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Integrys Energy Group, Inc. (



Q4 2011 Earnings Call

February 29, 2012 9:00 am ET


Steve Eschbach - VP, IR

Charlie Schrock - Chairman, President and CEO

Joe O'Leary - SVP and CFO

Larry Borgard - President and COO, Utilities

Mark Radtke - EVP and CSO

Dan Verbanac - President, Integrys Energy Services


Ashar Khan - Visium Asset Management

Mike Bates - D.A. Davidson

Amit Marwaha - Citigroup

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Welcome to the fourth quarter 2011 earnings conference call for Integrys Energy Group, Incorporated. (Operator Instructions) I would now like to introduce today's host Mr. Steve Eschbach, Vice President of Investor Relations at Integrys Energy Group.

Steve Eschbach

Thank you. Good morning. Welcome to the Integrys Energy Group's fourth quarter 2011 earnings conference call. Delivering formal remarks with me today are Charlie Schrock our Chairman, President and Chief Executive Officer; and Joe O'Leary, our Senior Vice President and Chief Financial Officer.

Other executives, including Larry Borgard, our President and Chief Operating Officer, Utilities; Mark Radtke, Executive Vice President and Chief Strategy Officer of Integrys Energy Group; and Dan Verbanac, President of Integrys Energy Services, are available for the question-and-answer session that will follow our formal remarks.

The slides supporting today's presentation and an associated data package are located on our website at Select Investors, select Presentations, and then today's presentation. Before we begin, I will advise everyone that this call is being recorded and will be available for audio replay through May 1, 2012.

I need to direct you to Slide 3 of our presentation and to point out that this presentation contains forward-looking statements within the definition of the United States Securities and Exchange Commission's Safe Harbor Rules including projected results for Integrys Energy Group and its subsidiaries. Forward-looking statements contain factors that are beyond our ability to control and, in many cases, we cannot predict what factors would cause actual results to differ materially from those indicated by forward-looking statements. Except as may be required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statement contained in this presentation, whether the result of new information, future events, or otherwise. This slide is a condensed summary on forward-looking statements, and you are encouraged to read and understand the more specific language that is contained in our filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K we filed last night, the forward-looking statements section of yesterday's news release, and Slide 48 in this appendix.

Slide 4 indicate that today's presentation includes non-GAAP financial information related to diluted earnings per share adjusted and adjusted earnings and/or loss. We believe that these are useful financial measures for providing investors with additional insight into our operating performance because they eliminate the effects of certain items that are not comparable from one period to the other. Please review the text of this slide for more information regarding these non-GAAP financial measures.

I will now turn this call over to Charlie Schrock.



Thanks Steve. Good morning everyone, and thanks for joining us on the call today.

I'll begin by providing a high level overview of our 2011 financial results and operating highlights. Joe O'Leary will then discuss our financial results in more detail and provide a summary of our financing outlook for 2012. And as usual, we will conclude with a question-and-answer session.

Turning to Slide 5, I am pleased to report improved earnings for both the fourth quarter and full year 2011. In the fourth quarter of 2011, we posted a 23% increase in diluted earnings per share adjusted over the same period in 2010. And for the full year, we posted about an 8% increase over the full year 2010. These favorable results are from the solid execution of our business plan.

As for 2012, we are introducing guidance for diluted earnings per share of $3.35 to $3.55 with a midpoint of $3.45. Joe will have more to say on that in just a few moments.

Slide 6 provides a brief operational update on our regulated utilities. Our utilities finished the year strong. As shown on Slide 19 in the appendix, the actual returns on equity for our natural gas and electric utilities were about 8% and 11% respectively in 2011. We expect some slight improvement in 2012, as our returns on equity for our utilities are projected to be in the range of 9% to 10%.

In terms of net income the shortfall of our actual utility earnings to authorized level was about $15.4 million in 2011, which is much better than $37 million that we had estimated at this time last year. The progress we made in 2011 places us within a range of what we can reasonably expect on a continuing basis.

From a rate perspective we reached resolutions on four of the five rate cases that were pending in 2011. This included rate cases for Peoples Gas, North Shore Gas and Upper Peninsula Power as well as the Wisconsin Public Service limited reopener case. The loan case that did not come to a final decision in 2011 was Minnesota Energy Resources, but interim rates were granted in February of 2011. The key details for each rate case are summarized in appendix Slides 22 to 26.

The highlight for our natural gas utility segment was our accelerated main replacement program in Chicago. In 2011, we began the field work for this program and installed 154 miles of new pipe, which is more than a threefold increase over what we have typically done in the past. I congratulate the project team, our employees and our contractors for a successful first year of this project.

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