CEO: ITC Holdings ‘essentially’ overcame lag in capital spending by close of 3Q13

Factors ranging from the pending spin/merge with Entergy (NYSE:ETR) to the weather have made 2013 to date “a demanding year for our company,” Joe Welch, chairman, president and CEO of ITC Holdings (NYSE:ITC) said during the company’s 3Q13 earnings call Oct. 31.

However, ITC was able to catch up on deploying its capital program by the close of the quarter. Through the end of 2Q13, ITC had been behind schedule on spending, as weather hampered some of its operations.

“We have worked hard to catch up on our capital plans from a slower than anticipated pace during the first half of the year, largely due to weather-related issues, and have essentially managed to meet our year-to-date budget targets by the end of September,” he said.

As of Sept. 30, the company had invested $648.9m, up from $455.4m as of June 30.

ITC on Oct. 31 updated its capital expenditure guidance to a range of $810m to $860m, from $760m to $860m. The $50m increase is spread across all four operating subsidiaries’ updated guidance: $215m to $230m for ITC Transmission; $170m to $180m for Michigan Electric Transmission Company (METC); $285m to $300m for ITC Midwest; and $140m to $150m for ITC Great Plains.

The previous capital guidance ranges for those companies were $200m to $230m for ITC Transmission; $160m to $180m for METC; $270m to $300m for ITC Midwest; and $130m to $150m for ITC Great Plains.

Welch said there have been “few significant updates” since the company’s 2Q13 earnings call, during which ITC provided “a very comprehensive update on the business.”

As  previously reported, Welch announced that the first phase of Michigan’s Thumb Loop 345-kV transmission project was placed into service on Sept. 27, “on time and on budget.”

“This project will strengthen the transmission grid in the Thumb area of Michigan and will serve as the backbone infrastructure to support the interconnection of new generation resources in the area,” Welch said. “The project will also serve to increase transmission system capacity and reliability, enable the delivery of lower cost generation and provide more efficient transmission of energy.”

Welch said the company’s execution of the project, along with numerous benefits the project will provide is “very much a testament to our independent model.” Benefits to the state’s economy are estimated at $366m from the project construction alone, he said, noting that enhanced reliability would provide additional benefits.

The Thumb Loop project is one of a number of larger projects within the company’s stand-alone, long-term capital plan. Completion of the first phase serves as “another important milestone in the company’s execution of our plan,” Welch said.

On the regulatory front, Welch discussed ITC’s request for rehearing of FERC’s July order directing subsidiary ITC Midwest to move from the generator reimbursement policy outlined in Attachment FF of the Midcontinent ISO’s (MISO) open access transmission tariff (FERC Docket No. EL12-104).

FERC on July 18 granted a complaint by Interstate Power and Light (IPL) and directed MISO to revise Attachment FF to reflect the same generator interconnection cost recovery provisions applicable to most other MISO pricing zones, thus lowering the 100% cost recovery provision to 10%. Such a change would be detrimental to the expansion of a robust generation system, he said.

“It is the [Attachment FF] policy that allows new generators to participate on a level playing field with existing generation resources; in particular, incumbent utility-owned generating resources,” Welch said. Further, Attachment FF is supported by FERC’s own policies as a means to increase competition in the bulk power markets “and help ensure both reliability and just and reasonable rates through open access,” he said.

There is no stipulated period for FERC to rule on the rehearing request.

The company reported 3Q13 operating earnings for 3Q13 of $66.5m compared to $56.1m for the same period last year, resulting in diluted operating earnings per share (EPS) of $1.26. Year to date, operating earnings increased approximately 18%, the company reported.

ITC also narrowed the range of its 2013 operating earnings guidance from the prior range of $4.80 to $5.00 EPS to $4.84 to $4.92 per share.