Edison International (EIX) — Q2 2022 Earnings Call Transcript

Well, thanks a lot, Sam, and good afternoon, everyone. Edison International reported core earnings per share of $0.94 compared to $0.94 a year ago. Based on our year-to-date performance and outlook for the remainder of the year, we are reaffirming our 2022 core EPS guidance range of $4.40 to $4.70. I also want to emphasize that we remain absolutely fully confident in our long-term EPS growth target of 5% to 7% through 2025. Maria will discuss her financial performance in her remarks. I would like to begin with an update on the tremendous progress that SCE has made in wildfire mitigation. In preparing for this year's peak wildfire season, SCE has a higher level of confidence in its ability to mitigate wildfires associated with its equipment. During the quarter, SCE achieved a significant grid hardening milestone. It has now replaced over 3,500 circuit miles of bare wire with covered conductor in just over three and a half years. SCE expects to have covered approximately 40% of its overhead distribution power lines in high fire risk areas, or HFRA by the end of 2022. In many locations throughout SCE's service area, covered conductor is the primary grid hardening tool. Since it balances risk reduction cost and timely execution, SCE plans to continue its current pace of installing about 1,200 miles per year of covered conductor for the next couple of years. I am pleased with the utility's execution of this program, which has and will continue to substantially improve safety for customers. SCE has achieved the majority of wildfire risk reduction through covered conductor and other system hardening measures, vegetation management, and equipment inspections. Public safety power shutoffs or PSPS provide additional risk reduction that is critical during extreme weather and fuel conditions. SCE also continues to implement cutting edge technologies to mitigate against high impact wildfires. For example, the utility is leveraging machine learning to improve the accuracy of wind speed forecasts at around 500 SCE weather station locations. And this will help better predict which areas may reach or exceed PSPS thresholds. The state of California continues to allocate substantial funding in support of forest resiliency and fire suppression, including wildfire crews and aerial resources. SCE is also supporting the readiness and response efforts of our local fire agencies. For the fourth consecutive year, SCE is providing aerial suppression resources to local fire agencies to help quickly extinguish wildfires when they do start. SCE is contributing $18 million to lease the quick reaction force of water and retardant dropping tankers to Orange, Los Angeles, and Ventura County Fire agencies. The QRF's most critical feature is that it can continue to hover, fill, and make retardant drops at night, making it the world's first fully electric aerial task force. In addition, SCE's fire camera network provides visibility to growing wildfires for fire agencies and the utility continues to explore adding artificial intelligence technology and new data sources that can detect and confirm new ignitions. Before I leave this topic, I would like to remind investors that we are hosting an in-person meeting on August 18 at SCE's Emergency Operations Center and Energy Education Center. Our leadership team and I look forward to discussing ongoing wildfire mitigation activities and SCE's opportunities in California's clean energy transition. So folks coming down. All right. Last week, SCE received a final decision from the Office of Energy Infrastructure Safety, approving its 2022 wildfire mitigation plan update. This is a prerequisite to submit the annual safety certification request which allows SCE to benefit from the presumption of prudency and the liability cap under AB 1054. This decision recognized the progress SCE has made in mitigating wildfire risk and increasing the overall maturity of its wildfire mitigation portfolio and strategies. Turning to wildfire-related settlements. We are pleased with SCE's progress in further resolving 2017 and 2018 wildfire and mudslide events claims. In the second quarter, SCE resolved approximately $400 million of claims. In total, the utility has resolved nearly 90% of its best estimate of expected losses and continues to make steady progress in resolving remaining claims. SCE is well on its way to reaching substantial resolution of claims in the TKM matter and remains on track to file the first application for cost recovery by late 2023. I would like to be really clear that SCE currently expects to seek full CPUC cost recovery of claims payments, excluding amounts recoverable from insurance or FERC or foregone under the agreement with the Safety Enforcement Division. We will keep you updated on our progress on this front. Shifting topics, I would like to briefly address a lawsuit brought by two former employees of Southern California Edison. As some of you may be aware, a jury awarded substantial damages to the plaintiffs. We do not believe that the jury’s decision was consistent with facts and the law, and it certainly does not reflect who we are or what we stand for. But rather than engage in a protracted legal challenge, we reached a settlement in July, for which we took a net after-tax charge of $16 million. Edison International and SCE did not admit liability or fault as part of the settlement. Okay. Most of my comments so far covered a lot about wildfire risk mitigation, which is a core component in adapting to climate change. I also want to emphasize our continuing focus on sustainability because this underlies our company strategy. We recently published our annual sustainability report, which details 2021 achievements. These are covered on Pages 5 and 6. Let me highlight especially that SCE has the lowest system average rate among the large California IOUs and that's primarily due to more than a decade of committed focus on operational excellence and cost management. Further, as you see on Page 7, the total energy burden in 2021, that is the total cost of electricity, natural gas, and gasoline relative to median household income for customers in SCE service area was below the median for customers in other states across the country. We see the potential for that to continue to decline with increasing levels of electrification. Our Pathway 2045 analysis shows that the greater efficiency of electric motors and appliances will reduce customers' total costs across all energy commodities by one-third by 2045. Well, let me conclude by saying that Edison International is a nationally recognized leader in the clean energy transition. In alignment with climate actions planned by the state of California, as we announced last year, our goal is to achieve net zero greenhouse gas emissions across Scopes 1, 2, and 3 by '45 and that will cover the power that SCE delivers to customers as well as Edison International's enterprise-wide operations, including supply chain. With that, let me turn it over to Maria for her financial report.

Thanks, Pedro, and good afternoon, everyone. Edison International reported core earnings of $0.94 per share for the second quarter. Core EPS at SCE increased year-over-year, primarily due to the adoption of the 2021 GRC final decision in the third quarter of 2021, partially offset by higher O&M expenses. At EIX Parent and other, the core loss was $0.05 higher in the second quarter. This was primarily due to higher preferred dividends and unrealized losses on investments in the second quarter of 2022 and compared to unrealized gains recognized in the same period last year. On Page 8, you can see SCE's key second quarter EPS drivers on the right-hand side, and I'll highlight a few. Authorized revenue from the 2021 GRC was higher by $0.34 for two reasons. First, the escalation mechanism for 2022 contributed $0.18 for the variance. Second, because SCE did not have a GRC final decision in the second quarter of last year, it was recording revenue at 2020 levels. This timing difference contributed $0.16 to year-over-year Q2 revenue growth. Other CTC revenue was $0.26 higher, primarily related to the approval of GRC Track 3. With this approval, SCE recognized revenue for costs previously deferred to memo accounts because the costs were also recognized there was no net earnings impact from this revenue growth. The remaining O&M variance for this quarter was primarily driven by the timing of wildfire mitigation activity expense recognition. Moving to Page 9. SCE's capital forecast is unchanged from last quarter, when we reflected the capital expenditures SCE requested in Track 4 of its GRC. During the second quarter, SCE submitted its Track 4 request, which covers funding for 2024, the third attrition year of SCE's 2021 GRC. In addition to requesting a revenue increase driven by the GRC attrition mechanism and inflation, SCE proposed deploying another 1,200 miles of covered conductor, which would bring the utility to a total of about 6,500 miles installed by the end of 2024 or about two-thirds of its overhead distribution miles in high fire risk areas. As shown on Page 10, our capital forecast continues to result in projected rate base growth of 7% to 9% from 2021 to 2025. This forecast incorporates SCE's current view of the request to be made in the 2025 GRC and other applications. We see strong potential for SCE to continue deploying capital and achieving 7% to 9% rate base growth through 2025. Before turning to guidance, I would like to share a couple of positive developments in the quarter. First, SCE recently completed its annual wildfire insurance negotiations for policies that run from July 2022 through June 2023. In view of the measures SCE has implemented to reduce wildfire risk, the company's insurance carriers have further reduced premiums this year. Second, during the quarter, both Moody's and Fitch affirmed EIX and SCE's credit ratings and raised their outlook to positive from stable. Both of these positive outlook changes were driven by recognition of the utility's significant progress addressing wildfire risk combined with the constructive AB 1054 framework. Turning to guidance. Pages 11 and 12 show our 2022 guidance and the key assumptions for modeling purposes. We are reaffirming our 2022 core EPS guidance range of $4.40 to $4.70. We are awaiting resolution and whether the cost of capital will remain unchanged for 2022. And after receiving a CPUC final decision, we will provide an update on guidance to incorporate any changes and our outlook for the rest of the year. In the 2023 cost of capital proceeding, the administrative law judge recently issued a scoping ruling with two positive components that I'd like to point out. First, the proceeding schedule calls for a proposed decision to be issued in mid-November, which could allow for a final decision to be made by year-end. Second, consistent with SCE's request and past proceedings, the schedule calls for updating the cost of debt and preferred in September, which will allow SCE to reflect more up-to-date interest rate forecasts. SCE has made a strong case for its requested ROE of 10.53%, and we will incorporate the final decision in our 2023 earnings guidance, which we will introduce on our Q4 earnings call. At that time, we will also update you on our long-term EPS growth rate target. We remain confident in our ability to achieve EPS growth of 5% to 7% from 2021 to 2025, which results in a 2025 EPS range of $5.50 to $5.90. I would now like to provide a brief update on our 2022 financing plan shown on Page 13. Our overall plan remains consistent with what we shared with you previously. In April, the parent borrowed $600 million under a term loan agreement, which matures in 2023. This transaction provides flexibility for issuing the previously disclosed debt and equity content securities later this year or in 2023. We will continue to monitor market conditions to optimize our capital structure, which, as we have said in the past, issuance, preferred equity, or common equity to the use of internal and at-the-market program. Our prior three-year ATM program expired earlier this year, and we plan to establish a replacement program in the coming weeks. Let me conclude by building on Pedro's earlier comments on sustainability. I will emphasize the strong alignment between the strategy and drivers of the EIX business and the clean energy transition that is underway. Since publishing the sustainable financing framework last June, SCE has issued $2.1 billion of sustainability bonds under that framework with strong demand from investors recognizing the environmental and social benefits related to projects funded by these bonds. Our large capital investment plan focused on the grid provides ample opportunity for continued issuance of securities under this framework, which is aligned with the company's sustainability-oriented strategy and vision. That concludes my remarks, so we can go to questions.

So Pedro, just in terms of the legacy liabilities and the settlement process, you guys have the end of '23 as a target for recovery filing. But I wanted to get a little bit more clarity on what exactly that threshold is to file. I mean at the pace you're going, you're likely going to have a sizable majority of the claims valued by year-end. You have 90% resolved already. If there's continued progress, could you potentially make the filing earlier? Can you hit 100% by year-end? I guess, why are we waiting to file?

Thank you for your question, Shar. I have a few thoughts on this. Previously, we indicated that we aim for at least 90 to 90 percent completion, but that's not a strict requirement. Our focus is on achieving substantial completion, which doesn’t necessarily mean 100%. We want to see enough progress to feel confident that we can submit an application to the commission, which they will agree to with the necessary settlements in place for clarity on the final exposure. Currently, when we refer to 90%, it encompasses both the Thomas Koenigstein mudslide cases and the Woolsey matter, which are different cases. By the end of 2023, we are confident we will be ready to make our first application. Given that the Thomas Koenigstein mudslide occurred a year earlier, it is likely to be the first one we apply for. It’s important to note that the nearly 90% we mention is a combined figure for all cases, and we haven't broken it down further due to the ongoing litigation. Overall, we do feel a sense of urgency to file for cost recovery, but we want to ensure we approach it correctly. We haven’t specified a precise percentage we need to reach because we consider many factors, including the amount outstanding, the number of plaintiffs, and the nature of the cases, all of which will influence our decision on when we are ready to proceed.

And then just given the progress being made on just on the underground legislation, does that potentially give you some framework to address some areas that would benefit, I guess, from that approach? And since you stated that covered conductors are, I guess, a much more effective solution for your service territory. Do you think there should be a legislative enabled framework that covers more than just undergrounding as a physical risk reduction measure?

Thanks, Shar. We have a framework in place, known as AB 1054, along with the wildfire mitigation plan process, which we are confident in. As we mentioned last quarter, we are focusing on several areas for increased targeted undergrounding. Our geographical conditions differ from PG&E's; they face more incidents related to trees falling on power lines in forested areas, while we encounter more issues with grasslands and chaparral, where wind causes contact with lines. Thus, from a risk management efficiency standpoint, using covered conductors—much cheaper than undergrounding and quicker to implement—has proven to be the better solution for most of our region. Still, we are planning to undertake more targeted undergrounding efforts, likely hundreds of miles rather than thousands. Regarding the legislative package in Sacramento, PG&E is particularly focused on it due to their larger undergrounding scale, which I respect. However, with our current scale and the strength of our wildfire mitigation plan framework at Southern California Edison, we believe we are well-positioned. Should any legislation be enacted, we will review it to determine if it could benefit our customers.

And just maybe one last quick one for you is just what's the ROEs that underpin the growth rate that you guys just reiterated?

So we have 10.3% embedded in our growth rate, and we have been looking at that and managing around all of that since we put the numbers out there.

Just curious, when you're looking out at potential things that could make material changes to your long-term rate base growth guidance, and I don't mean long term 20 and 30 years, that's probably further out than I'm going to be tracking you guys. But let's talk 2024, 2025, 2026, how do you think about things that could move the needle in those years? And what the process is to get more certainty on those items?

Yes, that's a great question. I'm really focused on the growth rate for 2030 and 2040, although it will likely be led by others at that time. We start with the core growth rate we've previously shared, which is expected to be between 5% to 7% up to 25%. There are many factors that support this. It begins with the investments required to maintain our core grid and continues with the necessary enhancements outlined in our reimagining the grid white paper. We're committed to building a grid that is not only safe and reliable but also resilient. A substantial amount of our investment will focus on these core necessities. Additionally, we anticipate a need for further investments within that 5% to 7% range to support the clean energy transition. This is a critical area, and we need to see how the market develops, including additional programs that can benefit both the clean energy transition and our customers, with the aim of having our customers help underwrite those investments. A good illustration of this approach is the building electrification application we submitted for $677 million, designed to stimulate a currently sluggish part of the market. The benefit-to-cost ratio for this proposal hovers around one, which is acceptable, although we prefer higher ratios. This aspect of the market requires stimulation, similar to what happened with solar 15 years ago. We're concentrating on investments that primarily benefit our customers and the economy first, which will ultimately also enhance our earnings. I've mentioned electrification, which encompasses both buildings and transportation, and storage is another area where we foresee an increased need. We are optimistic about the future prospects.

I have a follow-up regarding the cost recovery process in filing. You mentioned filing at the end of 2024 and the second half of 2023. Is there a clear framework for what that proceeding will entail, specifically how the process will work at the CPUC?

Michael, we've actually gone through all of the pieces of the CPUC process, but for recovery. The one outstanding thing that happened recently was that we got our settlement with the SED reapproved. So approved a second time. Interveners are now taking a look at that, of course, so we've gone through the CPUC process, but for the application. And that's what we would be doing. We'll be filing an application for recovery, which would lay out all of our requests as well as other information about the claims, et cetera. So that's really the process. And once you file an application, then the commission would come back with a scoping memo and a procedural schedule.

Maria, you mentioned you have good news on insurance costs. Could you share a little more detail?

Sure, Jonathan. I want to highlight that we are making significant efforts to reduce wildfire insurance costs for our customers. We’ve previously discussed two main strategies for achieving this. First, we aim to lower commercial premiums, and second, we are utilizing customer-funded self-insurance to enhance our coverage. This year, we have successfully added approximately $100 million in customer-funded self-insurance, which is a favorable approach for reducing costs and improving affordability since any unutilized amounts can carry over to the next year. Additionally, looking at rates from commercial insurance providers, we have observed a decrease. Compared to last year's policy, the current policy year has seen a drop in the average rate charged from 47% to 43%. This indicates that our ongoing risk reduction efforts are being recognized, and combined with the customer-funded self-insurance, we are able to offer better outcomes for our customers.

Just to make sure I understand that. So for $100 million of coverage, it would be $43 million versus $47 million and scaled up to the size of the program.

That's right. That's right. That's how you do it.

I have one more question regarding costs. I noticed you mentioned O&M for the quarter. I'm interested in understanding whether this is mainly due to timing or influenced more by general inflationary pressures. Additionally, I saw that you submitted a Z-Factor adjustment regarding labor costs, so could you elaborate on that in relation to your guidance?

Sure, absolutely. Regarding the O&M I mentioned for the quarter, some of that Track 3 is progressing through both areas, but it's primarily a timing issue related to recognizing wildfire mitigation expenses. That explains what occurred during the quarter. Concerning inflation, we recently filed a Z-Factor application, acknowledging that the inflation we are experiencing is mainly labor-related, particularly for management, wildfire mitigation, and outside contractors. This is where we are observing inflation. We have several strategies to mitigate the impacts of inflation, such as the attrition mechanism in our GRC and a collection of indices to adjust the revenue requirement annually. This is a significant measure to address inflationary risks. Additionally, the balancing accounts and memo accounts include costs recorded for reasonableness, and we can factor in market costs there as well. Regarding capital, in our Track 4 filing, we've included further inflation mitigation measures to ensure we can account for actual inflation in 2024. Referring back to the Z-Factor, we noted some inflationary effects. Looking further ahead, as we plan for the long-term growth trajectory, we will have a new GRC in 2025 that will allow us to incorporate the current contracts we hold. This should address all aspects related to the impact of inflation.

I know you kind of strongly resupported the 5% to 7% earnings growth for '25. Just curious when you're doing that, are you including kind of the higher financing cost environment that, let's say, we currently have versus beginning of the year when you kind of do that? Is that kind of in the mix?

Yes, it's definitely part of the considerations. The 5% to 7% EPS growth is primarily supported by rate base growth, which we've previously discussed, so I won’t revisit that in detail. However, it's an essential factor for the EPS growth. Other aspects we've shared, like operational variances and costs that exceed what has been authorized, provide context for understanding future developments. We manage various elements closely, with many subtopics under each line item. In this quarter, we updated the costs exceeding authorization to account for rising interest rates. We're considering the appropriate tenor based on interest rate forecasts. We anticipate filing two cost recovery applications as mentioned earlier, with one expected in late 2023 and others potentially still pending. We're focusing on the shorter end of the curve, currently reflecting an embedded interest rate of around 3.75% in our forecast.

And so I get the sort of the 2025 slide that talks about $0.20 of higher interest expense. But can you sort of discuss the $0.20 change in the operating variances and what's comprised in your assumptions there and the change in your assumptions?

Sure. We discuss operational variances every year, and it's an area we manage very closely. It is central to our commitment to overall operational excellence, and we have maintained the lowest system average rate in the state for a long time, which has a lot of history behind it. However, that line item encompasses many different factors, including the timing of regulatory impacts, operational efficiencies, and depreciation true-ups. As we approach our goals, we continue to review the mix involved and refine our expectations for what we can deliver at that time. We recognize that changes in the interest rate environment also play a role in our other categories, and this is part of our overall strategy for managing the business.

But is there anything sort of specific or it's just sort of a confluence of all of the things that you talked about?

It is a lot of different things in that category. It's just running the business and what we would perceive to be and characterized as an operationally excellent manner.

And Maria, I would add to that, Paul, just to give you a little more color. It is a big business. There's a lot of moving parts. And one of the things that's been really interesting and the work that we shared last quarter, right, where Steve Powell and team at SCE are driving further operational improvement, there's some bigger ideas, some smaller ideas, but this kind of bottom-up approach that we're focused on right now that has our employees, our teammates very deeply engaged in this. There's not a one big bang thing in there. You see to Maria's point, there's a lot of hard work and elbow grease across every part of the enterprise. And that's another illustration of how you just get a lot of pieces that add up to the total. And that we think is valuable because it gives us good diversity of approach in terms of operations.

And I think your disclosure talks about sort of the $3 billion of debt that has funded wildfires through the end of last year. Can you provide any update on that as to what issuance you might have done so far this year?

SCE had one issuance earlier this year that was used to fund wildfire claims. Typically, we make a number of wildfire claims payments, and as the amount builds up over the year, SCE would then finance it in the capital markets. However, I don't think there has been anything different in this approach. I believe this occurred in the first quarter.

And how much will that?

That was $1.25 billion, if I recall correctly or 1.2 something, round numbers.

If I understood you correctly, are you considering financing at a variable rate or a fixed rate? You mentioned focusing on the short end of the curve.

Yes, we have utilized various fixed rate notes and are also considering some variable rates. The team has occasionally had term loans in the mix. We will evaluate the most efficient and effective approach moving forward, with an emphasis on the shorter end of the curve. This is important as we anticipate the timing for our applications for recovery, likely coinciding with the second application. Minimizing costs is crucial for efficient business operations, and when we apply for the recovery of claims payments, we will also seek to recover the interest expenses incurred during this period. It's essential for us to be mindful of this from a customer perspective as well.

If I may, maybe to just pick up off of where these last couple of guys left off here. On the puts and takes on the $0.20, the plus and the minus there, can you talk about timing of the recovery? Do you start to get some of that recovery in by '25 or '26 if you think about it? Or you still kind of think about the same notional amount being outstanding there and you're just putting a different, the 3.75 or what have you there from the $0.20 Delta? And then on the other side of that, as you think about the $0.20 uplift on operational excellence, that would probably shift in and out based on rate case cycle, too, right?

Yes. There are two points to clarify. First, we do not include recovery in our growth targets of 5% to 7%. We are definitely preparing an application, and we believe we will present a strong case to the commission, but that is not factored into the 5% to 7% growth range. Second, regarding operational efficiencies, we consistently work to improve our company's efficiency for the benefit of our customers. This helps us manage customer rates effectively, while also ensuring we can make the most of our capital investments. The 79% rate base growth reflects the capital we will be deploying. We actively seek efficiencies every year, regardless of where we are in the rate case cycle. There are various strategies we will implement to achieve the most efficient outcomes, so we are dedicated to this aspect of our operations continuously, irrespective of the cycle stage.

Yes, Maria, you addressed it well. To emphasize your initial point, we have not factored in cost recovery in the base case that contributes to the 5% to 7%. We are doing this to align with GAAP treatment, as the only precedent was the misguided San Diego Gas & Electric stance from a decade ago. However, we are very confident in the case's merits and our ability to demonstrate to the commission that SCE is entitled to cost recovery, at least to some extent. This is an additional factor that we have not even integrated into our analysis, adding to our overall confidence in the 5% to 7%.

Can you discuss the pace of the operational excellence initiatives? It seems you took a charge related to organizational realignment this quarter. Is this the beginning of a broader program? How does this relate to the expected $0.20 benefit by 2025? Should we anticipate more of these initiatives, and to what extent could they contribute to that $0.20 increase sooner?

Sure. Thanks, Pedro. The charge you mentioned relates to changes we're making as part of our catalyst program, which is a bottom-up initiative for employees. We have identified thousands of ideas, and our teams have narrowed it down to over 600 initiatives that not only enhance affordability for customers but also improve safety, reliability, and more. Our intention is to implement these ideas over the next 24 months, benefitting from them along the way. Some will need investments in technology and changes to processes, but these efforts will lead to operational efficiencies and improvements in our core metrics. We expect this, along with other initiatives, to become a consistent practice that fosters ongoing operational enhancements and efficiencies year after year. As we establish a solid foundation with this program and look ahead to the next phase, we will be better equipped to determine how these improvements can benefit our customers and potentially contribute to earnings in the interim.

So it sounds like maybe it's still more ratable through the forecast right here?

Of the $5.2 billion of potential cost recovery, is there an approximate portion that you plan to file in late '23 that could be shared at this time? Or when can we expect to learn more about the initial filing's scope?

Yes. Ryan, it's a good question. You might recall that we really haven't split apart the TKM versus Woolsey claim amounts. We've been pretty candid that we do have active litigation going on, active settlements going on. And so I think it's been in our customers' interest to present the combined picture of the two. So therefore, we really can't provide color at this time on what the split is between those two and therefore, what you might see in an earlier filing versus later filing?

Just in terms of timeline, I mean, is there a period of time when you would actually be able to provide that clarity, given your comments around not necessarily needs to be 100% addressed or claimed?

Ryan, we are planning to make our first filing by the end of 2023. We have a strong sense of urgency, and if we progress with settlements enough to file earlier, we will. I expect to provide updates as we file the application, ensuring that the market is informed at the same time as the regulators.

And then regarding the $7.9 billion claim, it's unchanged from last quarter, which is good to see, given the remaining expected loss number came in. Do you have greater confidence on this remaining $900 million expected loss versus previous quarters? Or is there any way to frame the confidence level versus history.

Yes, let me address that. Maria, you might want to add something as well. We are committed to being straightforward, and it seems you have the GAAP definitions in mind. Our goal is to provide our best estimate at any given time, which, as you observed, does not fluctuate significantly from quarter to quarter. We have disclosed that the actual figure could vary. It’s important to note that while uncertainty always exists, the range of that uncertainty is becoming narrower now that we have an expected estimate of $400 million. With a smaller remaining amount, if we consider the uncertainty percentage over $1.3 billion compared to now over $900 million, we have a significantly smaller number this quarter. That’s about all I can say, but I want to emphasize, in line with our disclosures, that there is still uncertainty, and this is our best estimate; the final figure may be higher or lower.