hedging as you referred to it. Through this process, we've already been through one process with customers on the rates, and we'll continue to work with them. The returns are going to be very adequate and comments with the normal returns we get in projects like this in our midstream business. Now I'll turn it over to Diane.

[Diane Leopold, EVP, President & CEO, Gas Infrastructure Group]

This is Diane Leopold. Would say is when we first updated the cost estimates in light of the delay and the stop work order, we also updated all cost estimates for aspects - all aspects of our construction plan, including seasonality and when we're going to be building each of the spread and related productivity factors. We believe those are very reasonable for the plan that we have in place. And then we did add appropriate contingency level to cover a range of risk that are typical for our project at this phase.

[Operator]

The next question will come from Steve with Wolfe Research.

[Steven Fleishman, Wolfe Research]

So just agree on a rate sales price on Blue Racer. So just in the context of reaffirming your 6 to 8% growth. Does that fully include now all these asset sales and the debt paydown?

[James Chapman, CFO & Treasurer]

It does.

[Steven Fleishman, Wolfe Research]

Okay, great. And then Jim, you mentioned the business mix improvement. Is that so obviously - we can see that. Is it possible you also get some kind of business risk reassuring from the agencies. Or from these changes or is that not likely?

[James Chapman, CFO & Treasurer]

I think that's possible. We certainly see it that way as the reason we have done it in that manner. It's a little bit early to comment as we haven't really held those discussions yet with agencies. But that will be a fair argument to make in my view.

[Steven Fleishman, Wolfe Research]

Okay. And then, maybe one last question for Tom on the SCANA deal, I think you said you remain very optimistic on getting it done. It's obviously very noisy down there. And it's hard to - when you're watching it from the newspapers that necessarily be that strong on it. So could you maybe just give a little more rational why you're very optimistic about getting it done?

[Thomas Farrell, Chairman, President & CEO]

Sure, Steve. It is noisy. There's lot of things going on, there's lots of moving parts, but we we've been working on all those moving parts now for 10 months. We're very familiar with the folks that we're dealing with and what their interest are and their needs are. And in the end of the day, the Dominion offer or two offers now, our original offer which very popular with customers by the way, and the alternative offer which is popular with other kinds of customers are by far in a way, it's not even close, the best alternative for SCANA in the state of South Carolina, we were confident that the policymakers will come to that conclusion. We saw that last week or earlier I guess this week with the letter from Speaker Lucas for example, recognizing that among all the alternatives, this was the best.

[Operator]

The next question will come from Greg Gordon with Evercore.

[Gregory Gordon, Evercore ISI]

Can you hear me? There is no mention in the official slide deck or the release on dividend policy, so can you just restate where you are on the dividend policy, please?

[Thomas Farrell, Chairman, President & CEO]

No change for our dividend policy.

[Gregory Gordon, Evercore ISI]

So 10% growth for '19?

[Thomas Farrell, Chairman, President & CEO]

Yes, but it's obviously up to the board, it's up to the board but that's the expectation, yes.

[Operator]

The next question comes from Julien Dumoulin-Smith with Bank of America.

[Julien Dumoulin-Smith, Bank of America Merrill Lynch]

I just wanted to follow up little bit on the credit question still. Can you elaborate a little bit on the use of proceeds year useful rates are obviously very well on the manger proceeds there. by just thinking about the near-term and practically what you're doing?

[Thomas Farrell, Chairman, President & CEO]

Yes, so for the Blue Racer proceeds and the generation sale proceeds all expected this quarter. So we will take that and use it to repay parent level debt as mentioned. And we have kind of an array of debt in parent company, some of which is prepayable, some of which is commercial paper, which is kind of a shock absorber on our baseline timings of their receipt etcetera, cetera. So we have identified ways to use that cash this quarter and pay down debt. I would expect some Big Bang kind of liability management exercise with standards and the like. It's going to be managed on a more solid basis with our existing securities which are prepayable, et cetera.

[Julien Dumoulin-Smith, Bank of America Merrill Lynch]

And maybe to clarify that. Just obviously it's very good multiples here. I mean net-net, how do you see it in terms of accretion, dilution on an earnings basis relative to the liability management?

[James Chapman, CFO & Treasurer]

Given the sales price - prices achieved, and given the reduction in interest from the debt paydown, and given the likely receipt of earn out proceeds on the Blue Racer side, we are very comfortable with that impact is modest and in line with our 6% to 8% growth profile through 2020.

[Julien Dumoulin-Smith, Bank of America Merrill Lynch]

Got it, excellent. And then just a quick clarification on SCANA. Just with respect to the deal and of course the court case pending, how do see that court case. is there a pathway to that court case and the ability to close the transaction given any net range of outcomes?

[Thomas Farrell, Chairman, President & CEO]

Well, one of the conditions we have to close is to no change in law, that court case with change law as we - as it existed when we made the decision transaction. But no orders being entered. Lots of rumors running around South Carolina and I just wouldn't believe everything one reads in the newspaper about every single thing everybody is saying. We're going to continue to work with all the parties including that we have the lawsuit, we're not a party of the law suit. But obviously the interest of that law suit. As well as what's going on at the Public Service Commission. So all these things have to be resolved without affecting financial parameters that we entered into the original financial parameters we entered into with SCANA in January. Or we won't close. I'm optimistic that that will all - we work our way through all of it, and we will close by the end of the year.

[Operator]

The next question will come from Praful Mehta with Citigroup.

[Praful Mehta, Citigroup]

So quickly just following up on SCANA. I wanted to understand what prompted the new proposal? Was there some feedback you received that suggested this would go better? And is there room for another proposal? Or this is it at this point, this is what's on the table and you're expecting one of these to go through?

[Thomas Farrell, Chairman, President & CEO]

We have been in dialogue with people, variety of customers, customer classes, policymakers, all name it for literally last 10 months. And it became apparent to us that there was the significant interest by many in moving the refund into more of a non-rate going reduction. So we work through that and came with the proposal that you saw us put forward I guess it was last week. Things are all sort of running here. I guess it was last week that we put that proposal out. But that's all, there's two proposals, either one we're comfortable with. We don't expect any changes to either one of them.

[Praful Mehta, Citigroup]

Got you. Fair enough. And then secondly, in terms of Blue Racer, the $300 million earn out, Jim, is that expected to show up in operating earnings, is that going to be removed more as onetime?

[James Chapman, CFO & Treasurer]

The $200 million, most likely in operating earnings.

[Praful Mehta, Citigroup]

I got you. And finally just on ACP. If you have a - you kind of highlighted the point that you want to hit the late 2019 timeframe to meet the critical winter period. If you do not hit that timeframe, is there any implications from an earnings or any penalties perspective?

[Diane Leopold, EVP, President & CEO, Gas Infrastructure Group]

No, I wouldn't expect any change in earnings. The construction plan and costs are going to be similar regardless given the AFUDC that we have when we get into service.

[Operator]

Thank you. This does conclude this morning's conference call. You may now disconnect your lines, and enjoy your day.