Cleco Corporation (CNL)
Q2 2008 Earnings Call
August 6, 2008 11:00 am ET
Ryan Gunter - Investor Relations
Mike Madison - President and Chief Executive Officer
Russell Davis - Vice President and Interim Chief Financial Officer
Darren Olagues - Senior Vice President, Cleco Midstream Resources LLC
Dilek Samil - President and Chief Operating Officer, Cleco Power LLC
Paul Ridzon - KeyBanc
[Shaar Aruzia] - Calyon Securities
Michael Lapides - Goldman Sachs
[Philips Gray] - White Asset Management
Patrick McKinley - Citidon & Company
Oliver King - Zimmer Lucas
[Edu Marty] - Debt Capital Advisors
David Dickens - Davin Capital Management
Ryan Gunter – Investors Relation
Previous Statements by CNL
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Before we begin, please keep in mind that during conference call today, we will make some forward-looking statements. These statements are subject to many risks and uncertainties. Actual results may differ materially. Please refer to the risk factors and cautionary notice regarding forward-looking statements and various reports filed with the Securities and Exchange Commission including our 2007 annual report on Form 10-K and our first and second quarter 2008 quarterly reports on Form 10-Q.
And with that, I will turn over to Mike.
Mike Madison – President and Chief Executive Officer
Thank you, Ryan and good morning everyone. I can’t tell you how pleased I am to report on the steady progress that we’ve made in executing our strategy, reaching some significant milestones and marking to identify new opportunities. Most significantly, in our regulated Cleco Power business, we filed a new rate plan with Louisiana Public Service Commission on July the 14th, of this year.
While the filing is the result of many months of hard work, it is only the beginning of a yearlong regulatory process with the LPSC. You may recall that after the LPSC granted its certificate of public convenience and necessity in May of 2006, which was the authorizing event for the construction of Rodemacher Unit 3, the Commission directed Cleco Power to file a full rate case 12 months prior to the expected commercial operation date. Now, in addition to this significant event, Cleco Power recently signed an amendment to our engineering procurement and construction contract with Shaw Contractors, Incorporated to move forward the substantial completion date of Rodemacher Unit 3, to June 30 of 2009, approximately three, four months ahead of the original schedule. Therefore, we expect to have our new rate plan in effect as Rodemacher Unit 3, becomes commercial operation in less than one year from now.
Let me remind everyone, the savings provided by the fuel diversity strategy of Rodemacher 3 is putting Cleco Power in a unique and enviable position. Under our proposed rate plan, we are lowering residential customers bill, bills that are covering the $1 billion capital cost of the new unit plus the rising cost of doing business. If approved the new rate plan also gives Cleco Power the opportunity to improve its allowed rate of return. We are requesting of a 11.25% return on equity as a part of the new rate plan, I’m sorry, that’s a 12.25% return on equity as part of the new rate plan compared to the capped return on equity of 11.65, which we are currently allowed.
I’m also very pleased to finally be able to report that in addition to this filing we have the opportunity to report a request for recovery of approximately a $140 million for a transmission upgrade project in the Acadia load pocket area. We finally have a very specific project, transmission project to pursue. This project will provide much needed reliability in this area and once complete will greatly reduce, if not eliminate that area’s dependence of Cleco Power’s Teche units. We continue to collaborate with all parties involved in the project to design and achieve approval for a solution that will be of great benefit to the region.
In addition to this transmission project, Cleco Power continues to develop projects that will enhance our overall system performance. An example of this is a $31 million Black Start generating project located at Teche Power Station, if approved the project will be constructed during the 2008 through 2010 timeframe.
As we walk through the regulatory process for Rodemacher Unit 3 and other projects the construction of Rodemacher 3, as I’ve said continues to progress ahead of schedule and on budget. We are now in the 27 month of construction and through June 30, we have spent approximately $772 million on the project, also this fall we will cut the ribbon on our new port facility adjacent to the unit on the Red River. We will then start stock piling limestone and petroleum coke, the fuel for Rodemacher Unit 3, which is a byproduct of Louisiana’s refinery industry.
Now, in addition to the rate case on our Rodemacher Unit 3 project, we continue to move forward and on schedule with our 2007 long term request for proposals that we issued last October. Keeping with the current schedule, we’re still planning to notify winning bidders in mid August, hopefully by the end of this year or early in 2009, we will file our certification with the LPSC and announce the winning bid.