Nov 2, 2007
Executives
Dale Jahr - Director of IR David Emery - Chairman, Presidentand CEO
Analysts
Neil Stein - Latin Capital Gordon Howald - Caylon Ella Sansibar - RBC Capital Markets
Operator
Ladies and gentlemen thank youfor standing by, and welcome to the Black Hills Corp. Quarterly Earnings Call.At this time, all participants are in a listen-only mode.
Later, we’ll conductthe question-and-answer session. Instructions will be given to you at thattime.
(Operator Instructions). As a reminder, today's conference call is beingrecorded.
I would now like to turn theconference over to Mr. Dale Jahr.
Please go ahead.
Dale Jahr
Good morning everyone and I’dlike to add my welcome. Thank you for joining us.
We are conducting thisconference call a little differently this morning. Mr.
David Emery, ourChairman, President and CEO, will be joining us from Cheyenne, Wyomingwhere our Board of Directors held its quarterly meeting. Of course, Cheyenne is home to ourutility, Cheyenne Light, Fuel & Power.
I am in our Rapid City headquarters, handling thelogistics of this call and other matters related to our earnings release ofyesterday. Our CFO, Mark Thies, could not join us in the call this morning.
I remind the audience that thisconference call may include forward-looking statements as defined by the SEC.These statements concern our plans, expectations, and objectives for futureoperations. Such statements are based on what we believe are reasonableassumptions and based on current expectations of industry and economicconditions and other factors.
However, risks and uncertainties could causeresults to differ materially from those in forward-looking statements. I referyou to the cautionary language published in our press release and other publicdisclosures.
Again, this discussion will beled by Mr. David Emery, and Dave would like to start off with the review of therecent results before we open the call to you r questions.
Dave?
David Emery
Thank you Dale and I'll reiteratemy welcome to everybody. Thanks for being on the call today, we appreciate it.
2007 continues to be a good yearfor Black Hills Corporation. And in the third quarter, which we are here totalk about today, we posted some pretty good operating results in a quarterthat historically is the weaker quarter for us, primarily due to seasonality ofsome of the energy markets.
We also, during this quarter, made significantprogress on some of our key strategic initiatives, and I'll talk about thatmore later. First, yesterday, our Boardapproved an increase in our quarterly dividend of $0.35 a share.
That's up apenny, which would equate to a $1.40 in an annual dividend. 2007 represents the 37thconsecutive year dividend increases, and this will be the 38th year after we gothrough another year here with this penny increase.
We typically do this dividendincrease after the results and in conjunction with our year-end results'disclosures. This year, as I think is a signof confidence in our confidence in the future, the Board accelerated theincrease to this quarter instead, which I think, bodes well for the future for Black Hills.
Looking at third quarter results,the net income for the third quarter was $17.5 million or about $0.46 a shareversus $22.3 million or $0.66 a share last year. One thing I will note is thatwe did in February issue about 4.17 million shares, which was roughly an 11%dilution in our outstanding shares of stock.
If you look at continuingoperations in the third quarter, the number was $17.6 million or $0.46 againcompared to 22.2% or $0.66 in 2006. If you look at the year-over-yearcomparison, there is a couple of one-time issues that impacted each year.
Firstin 2007, couple of items and I'll talk about them both more a little later, butwe had a $1.9 million impairment of our Ontario, California qualifying facilitypower plant. We also had a couple cents inexpenses, $0.02 in expenses, related to our Aquilatransaction, which were ongoing and progressing towards closing.
In 2006, we had a couple positiveitems; one was a $2 million, just under $0.06 beneficial tax adjustment and$1.9 million insurance proceed that we received due to our Las Vegas plant outage. So if you take outthose items quarter-over-quarter were relatively comparable slightly down, butfairly consistent quarterly performance.
Switching to the business unitsand operations, in almost all of our business units with the exception of oneand I will talk about that, we had either normal or a little better than normaloperations in the business units. Our utilities performed well.
Black HillsPower was essentially flat, nominally greater than last year in the samequarter. Significantly higher numbers as far as just our native load, we had agood native load year as well as the impacts of the rate case that went intoeffect January 1.
Those were offset by much lowermargins from off-system sales in this quarter. The quarter was just really weakfrom a market perspective and in addition our native load use with higher,which meant we had less of our low-cost resources to sell into the market.
Cheyenne Light, good performancecontinuing there, more aggressive particularly related to in operating expensereductions and more aggressive on some of our collections activity and less baddebt expense as a result of that. Our power plant availability and ourregulated fleet was very good.
A little bit of maintenance outage at some ofour coal facilities, but other than that availability was very, very high. In the wholesale energy side,energy marketing is continuing a great year.
Year-over-year, this is a couple $100,000gain in net income, $2.3 million versus $2.1 million last year. Strongerrealized margins were offset by higher expenses particularly related tocompensation and then also mark-to-market costs as well.
On the bright side, a goodpositive increase in volumes marketed for both gas and crude oil continuingthat slow steady growth trend we've had in circle. They have just had a greatyear because of all the gas price volatility primarily basis differentialsbetween Rockies and some of the other parts ofthe country.
Power generation was relatively anormal year, a normal quarter with the exception of an impairment, on our Ontario, Californiaplant. We've disclosed in some of our prior 10-Ks and Qs that we had a mismatchbetween the contract for our steam house and our actual power sales contract.And because of that and because we are not getting real strong indications ofeither an ability to re-contract the steam house door re-contract, the poweritself, we elected to impair that facility this quarter.
That was a $1.8million after tax charge. Other than that in our generationfleet our availabilities remained very strong, good operating results, prettynormal operations.
Again, on comparing quarter-over-quarter to last year, thetwo one-time issues I had brought were related to our generation for lastyear. So we had a $2 million and $1.9 millionbenefit last year, that made that quarter look stronger relatively speaking.
Oil and gas earnings to almost $2million versus $3 million last year, even though we had much strongerproduction. Now, year-over-year, the production increase looks very positive,but we had a quite weak third quarter in 2006.
So it makes the number lookartificially better for this year when it's a 13% number. Prices were clearly down evenwith hedging this year over last.
Our depletion increased as a result ofseveral things. Continued cost increases in our drilling and rework activity,as well as the impact that those cost increases have on future developmentcosts for approved and developed reserves.
Those things combined with therevisions we had last year, at the end of year have just kind of continued topush our depletion number up. We are revising this year ourproduction growth down, little bit more than we had before, primarily justbecause of the activity that we have, the trend in cost, and just our overall attitudethat I think we're trying to be much prudent in the way we are spending thosedollars and not just pushing for a production goal.
When you have gotrelatively weak and very weak prices in Rockies in the third quarter combinedwith continued increase in capital cost, makes better sense in our opinion toback off little on pushing for production goal and spend our capital wisely,instead of just to achieve a production goal. Coal mining down slightly,despite a little bit higher volumes, most of that's just purely related tooperating expenses and increased royalties.
The majority of that is the resultof increasing overburden. We have been talking about for a year or two now thatour overburden was going to increase as we mined into a different part of ourpit and that is indeed happening.
So, nothing unusual there, but it will be ahigher overburden ratio than historically had for quite a while, and into thefuture. Shifting gears to corporate.
Nota lot to talk about there, except for the $900,000 and a couple cents in a Aquila related expenses recognized in the third quarter.We've said in last quarter's release, we would have $0.5 to $0.10 in expensesrecognized in 2007 related to the Aquilatransaction. And this is a couplepennies of that number.
And we expectmore obviously in the fourth quarter. We're also capitalizing costs associatedwith Aquila, but this is just the expenseshare.
Shifting gears to 2008 guidance,we're putting out guidance for our existing operations only, essentially underthe assumption that everything stays status quo from a business perspective.We're making the assumption that Aquila closes, which means we won't have towrite-off any of our capitalized costs for Aquilain '08. But we're not including any of the results of Aquila.We're not exactly sure when that's going to close, although, we expect it to bein the first quarter, and not comfortable putting out specific numbers for Aquila yet.
We plan to do that after we close on thetransaction. So looking at guidance than fornext year; net income from continuing operations for 2008 will be in the rangeof $2.35 to $2.55; that does not include a forecast of Aquilarelated expenses in the $0.10 to $0.20 a share.
Some of the key issues related toour guidance, we expect an increase in Cheyenne Light Fuel & Power, ourelectric and gas utility, because of the Wygen II Power plant, that's scheduledto be online January 1, 2008. And the rate case associated with that, which isexpected to take effect on the same date.
Our electric utility will berelatively flat from an earning perspective. We had a rate case there that tookeffect January 1 of '07.
And so their operations will be relatively stable. Oil and production, again, fornext year, we are assuming a 2% to 4% production growth rate, rather than afour to six number we had out there before, primarily due to the same reasonsthat I talked about for 2007 just a minute ago.
Our oil and gas prices weredisclosed there, based on NYMEX and the hedges that we have in place today. Soyou can see what oil and gas price assumptions were operating under.
We do forecast a decrease inearnings from energy marketing, not due to anything really negative in thebusiness, its just, we've had phenomenal year there. And the basis differentialbetween Rockies and other parts of the countryhad been very, very good.
We've had excellent volatility there, which helpedtremendously in our earnings and it's just very difficult for us to just saythat will continue. We know there is going to beanother pipeline Rockies Express, coming on out of the Rockies here aroundyearend, that should narrow some of the basis differential and other things.
Webelieve a lot in that business. It has done very well for us, but it's hard topredict another year just like this year.
Harder we serve, we can have thevolatility and basis differential that we had on this year. We predict a decrease in earningsin our coal mines, despite more production associated with Wygen too, primarilyrelated, again, to the O&M cost associated with higher overburden ratios, alittle bit higher royalties due to price improvements there.
No significantaverages at our power plants. Another key item is we areassuming mid-year 2008, June 2008 commercial operations that are going throughthe power plant in New Mexico,which is currently under construction.
A negative item for next yearthat we talked about in some of our previous public releases is that we have atermination payment associated with an old contract on our Harbor facility in California. Thattermination payment will end in about two-third of the way through 2008, whichis about a $3.6 million decrease in revenue, compared to 2007.
And then,certainly in the rest of '08 and '09, that payment will no longer be in placeand we've been speaking to that for a while, so it shouldn't be a surprise foranyone. Normal operations on anon-regulated fleet, the successful completion of Aquilawhich I talked about and then really, no other material changes in thecompany's business mix.
As you are aware, we put out a public release that sayswe are conducting a strategic review of some of our IPP assets, in particular,and until we know the results of that review and make any decisions related toasset divestitures. We have to maintain a status quo as far as giving earningsguidance comps.
Moving on to some of our keystrategic objectives, we're making excellent progress on a lot of fronts; wehave got a lot of exciting activity going on. I talked about Wygen II already.That plant is well under construction and definitely in line for January 1,2008 commercial operation date.
Just in a last couple weeks, wehave completed test firing that at full load on coal. And the facility will beup and down here in the next couple of months as we continue to test and traincrews and some of those things.
But we're very, very pleased with our progresson the plant to-date. The rate case related to that inCheyenne Light in general both gas and electric rate cases are proceeding.
Ourhearings were held within the last couple of weeks here in Cheyenne and we hope to have an order -- afavorable order prior to year-end. I mentioned before thatconstruction in our Valenciasite in New Mexico was on schedule that 140million megawatt plant will be on in June of 2008 and it's already undercontract on a 20-year power purchase agreement to Public Service in Mexico.
That'sa towing agreement, where they take the fuel risk. We're excited about our progressthere as things are going very well.
We have had great construction weather andit's on schedule as well. Wygen III which will be the twin to our Wygen IIplant, in the Wyodak Mine near Gillette is also progressing.
We disclosed lastyear that we received in early 2007 this year I guess in early 2007 our airpermit. We recently filed our industrial [siding] permit in hope here in thenext month or so to file our Certificate of Public Convenience and Necessity inWyoming and South Dakota for that plant.
Our goal is tostart construction late first quarter of 2008, assuming we get the necessarilyregulatory approvals. Finally strategic initiatives ourlargest one, is our pending acquisition of five separate utility propertiesfrom Aquila.
It's still on track for firstquarter 2008 close. We announced that deal in February and have been very, verybusy on a couple of different fronts.
One is, all of the integration planningand transition planning and hiring and recruiting that comes along with theacquisition that is all going very well. A lot of work going on there but weare very pleased with where we stand in our preparedness to take over theseutilities.
We still have a lot of work to do, but we are -- where we want to beat this stage. Regulatory approval wise, we'veessentially obtained four of the seven necessary approvals that we need for thetransaction.
We have obtained State Utility permission or equivalent bodyapprovals in Iowa and Nebraska. We had our hearing in Colorado and expect an order prior to year end in Colorado.
We are stillworking on State of Kansasapproval just really gearing up there real heavily into the discovery phase ofthat one. So that will be an early next year process.
We've received our Federalapprovals on Hart-Scott-Rodino Antitrust clearance, and also approval, from theFederal Energy Regulatory Commission on our acquisition of the ColoradoElectric Utility. As all of you are aware our deal is cost contingent on theAquila, Great Plains merger which will occursimultaneous with our asset purchase.
They are making great progress as welland have their regulatory proceedings underway in both Missouriand Kansasand they have had two successful shareholder votes at each organization in thelast month, where the shareholders approved that merger. So, things are going very,very well on all fronts from on strategic objectives perspective.
We are veryexcited about our long-term prospects related to those projects as well ascontinuing our performance in 2007, which we are very happy about. With that I would entertain anyquestions.
Operator
(Operator Instructions). And ourfirst question will come from the line of Neil Stein from [Latin Capital].Please go ahead.
Neil Stein - Latin Capital
Yes, hi, good morning.
David Emery
Good morning, Neil, how are youtoday?
Neil Stein - Latin Capital
Good, thanks. Few questions,first, in your '08 guidance, could you say how much lower the trading andmarketing contribution is relative to '07 [off] quarter?
David Emery
Yes, we had not specificallyidentified that, Neil, and I am sure you would like to know, that we have notspecifically identified that number.
Neil Stein - Latin Capital
Is it possible or you could saywhether, roughly what the percentage contribution is or range or maybe even sogenerally speaking about how you go about forecasting earnings from thatsegment, because it's very difficult to analyze the various moving parts andcome-up with a precise estimate.
David Emery
Yeah. It's very difficult toforecast in general, and that's why we don't give the segment disclosuresbecause, as you know, that unit depends tremendously on gas price volatility,seasonal spreads for our storage, and basis differentials between Rockies andother parts of the county.
And those are very, very difficult to forecast. Andso for that reason we don't give the specific disclosures there.
And Iunderstand the frustration with that, but it is very, very difficult forecastfor us, as well as you. Sympathetic there but it is achallenge.
Those are the three parts of our business and we have talked aboutthat a lot, related to our dependencies on, in addition to our producerservices, which is a fee-based business. And we depend on our storage, which isthe seasonal spreads and certainly just the overall volatility and gas pricesfor our proprietary trading and then, the basis differentials for ourtransport.
And so, relatively speaking, it's hard to predict what those aregoing to do next year.
Neil Stein - Latin Capital
Moving on to the Aquila acquisition, from the various public filings wehave come up with a rate-based total of about $450 million to $500 million. Isit possible, if you could comment, are we in the right range there?
David Emery
I don't specifically, off the topof my head, know what that number is Neil. I mean, I think you are in theballpark, but I would hate to say definitively.
All of that information thoughis available and I know we have referred people before to Aquila'sFERC Form 1 on some of those properties.
Neil Stein - Latin Capital
Okay.
David Emery
Previously about looking EBITDAnumbers and things related to those last year's FERC Form 1, but they'd giveyou real accurate information about us. I will not give you number that I amnot confident of, off the top of my head.
Neil Stein - Latin Capital
And, again, the purchase price isabout $950 million?
David Emery
Yeah. The actual purchase priceitself is 940.
And then, we'll have some other one-time fees and otherassociated costs.
Neil Stein - Latin Capital
Okay. How do you from evaluationperspective when you are looking at acquisitions like this, how do you justifypaying two times rate base?
Or you know certain assets where you kind of knowwhat the return pro forma is going to be?
David Emery
Essentially, it comes down tolooking at the value and what we think the value is, and what it can be underour ownership. We've talked about that before.
But one of the benefits that wethink we bring to the transaction is a much different G&A cost structurethan what Aquila has. You know Aquila was quite a bit larger and has been contractingand selling utility assets.
And as they've done so their G&A hasn't reducedproportionally. And so, if look at, at our situation its completely different,because we're buying assets only, we don't get any of the associated G&Afunctions or assets liabilities with our of the purchase.
So we can built-upour G&A structure from scratch essentially on top of what we already have.But add on to that and specifically designed at to serve these additional fiveutilities, which allows us to really light size it right from the start. So that's where we see one of theadvantages and certainly, some of the advantages -- upside opportunity we seethere is, Aquila's Colorado Electric Propertydoes not have much of its own generation.
They were out actively seekingrequest for proposals at the time the acquisition was announced. That processhas been put on hold to allow us to jointly look with Aquilaat some self build options that we might pursue there as well.
So, those aresome of the rational behind the deal.
Neil Stein - Latin Capital
On the G&A savings, I couldsay whether that would that be good for customers, but what gives youconfidence, our shareholders would benefit?
David Emery
Well, I think, we're prettycomfortable with the way that they would occur. Essentially, we'd be able toretain some of those benefits for shareholders.
Certainly, customers willreceive some as well. So, truly going to be good for both shareholders and customersfrom our perspective, and that's just essentially bowed down to successfullynegotiating regulatory process, in order to make that happen.
That's one of thethings we believe we're pretty good at as far as regulatory relationship andour ability to work on a deal. It's truly well in for shareholder andcustomers.
Neil Stein - Latin Capital
Okay. I'll let someone else askthe question.
Thanks so much.
David Emery
Thank you, Niel.
Operator
Thank you. (OperatorInstructions) We'll go to line of Gordon Howald from Caylon.
Please go ahead.
Gordon Howald - Caylon
Hi, guys.
David Emery
Good morning, Gordon. How areyou?
Gordon Howald - Caylon
Good morning. You talked aboutthe native load being higher here in the quarter, was this higher due to weatheror is this something that we need, kind of a recurring issue that we should bethinking about as we go through 2008 and beyond.
I mean there is excesswholesale capacity just continuously getting degraded or is it justweather-related here?
David Emery
Well, we've talked about a lotfor a long time that we have slow steady load growth in Black Hills Power, butits 1%, 2% a year number and it has been for years and its been very, verysteady. So there is some erosion of our excess low costs coal-fired generationto sell in the market.
It's not a radical erosion but it's a slow steady oneand it's been going on since we built our last plant. The other one is -- this thirdquarter was particularly hot for us and so our native sales were up some 4%, Ibelieve in megawatt hour sales related to just our native loads.
So, related tothat, you know, we had less offsystem sales, we also had increased purchasepower and fuel for peaking generation costs as well.
Gordon Howald - Caylon
Got you. If I could have a one ortwo more you talked and Neil touched on this earlier trading margins coal wereup $5.7 million in the quarter that you mentioned some offsets mark-to-marketbeing about $0.9 million, compensation bad debt.
Could you give us a littlemore granularity on what this offsets were, you only identified onespecifically and obviously some of the other ones appeared to be prettysignificant.
David Emery
Yeah the only thing we've outpublically Gordon is just specifically what's in the press release as far asthe off system or the gross trading margin number and then the mark-to-marketthe others are related primarily when you have high current gross margins. Your compensation expense goesup, even though you have mark-to-market or something that offsets that tradingmargin from an actual net income perspective so your compensation expenses areregardless of the mark-to-market issue.
Gordan Howald - Caylon
Yeah that makes some sense, andwhich of these cost are then recurring? I mean how should we think about therecurring nature of some of the offsets that make any sense?
David Emery
Yes.
Gordan Howald - Caylon
It's just a significant numberand that's why I am trying to dig in a little bit.
David Emery
Right. Well I don't know if Icould add a whole lot of color to that, Gordon, frankly, at least not now, Ithink there will be a little bit more information in there when we put out our10-Q next week, but not a whole lot.
Gordan Howald - Caylon
Okay and I'll look through thereand if I could just one more and I'll let other people ask. The rationale forthe IPP sales, I know you have talked about that in the past.
So are youlooking at market conditions and that's prompting you to possibly sell orlooking to sell some of those assets, and is it really just to raise for theAquila acquisition, and lastly in I am sure you talked about this, what kind oftiming do you have on these asset sales or pertaining Aquila?
David Emery
Yes, what we are doing obviouslyis conducting that review and what prompted the need to do the review on ourpart is obviously we are in a financing mode here with the Aquilatransaction but that in of itself really isn't the trigger. The trigger is wehave some great assets in some excellent locations, some of which may be morevaluable to others than to us long-term when market conditions are very, veryfavorable.
So, it seemed like a good time for us if we were considering tryingto high grade our IPP portfolio if you will, now is a good time to look atdoing just that. So, we are out conducting thatprocess to try to value those assets and then make our strategic decisionsappropriately.
Certainly, the timing is good relative to the Aquilatransaction, but that's not the primary driver.
Gordon Howald -Calyon
That's probably agreed on.
David Emery
And you know as far as the timingpart I didn't answer that of your question but we would anticipate the timingto be within the next couple of quarters we would work our ways through thatprocess and make decisions one way the other. And then not any different than atypical process like this takes, it takes several months to work your waythrough it.
And we would anticipate every similar timeframe as far as reachingthe point where we would make a decision whatever that decision may be.
Gordon Howald -Calyon
It sounds like a small strategicmove on your part. I appreciate it.
Thanks guys.
David Emery
Yes. Thanks Gordon.
Operator
Thank you. Our next question willcome from the line of [Ella Sansibar] from RBC Capital Markets.
Please goahead.
Ella Sansibar - RBC Capital Markets
Good morning.
David Emery
Good morning.
Ella Sansibar - RBC Capital Markets
I have a couple of questionsabout your oil and gas production you stated that you plan to slow productionto a rate of about 2% to 4% versus prior guidance of 4% to 6% for next year, isthere an estimated exit rate for fourth quarter?
David Emery
Yes. We haven't disclosed that,no.
Ella Sansibar - RBC Capital Markets
Okay. And also you cited asdrivers for that one of them being the pricing environment, if prices were toturn next year, would you be in a position or think about accelerating drillingto increase the growth rate back up to above 4% or 6%?
David Emery
We've talked for quite a whileabout the amount of undeveloped reserves we have and even probable and possiblereserves and so we do have the ability to do that assuming we can get permitsand rigs and things like that. And if economic conditions warrant it probablymakes sense to do so.
It's hard to make that decision without being sitting inthe circumstance where conditions may have been more aggressive. But we havethe properties in our existing inventory to do just that.
Ella Sansibar - RBC Capital Markets
Okay.
David Emery
There is, certainly if priceconditions warrant, we could react relatively quickly, assuming we have all thepermits we need and we are trying to stay ahead of the game on permits, so wecould do that. Now, a little bit of color back on your first question.
Wehaven't put out an exit rate, but we have said that our '07 production will beat 2% to 4% growth rate as well. So you can at least infer an exit rate fromthose numbers.
Ella Sansibar - RBC Capital Markets
Thank you very much.
David Emery
You bet.
Ella Sansibar - RBC Capital Markets
I also, a follow-up on that,wanted to understand the sum, if there is any impact to your E&P assets dueto the Rockies Express or Spectra's new proposed Bronco pipeline?
David Emery
Anything that helps prices out ofthe Northern Rockies is a net positive for us.Now, a lot of our gas reserves that are producing today are in the San Juan Basin. But we do have a lot of propertyin the Rockies and our Piceance Basin properties that webought last year.
You know, lots of those are undrilled proved undevelopedreserves. So the Piceance Basin and Powder River Basin and Montana properties,those would all be positively impacted by any pipeline project or anythingelse, frankly that would nail the basis differentials between Northern Rockies,and the NYMEX or mid-continent prices.
It's hard to specifically statehow much they would be impacted, but it certainly is a net positive, anythingwe can do to reduce that basis differential because the Rockies prices arevery, very low, particularly, in the third quarter intraday spot prices wereunder a dollar in parts of Rockies, Southwest Wyomingand other places.
Ella Sansibar - RBC Capital Markets
Okay. And finally, along thesesame lines, are there any plans to do a strategic review of your oil and gasassets?
David Emery
Don't have any plans at thistime.
Ella Sansibar - RBC Capital Markets
Great. I have no furtherquestions.
Thank you.
David Emery
Thank you.
Operator
(Operator Instructions) And ournext question, we have a follow-up Neil Stein from Latin Capital. Please goahead.
Neil Stein - Latin Capital
Thanks. You know, with respect tothe review of the generation business, do have any sort of point of view onwhether or not equity markets are properly valuing those assets relative towhat the private market might be one to pay?
David Emery
I don’t know. I do have anopinion on that one Neil.
I think that certainly, the people who follow us, Ibelieve looked pretty carefully at our IPT portfolio. And we disclose all ofour plans and contract provisions and things for those.
So, I guess I don'thave any reason to believe that they are not fairly valued. Certainly, someplayers who were willing to put a lot of debt on some of those assets and justmore aggressive as far as overall general return criteria may value them higher
Neil Stein - Latin Capital
Got it
Dave Emery
We have seen some of that in themarket and so that’s really what prompted the timing for the review is, if yougot these conditions combined with some of the other things we’ve going on,it’s probably a good time to take a look.
Neil Stein - Latin Capital
What’s your view on potential taxleakage from the sale and would there anyway to pursue some sort of [light] onexchange treatment in connection with the Aquilaacquisition.
Dave Emery
We certainly haven’t looked realat what we have looked but we haven’t stated anything related to any taxleakage. They really depend on what if anything we decide to sell and win.We’re doing a lot of things related to construction and otherwise, so clearlypursuing strategies to minimize tax leakage is something that we would pursue.Now, how successful we would be in that, its hard to say until you knowspecifics of which assets you might sell and what the specific tax conditionsrelated to that asset are, so really difficult to say this time.
Neil Stein - Latin Capital
Okay. And thanks very much again.
Dave Emery
Thank you.
Operator
And at this time, I am showing nofurther questions. Please continue.
Dale Jahr
All right. Well, thank youeveryone for attending the call today.
Thanks for your interest in Black Hills. We’re very excited about what we have goingon.
We’re very excited about the future with all of the construction we’vegoing on, growth in our existing business units as well as really lookingforward to the closing date of Aquila,hopefully, in the first quarter of 2008 and allow us to add those into ourcompany, and continue to pursue growth in those areas as well. So, thanks foryour attention.
Thanks for your interest in Black Hills.Have a good day.
Operator
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