Dominion Resources' (D) CEO Thomas Farrell on Q2 2014 Results - Earnings Call Transcript

Dominion Resources, Inc. (NYSE:D)

Q2 2014 Earnings Conference Call

July 30, 2014 10:00 AM ET

Executives

Thomas Hamlin – VP, IR

Mark McGettrick – EVP and CFO

Thomas Farrell – Chairman, President and CEO

Paul Koonce – EVP and CEO, Energy Infrastructure Group

Analysts

Julien Dumoulin-Smith – UBS

Greg Gordon – ISI Group

Steve Fleishman – Wolfe Research LLC

Dan Eggers – Credit Suisse Securities LLC

Paul Fremont – Jefferies

Matthew Tucker – KeyBanc Capital Markets

Operator

Good morning and welcome to Dominion’s Second Quarter Earnings Conference Call. On the call today we have Tom Farrell, CEO; Mark McGettrick, CFO and other members of senior management. At this time, each of your lines is in a listen-only mode. At the conclusion of today’s presentation we will open the floor for questions. At that time instructions will be given as to the procedure to follow if you would like to ask a question.

I would now like to turn the call over to Tom Hamlin, Vice President of Investor Relations and Financial Planning for the Safe Harbor statement.

Thomas Hamlin

Good morning and welcome to Dominion’s second quarter 2014 earnings conference call. During this call we will refer to certain schedules included in this morning’s earnings release and pages from our earnings release kit. Schedules in the earnings release kit are intended to answer the more detailed questions pertaining to operating statistics and accounting. Investor Relations will be available after the call for any clarification of these schedules.

If you have not done so I encourage you to visit the Investor Relations page on our website, register for email alerts and view our second quarter earnings documents. Our website address is www.dom.com. In addition to the earnings release kit we have included a slide presentation on our website that will guide this morning’s discussion.

And now for the usual cautionary language, the earnings release and other matters that will be 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 Report on Form 10-K and our Quarterly Report 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 measures of our Company’s performance that differ from those recognized by GAAP. Those measures include our second quarter operating earnings and our operating earnings guidance for the third quarter and full year 2014, as well as operating earnings before interest and tax commonly referred to as EBIT. Reconciliation of such measures to the most directly comparable GAAP financial measures we are able to calculate and report are contained on Schedules 2 and 3 and Pages 8 and 9 in our earnings release kit.

Joining us on the call this morning are our CEO, Tom Farrell; our CFO, Mark McGettrick, and other members of our management team. Mark will discuss our earnings results for the second quarter and our earnings guidance for the third quarter and full year 2014. Tom will review our operating and regulatory activities and review the progress we have made on our growth plans.

I will now turn the call over to Mark McGettrick.

Mark McGettrick

Good morning. Dominion reported operating earnings of $0.62 per share for the second quarter of 2014, which was in the upper half of our guidance range of $0.55 to $0.65 per share. Excluding the $0.02 per share impact of mild or the normal weather second quarter operating earnings would have been at the top of our guidance range. Positive factors during the quarter were lower than expected operating and maintenance expenses, lower than expected interest expenses and a lower effective tax rate. Offsetting these positives were lower kilowatt hour sales due to mind weather and the impact of our unplanned outage at our Millstone nuclear plant.

On the year-to-date basis our 2014 operating earnings are $0.22 per share better than the first-half of 2013. GAAP earnings were $0.27 per share for the second quarter. The principal difference between GAAP and operating earnings was a $191 million charge associated with Virginia legislation signed into law in April that permits Virginia Power to recover through base rates 70% of the cost previously deferred or capitalized through the end of last year relating to the development of third nuclear unit at North Anna and the development of offshore wind facilities.

A reconciliation of operating earnings to reported earnings can be found on schedule 2 of the earnings release kit.

Now moving to results by operating segment; at Dominion Virginia Power, EBIT for the second quarter was $243 million, which was below the midpoint of its guidance range. Kilowatt hour sales were below expectations largely due to milder than normal weather. Excluding weather, sales were up about 1% year-to-date, somewhat below expectations. Second quarter EBIT for Dominion Energy was $215 million, which was near the top of its guidance range. Higher transportation and storage revenues and lower operating expenses drove the strong results.

Dominion Generation produced EBIT of $306 million in the second quarter, which was below the midpoint of its guidance range. EBIT from utility generation was below expectations due to lower than expected kilowatt hour sales reflecting mild weather. EBIT from merchant generation was impacted by an unplanned outage at Millstone. A loss of offsite power caused both units to shut down automatically as designed. Millstone unit 2 was unavailable for three days and unit 3 was unavailable for nine days.

On a consolidated basis, our effective tax rate was 31% for the quarter, which was below our guidance of 33%. Interest expenses were also a little lower than our expectations. Overall, we are very pleased with our second quarter and year-to-date operating results.

Moving to cash flow and treasury activities, funds from operations were $1.7 billion for the first half of the year. Regarding liquidity; we had $4.5 billion of credit facilities at the end of the second quarter. Commercial paper and letters of credit outstanding at the end of the quarter were $3.2 billion. And taking into account cash and short-term investments we ended the quarter with liquidity of $1.6 billion.

During the second quarter we executed final agreements with our existing credit providers to increase our credit lines by $1 billion from $3.5 billion to $4.5 billion, the terms of which will run for five years. Gas Holdings was also added as a potential borrower under these facilities. For statements of cash flow and liquidity please see pages 14 and 25 of their earnings release kit.

Now moving to our financing plans, earlier this month we issued $1 billion of mandatory convertible securities. The issue was very well received by the market and we thank those of who participated. During the second quarter, we also filed the Dominion Gas Holding’s S4 registration statement with the SEC. This quarter’s 10-Q filing will include financials for Dominion Gas for the first time. The $1.2 billion of 144A bonds issued last fall are expected to be exchanged for registered securities next week.

We’ve also filed a combined Shelf registration for future debt issuances including expectations for debt issue of approximately $1 billion for Dominion Gas in the fourth quarter. On March 28th we filed an S-1 registration statement with the Securities and Exchange Commission for initial public offering of common units representing limited partner interest in Dominion Midstream Partners LP, a master limited partnership whose initial asset will be a preferred equity interest in Cove Point. We expect to commence the offering later this quarter after receiving work approval to begin construction of the Cove Point export project.

Now to earnings guidance. Our operating earnings guidance for the third quarter of 2014 is $0.90 to $1.05 per share compared to $1 per share for the third quarter of 2013. Mild weather impacted last year’s third quarter earnings by $0.04 per share. Last year’s results also included $0.07 per share from the contribution of the TL 388 pipeline to Blue Racer.

The midpoint of this year’s third quarter guidance range is flat to last year’s results when normalized for weather and the asset drop. Positive factors for the quarter included returns in normal weather, higher revenues from our Rider projects and higher merchant generation margins. Offsetting factors include higher interest expenses and higher operating and maintenance expenses. Our operating earnings guidance for the year remains at $3.35 to $3.65 per share. Through the first half of the year we are up $0.22 per share or 15% over last year.

As to hedging you can find our hedge positions on page 27 of the earnings release kit. Since our last earnings call we have made no changes to our hedges at Millstone.

So let me summarize my financial review. Operating earnings were $0.62 per share for the second quarter of 2014, in the upper half our guidance range. Excluding the impact of mild weather, earnings would have been at the top of our range. Lower than expected operating expenses, interest and taxes offset mild weather and the impact of the unplanned outage at Millstone. Year-to-date operating earnings were $0.22 per share or 15% higher than a comparable period in 2013.

Our financing plans for the remainder of 2014 include a debt offering for Dominion Gas Holdings and the initial offering of Dominion Midstream Partners. And finally our operating earnings guidance for the third quarter of 2014 is $0.90 to $1.05 per share. Our operating earnings guidance for the full year remains $3.35 to $3.65 per share.

I will now turn the call over to Tom Farrell.

Thomas Farrell

Good morning. Our business units delivered strong operational and safety performance in the second quarter. Our nuclear fleet continues to operate well completing two refueling outages last quarter. As Mark mentioned a loss of offsite power triggered an automatic shutdown at Millstone power station on May 25. The loss was due to a problem with the local utilities of substations not the generating facility and backup emergency diesel generator maintained both units in a safe and stable condition until offsite power was restored.

We continue to make progress on our growth plans. Construction of the 1,329 megawatt Warren County combined-cycle plant is progressing on schedule and on budget. Start-up and commissioning activities are underway and one of the combustion turbines completed first fire last week. The project is about 90% complete and is expected to be in service during the fourth quarter.

Last August we began construction of the 1,358 megawatt combined-cycle facility in Brunswick County Virginia and expect that plant to be in service by mid-2016. Currently there are about 680 workers on the site. Procurement is 92% complete and all major equipment has been delivered. Overall construction is about 20% complete and is on time and on budget.

The conversion of Bremo Units 3 and 4 from coal to natural gas was completed during the second quarter on time and on budget. Construction is also on schedule for six solar projects totaling 139 megawatts purchased earlier this year from Recurrent Energy. Long term power purchase, interconnection, engineering, procurement and construction as well as operation and maintenance agreements have been executed for each of the projects. All these facilities are expected to reach commercial operation later this year.

In the second quarter Dominion acquired two solar development projects in Tennessee and announced plans to acquire [seven] projects in California latter this year. These acquisitions will bring our total solar generating portfolio to 232 megawatts. Once constructed, all of these projects are expected to qualify for the federal investment tax credit. We’re working on identifying and acquiring additional solar projects to support our plan to grow the company’s solar portfolio by up to 250 megawatts this year.

At Dominion Virginia Power we have a number of electric transmission projects at various stages of regulatory approval and construction. During the second quarter $394 million of transmission assets were placed into service, including the Mt. Storm to Doubs 500 KV rebuilt project which was finished a year early. Year-to-date in service total is over $500 million. Electric transmission’s capital budget for growth projects, including [inaudible] maintenance and security related investments continues to remain strong through the remainder of the decade. Progress on our growth plans for Dominion Energy continues as well. Construction is underway on the Allegheny Storage Project and we have begun to accept injections.

Construction is also underway on our Natrium-to-Market project. Both of these are on budget and on schedule to commence full service by November. We’ve had continued success in providing incremental transportation service as a result of the growing production within our region. We described these as producer outlet projects taking advantage of the flexibility of Dominion Energy’s pipeline network to provide incremental services with shorter lead times and relatively small capital investment.

Dominion Energy signed agreements for two new expansion projects during the second quarter; the [inaudible] project and Western Access 2. Since last year we have announced nine such projects totaling just under 2 billion cubic feet per day by 2016. Two of the projects [Whitey Receipts] and Lebanon II were replaced into service in June both on time and on budget.

On our last call we announced that Dominion Southeast reliability project, a non-binding open season for firm transportation services through a new pipeline expanding from the Marcellus and Utica production regions to markets in Virginia and North Carolina. This proposed 42 inch pipeline would extend approximately 550 miles.

The Southeast project is designed to provide initial service of up to 1.5 billion cubic feet per day. The response has been very strong. We’re in negotiations with multiple parties and hope to secure necessary agreements to solidify our project plan within the next 60 days.

Subject to the conclusion on negotiations we expect to submit a FERC pre-filing in the fourth quarter with firm transportation service available as early as November 2018. The Utica region continues to be very active. Through the middle of July a total of 1,386 horizontal Utica permits have been issued and 942 wells have been drilled, an increase of 33% in wells permit and 39% in wells drilled so far this year. The number of producing wells has increased by 75% from 270 to 472 also in just the past six months. A second, 200 million cubic feet per day processing plant at Blue Racer’s Natrium facility became operational in the second quarter and based on new wells coming online should be at full capacity soon.

Fractionation capacity at Natrium will be expanded from 46,000 barrels per day to 126,000 barrels by March of next year. In addition a 2 million cubic per day processing plant at Burn, Ohio is presently under construction and is expected to begin operations in the fourth quarter.

Now an update on our Cove Point project, in May the Maryland Public Service Commission approved the CPCM an air permit. Last week we received approval from the State Board of Public Works to construct a temporary pier. On May 15, FERC issued its environmental assessment. We expect to receive FERC order approving the project in the next few weeks and begin construction shortly thereafter. The Cove Point Liquefaction is expected to begin operations during the fourth quarter of 2017.

Before I answer questions I want to comment on the recent Greenhouse Gas emission goals introduced by the environmental protection agency. As you know EPAs proposed guidelines for states to follow in developing plans to reduce tier two emissions from existing power plants. We like other utilities are evaluating the guidelines and the proposed state reduction targets. We certainly believe it will increase the industry’s utilization of natural gas current production which in turn should increase the need for pipelines and other related infrastructure.

As the states develop and the EPA approves their respective compliant plans we will continue to evaluate the challenges and the many opportunities these changes will bring. So to summarize, our business has delivered strong operating and safety performance in the second quarter. The Warren county and Brunswick construction projects are proceeding on time and on budget. Our Blue Racer joint venture Dominion East, Ohio and Dominion Transmission continue to capitalize some of the growth opportunities in the Marcellus and Utica shale regions.

We look forward to receiving our remaining regulatory approval, to begin construction of our Cove Point Liquefaction project. And finally we look forward to our initial public offering by Dominion midstream partners later this quarter. Thank you and we are ready to take questions.

Question-and-Answer Session

Operator

Thank you. At this time we’ll open the floor for questions. (Operator Instructions). Our first question will come from Julien Dumoulin-Smith with UBS.

Julien Dumoulin-Smith – UBS

Can you hear me?

Thomas Farrell

We can hear you.

Julien Dumoulin-Smith – UBS

Excellent so first just a little bit of clarity on the Southeast project if we could, can you talk a little bit about the competitive dynamics obviously you talked about a pretty expedited timeline here to get the details. Could you just frame it little bit, where you’re thinking about those customers and how you’re seeing competitors frame up, I mean it seems like you’re down at the end of the fairway here in terms of getting the project off the ground now?

Thomas Farrell

Good morning. We are, as I said in negotiations with a number of parties. We expect to assuming they are successful conclude all that within the next 60 days. It’s a big pipe, it’s 550 miles, 42 inches is a big pipe, initial sizing would contemplate $1.5 billion or 1.5 billion a day of capacity. That necessarily means we’re concentrating on end users rather than producers. There’s two ways to go about that, one is to get demand from producers. But producers got to sell to somebody. So our concentration is on developing a pipe that would be useful for end users. But it all we’ll have to see how it goes but we expect to conclude all of that within about 60 days.

Julien Dumoulin-Smith – UBS

Excellent, can you just clarify quickly when it comes to in next few weeks what exactly is your expectation for approval. This is in theory outside of the context of an open meeting for Cove Point?

Thomas Farrell

The next meeting your point Julien of course has assumed incorrectly that FERC does not have a public meeting in August, their next public meeting is in September. So the answer to your question is yes. FERC actually does most of its orders these days Julien outside the public meetings. The commentary had closed in June. All the comments have been posted and they are going through their work. They work very diligently at FERC year around. So we’re hopeful that we would get what we would call a notational approval in next few weeks. If not that would take us through the public meeting in September.

Julien Dumoulin-Smith – UBS

Excellent and then the last detail do you almost had the solar mile marker you set for yourself here, why 250 in terms of total megawatts, I mean is there a potential of scale of the renewables business little bit more is that really kind of what the tax have to take cost for?

Thomas Farrell

It doesn’t have anything to do with the tax upside. We saw 250 was a number that would allow us to get really experience with a variety of different technologies in different places to see how they work and we’re continuing to evaluate our solar strategy as we go through the balance of the year.

Julien Dumoulin-Smith – UBS

Excellent thank you very much.

Thomas Farrell

Thank you Julien.

Operator

Thank you. Our next question will come from Greg Gordon with ISI Group.

Greg Gordon – ISI Group

Thanks good afternoon Julien covered a couple of my questions, can you talk a little bit about what you’re seeing in terms of whether normal demand sorry if I missed you earlier in the presentation I hopped on a little late but in particular it looks like industrial sales were up quite substantially in the quarter, and have you seen your business get back on track after the setbacks we saw last year because of the government issues?

Mark McGettrick

Greg this is Mark. Actually we’re little disappointed with sales year-to-date. We had hoped to be on a weather normalized basis about 1.5% sales growth this year over last and we’re lagging that down around 1%. We had seen very strong industrial sales growth, although again industrial processes are pretty small piece of the pie. We’ve also seen extremely strong datacenter growth but at the same time our residential and smaller commercial growth has lagged what we would have expected to be the growth rate.

So right now we’re looking at about 1% and we hope these other two areas recover as we ramp up throughout the year and to just remind you of the sensitivity a 1% change in sales for us depending on customer class is between $0.04 and $0.05, so manageable number for us but we like to see a little stronger.

Greg Gordon – ISI Group

Okay so you’re talking about a $0.02 or $0.03 issue if you are 50 basis points behind?

Mark McGettrick

If we finish at on 1% versus 1.5% that’s right.

Greg Gordon – ISI Group

Okay do you have any sense of what’s driving the shortfall in residential, was it just slower than expected growth in housing, is it higher than expected conservation, is it distributed DG or is it too difficult an analysis to nail that down?

Mark McGettrick

No, I think we lean much more toward – housing is not recovering quite as quickly as we thought. Although we have growth in new connects year-over-year it’s not like we’ve had historically so we’re going to need to have more new housing starts to be able to achieve the residential growth rate that we want.

Greg Gordon – ISI Group

Great, can I ask one follow up question on the pipeline project here, your body language is pretty strong on being able to get to the finish line on a rather large project, there are competing projects in the region, what gives you the confidence that you have the competitive advantage on this pipe to bring the commercial viability?

Thomas Farrell

Well Greg, first good morning, there are a lot of gas; there is a lot of infrastructure even to get out of the basin. So that would necessarily conclude that only one pipe lever be built out of the basin. And you have to draw your conclusions, we had a very successful open season and we are working hard to conclude it within the next 60 days.

Greg Gordon – ISI Group

Thanks guys, take care.

Thomas Farrell

Thank you.

Operator

Thank you. Our next question will come from Steven Fleishman with Wolfe Research.

Steve Fleishman – Wolfe Research LLC

Yeah hi good morning just first, I know every fall you guys give your kind of five year CapEx update and I’m sure now not the time to go through the details of that but maybe at a high level you can talk a little bit about thematically where things are headed there?

Thomas Farrell

Steve you’re correct. We typically give an update on five year capital outlook in the fall and we would expect to continue that trend this fall. I think by way of comparison as we commented quickly we had another year or two but we expect our capital expenditures actually be up over the five year period from what you saw last year. We’ve announced a lot of new projects particularly in our energy business, we’ve announced the solar projects this year and so we would expect CapEx to be up as we present this fall.

Steve Fleishman – Wolfe Research LLC

Okay. And then just one technical issue, you mentioned normal weather in terms of your guidance for Q3 and the rest of the year and seems like it’s been anything but that. So just as you are thinking about kind of the weather issues for the rest of the year do you have ability to offset if things are a lot below normal this summer or should we assume it just is what it is and you will just update us when we get to the end of the quarter?

Thomas Farrell

Yeah, I think it’s also really Steve, it is true in July you know weather cost us about $0.03 for the month but you know August is a strong month for us and September can be an unusually strong month depending on what the pattern is. So it’s not being conceivable that would be made up just in weather as we go through the rest of the summer or the rest of the year.

So I think you know we’ll hold for an update on that until we see a larger piece of what the quarter is going to look like and what the forecast for the fourth quarter is going to look like.

Steve Fleishman – Wolfe Research LLC

Okay, great. Thank you very much.

Operator

Thank you. Our next question will come from Dan Eggers with Credit Suisse.

Dan Eggers – Credit Suisse Securities LLC

Hi, Good morning guys.

Thomas Farrell

Good morning, Dan.

Dan Eggers – Credit Suisse Securities LLC

Just following-up on the pipeline question, with your end user demand kind being the driver for contracting. Is that customer base picking this up because they are trying to get to a cheaper form of gas or is this incremental demand that they are trying to service with new gas generation and that sort of stuff?

Thomas Farrell

Dan I don’t think that we should talk to what our customer are contemplating but as we have said when we have talked about the Southeast pipe and as we have gone around and spoken, not only to the customer but to the communities involved in the political establishments that will be affected. It’s important the Southeast needs a little more, as there is no question that greenhouse gas law is going to move people to more gas. It’s just going to happen. Southeast does not have an pipeline infrastructure to deal with that situation and one single pipe can get challenged for operational issues and you just can’t that’s not going to be tolerable for folks as we go through the next few decades.

So I think the reliability is very part of it and having access to a different basin and that basis potential differentials between what the folks have been use to for all these years with Gulf of Mexico et cetera having Southeast access to the Marcellus and Utica makes it very attractive that’s why you have all these competing projects.

So let’s see how it goes but I think that’s a combination of reliability, concern about expansion potential for various fleets and having access to a different basin. And like I said there as you all have noted there is a lots of projects, maybe ours won’t come to fruition. We feel good about where we are and there are maybe others.

Dan Eggers – Credit Suisse Securities LLC

Okay, thank you for that. And then Tom the Artificial Island transmission project was kind of the first test of [order 1000s] going to work. Given that it went to an incumbent for the right of ways, how do you guys think about kind of these transmission opportunities outside of our footprint, is that affecting maybe some capital allocation decisions?

Paul Koonce

Dan good morning this is Paul Koonce. Yes know the initial decision went to the incumbent but last week the PJM Board sent a notice to the four finalists, Dominion being the one that they would like to take a second look at the PJM manager’s decision. So we are still very much engaged on the opportunity presented by Artificial Island. We have in the past challenged PJM manager’s decision and prevailed. We can’t say for certain that we will do so again but that decision, about who builds Artificial Island is still an open question.

Dan Eggers – Credit Suisse Securities LLC

Okay, thank you and then I guess just last question on guidance for the quarter with the $0.03 negative in July, does that kind of calibrate us to a little bit below the midpoint from starting-point today or did the range already take into account this recent drag in July?

Mark McGettrick

Dan, it’s Mark. We always put ranges out based on normal weather just been our practice. So if that $0.03 holds and if there is no offsets in other areas that would guide you to below the midpoint. But let’s see what the rest of the quarter present to us in terms of weather and other earnings drivers.

Dan Eggers – Credit Suisse Securities LLC

Very good, thank you guys.

Thomas Farrell

Thank you.

Operator

Thank you. Our next question will come from Paul Fremont with Jefferies.

Paul Fremont – Jefferies

Thank you very much. I guess my first question relates to the 250 in solar. Can you give us an idea of what that would do to your effective tax rate next year because this year I think you are like at a 32% projected tax rate?

Thomas Farrell

Well our assumption on that Paul is that firstly all those projects will be completed in 2014. So for the effective tax rate for next year that wouldn’t be an impact.

Paul Fremont – Jefferies

What I’m saying with the production tax credits wouldn’t that – that would presumably lower your effective tax rate next year?

Thomas Farrell

Most of the tax credits associated with these projects are one time credits, investment tax credits that we would take in 2014.

Paul Fremont – Jefferies

Okay, and then can you just give us a sense of what is driving the decision to either stay at 250 megawatts or potentially move to a higher level in terms of solar program?

Thomas Farrell

We have been looking across all of our – as we do constantly, we go into a process looking all of our capital allocation, what all of our opportunities re. Solar we think is going to be – is going to an increasing part of the energy infrastructure mix, being able to do it at utility scale we think is going to important particularly with this – and we thought that a couple of years ago which is why we started down this path but in particular because of the proposed greenhouse gas rules, and the four pillar or cornerstones, whatever you want to call them that EPA has set out as guide posts for states, we think solar could be useful across our service territories, not like it is in many other parts of the country. But we ought to be able to do some advances there.

So we are learning, we are learning about installation and maintenance et cetera as we continue to look at whether we will deploy it elsewhere. So I think the short answer is to say, we are going to continue to evaluate. We may decide to stay at 250 and we may decide to expand it. But we will know more about that later in the year.

Mark McGettrick

Hi, Paul this is Mark. Just to give you a data point on that. This is not new for us do you recall eight or nine years we built several wind projects earlier in the development period for the same reason that Tom just outlined on solar. But we elected not to expand the wind program because it didn’t fit our business profile going forward. So the solar development scale here is at about the same level as we started wind. We’ll just see what happens to it going forward.

Paul Fremont – Jefferies

And then my last question is with respect to the construction of Cole Point do you have any provisions with the contractor’s sort of guaranteeing that will be competed in 2017?

Paul Koonce

Paul, this is Paul Koonce, we have a good EPC contract we have a certain amount of time built into the schedule to provide for certain permitting delays and none of that has been impacted to-date.

Paul Fremont – Jefferies

Okay. So there is nothing that is sort of ironclad in your contract that it needs to be completed by the end of ‘17 but right now everything look as if it will be completed by ‘17?

Thomas Farrell

Everything is right on schedule.

Paul Fremont – Jefferies

Thank you.

Operator

Thank you. Our next question will come from Matt Tucker with KeyBanc Capital Markets.