Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Daniel Eggers – Credit Suisse.
Daniel Eggers – Credit Suisse
On the cap ex, the 20% to 25% room to cut in ’09, how much of this do you guys thing is going to be permanently capital versus capital that gets pushed out in to ’10 and beyond I guess is question one?
Dennis R. Wraase
I tell you there’s a small amount that would be permanent but most of it, as you would expect in the distribution business related to lower load growth where we’ll be able to push out substations and those kinds of reliability projects to future years because the load won’t be there when we had originally planned. So, a lot of it will be deferred in to future years.
Daniel Eggers – Credit Suisse
Then I guess with the Delta and Cumberland plants in process how are you guys thinking about financing those? If we look out in the market first mortgage bonds have been placeable, we haven’t seen a lot, are you guys looking at Holding company debt or Conectiv debt or is this going to have to be more of an equity funded type of investment right now.
Paul H. Barry
The way we look at that Dan is really those projects are self funded from cash flow from Conectiv Energy over the course of their construction period.
Daniel Eggers – Credit Suisse
Those are all cash funded effectively?
Paul H. Barry
Correct.
Daniel Eggers – Credit Suisse
Turning kind of the tone to Pepco Energy Services we’ve seen kind of two profile players have material problems in the third quarter. How are you guys looking at that business? You’re seeing margin pressure and you’re seeing liquidity pressure in that business. What is the outlook and where do you guys see the comfort level with your size of balance sheet to support that business.
Dennis R. Wraase
First off I’d say I haven’t seen or I don’t think John would say that we’ve seen the contraction of the margins. Obviously we are building in to any of our new business an appropriate cost to deal with the liquidity and the kinds of credit pressures that we have seen however, I’d like to differentiate ourselves from having read your report which came out this morning from RRIs for example where we have continued to run this on a profitable basis. I would say we are giving very careful consideration as we embark on these new markets but we believe at the moment that we are appropriately pricing and have the ability to continue to receive the gross margins that we have had in the past.
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