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| 8-K - MIDAMERICAN ENERGY HOLDINGS COMPANY FORM 8-K - BERKSHIRE HATHAWAY ENERGY CO | mehc8k10302009.htm |
2009
EEI Financial Conference
Patrick J. Goodman
Senior Vice President and Chief Financial Officer
Patrick J. Goodman
Senior Vice President and Chief Financial Officer
Forward-Looking
Statements
This
report contains statements that do not directly or exclusively relate to
historical facts. These statements are “forward-
looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements can typically be identified by the use of forward-looking
words, such as “may,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “intend,” “potential,”
“plan,” “forecast” and similar terms. These statements are based upon MidAmerican Energy Holdings Company’s (“MEHC”)
and its subsidiaries’ (collectively, the “Company”) current intentions, assumptions, expectations and beliefs and are subject to
risks, uncertainties and other important factors. Many of these factors are outside the Company’s control and could cause
actual results to differ materially from those expressed or implied by the Company’s forward-looking statements. These
factors include, among others:
looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements can typically be identified by the use of forward-looking
words, such as “may,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “intend,” “potential,”
“plan,” “forecast” and similar terms. These statements are based upon MidAmerican Energy Holdings Company’s (“MEHC”)
and its subsidiaries’ (collectively, the “Company”) current intentions, assumptions, expectations and beliefs and are subject to
risks, uncertainties and other important factors. Many of these factors are outside the Company’s control and could cause
actual results to differ materially from those expressed or implied by the Company’s forward-looking statements. These
factors include, among others:
– general
economic, political and business conditions in the jurisdictions in which the
Company’s facilities operate;
– changes in
governmental, legislative or regulatory requirements affecting the Company or
the electric or gas
utility, pipeline or power generation industries;
utility, pipeline or power generation industries;
– changes
in, and compliance with, environmental laws, regulations, decisions and policies
that could increase
operating and capital costs, reduce plant output or delay plant construction;
operating and capital costs, reduce plant output or delay plant construction;
– the
outcome of general rate cases and other proceedings conducted by regulatory
commissions or other
governmental and legal bodies;
governmental and legal bodies;
– changes in
economic, industry or weather conditions, as well as demographic trends, that
could affect customer
growth and usage or supply of electricity and gas or the Company’s ability to obtain long-term contracts with
customers;
growth and usage or supply of electricity and gas or the Company’s ability to obtain long-term contracts with
customers;
– a high
degree of variance between actual and forecasted load and prices that could
impact the hedging strategy and
costs to balance electricity and load supply;
costs to balance electricity and load supply;
– changes in
prices and availability for both purchases and sales of wholesale electricity,
coal, natural gas, other fuel
sources and fuel transportation that could have a significant impact on generation capacity and energy costs;
sources and fuel transportation that could have a significant impact on generation capacity and energy costs;
– the
financial condition and creditworthiness of the Company’s significant customers
and suppliers;
– changes in
business strategy or development plans;
– availability,
terms and deployment of capital, including severe reductions in demand for
investment-grade
commercial paper, debt securities and other sources of debt financing and volatility in the London Interbank
Offered Rate, the base interest rate for MEHC’s and its subsidiaries’ credit facilities;
commercial paper, debt securities and other sources of debt financing and volatility in the London Interbank
Offered Rate, the base interest rate for MEHC’s and its subsidiaries’ credit facilities;
Forward-Looking
Statements
– changes in
MEHC’s and its subsidiaries’ credit ratings;
– performance
of the Company’s generating facilities, including unscheduled outages or
repairs;
– risks
relating to nuclear generation;
– the impact
of derivative instruments used to mitigate or manage volume, price and interest
rate risk, including
increased collateral requirements, and changes in the commodity prices, interest rates and other conditions that
affect the value of derivative instruments;
increased collateral requirements, and changes in the commodity prices, interest rates and other conditions that
affect the value of derivative instruments;
– the impact
of increases in healthcare costs and changes in interest rates, mortality,
morbidity, investment
performance and legislation on pension and other postretirement benefits expense and funding requirements;
performance and legislation on pension and other postretirement benefits expense and funding requirements;
– changes in
the residential real estate brokerage and mortgage industries that could affect
brokerage transaction
levels;
levels;
– unanticipated
construction delays, changes in costs, receipt of required permits and
authorizations, ability to fund
capital projects and other factors that could affect future generating facilities and infrastructure additions;
capital projects and other factors that could affect future generating facilities and infrastructure additions;
– the impact
of new accounting pronouncements or changes in current accounting estimates and
assumptions on
financial results;
financial results;
– the
Company’s ability to successfully integrate future acquired operations into its
business;
– other
risks or unforeseen events, including litigation, wars, the effects of
terrorism, embargoes and other
catastrophic events; and
catastrophic events; and
– other
business or investment considerations that may be disclosed from time to time in
MEHC’s filings with the
United States Securities and Exchange Commission (the “SEC”) or in other publicly disseminated written
documents.
United States Securities and Exchange Commission (the “SEC”) or in other publicly disseminated written
documents.
Further
details of the potential risks and uncertainties affecting the Company are
described in MEHC’s filings with the SEC.
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. The foregoing review of factors should not be construed as exclusive.
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. The foregoing review of factors should not be construed as exclusive.
MidAmerican
Energy Holdings
Company Energy Assets
Company Energy Assets
• $42
billion of assets as of
June 30, 2009
June 30, 2009
• $11.8
billion of revenue(1)
• 7 million
electric and
natural gas customers
worldwide
natural gas customers
worldwide
• Nearly
17,000 miles of
interstate natural gas
pipeline with
approximately 7.0 bcf
capacity
interstate natural gas
pipeline with
approximately 7.0 bcf
capacity
• Approximately
18,000
megawatts(2) of owned
generation
megawatts(2) of owned
generation
• Approximately
23 percent
of this generation is
renewable or noncarbon
of this generation is
renewable or noncarbon
___________________________
(1) $11.8
billion of revenue for the twelve
months ended June 30, 2009
months ended June 30, 2009
(2) Net
owned megawatts in operation and
under construction as of June 30, 2009
under construction as of June 30, 2009
Corporate
Strategy
• Own
and operate a portfolio of high quality utility businesses
– Focus on
operational efficiency, cost control and customer service
– Cooperative
approach with regulators and customers
– Pursue
internal capital investment opportunities to expand regulated asset
base
• Maintain
prudent financial and risk management policies
– Committed
to improve holding company and subsidiary credit profile
– Stable and
highly diversified asset base
• Grow
and diversify through a disciplined acquisition strategy
– Target
additional energy assets
– Focus on
long-term risk-adjusted cash flow returns
– Continue
to utilize ring-fencing approach
– Capitalize
on access to long-term capital from Berkshire Hathaway
– Continue
track record of proven integration capabilities and improving
financial performance
financial performance
MidAmerican’s
Strategy Has Delivered Outstanding Results
MidAmerican
Competitive Advantage
• Diversified
portfolio of regulated assets
– Weather,
customer, regulatory, generation, economic and catastrophic risk
diversity
• Berkshire
Hathaway provides MidAmerican with a $3.5 billion equity
commitment
commitment
– Access to
capital even in times of utility and general market stress
• No
other utility has this quality of explicit financial support
• No
dividend requirement
– Cash flow
is retained in the business and used to help fund growth and improve
credit
metrics
metrics
• Berkshire
Hathaway ownership
– Access to
capital from Berkshire Hathaway allows us to take advantage of market
opportunities
opportunities
– Berkshire
Hathaway is a long-term holder of assets, and its owner for life
philosophy
promotes stability and helps make MidAmerican the buyer of choice among regulators
promotes stability and helps make MidAmerican the buyer of choice among regulators
7
Constellation
Energy
Termination
Fee
Cash in
Lieu of Shares
Repayment
of 14% Note
Proceeds
on Sale of Shares
Total
Proceeds
Initial
Investment in Constellation Energy
8%
Series A Preferred Stock
Net
Proceeds
Cash Flows
from Operating Activities Impact
Cash Flows
from Investing Activities Impact
Net Income
Attributable to MEHC Impact
$ 175
418
-
-
593
$ -
-
1,000
536
1,536
-
$ 1,536
$ 175
418
1,000
536
2,129
$ 1,129
Proceeds
($
millions)
2008
2009
Total
(1,000)
$ (407)
(1,000)
$ 175
$ 128
$ 303
$ 646
$ 418
$ 1,000
$ 668
$ (582)
$ 22
8
Growth
in Shareholders’ Equity
• Termination
of the Constellation Energy transaction and sale of stock
added more than $668 million to MEHC shareholders’ equity
added more than $668 million to MEHC shareholders’ equity
• BYD
investment of $232 million in July 2009 is valued at more than $1.8
billion as of September 30, 2009
billion as of September 30, 2009
• Despite
the difficult economic environment, MEHC shareholders’ equity
has grown from $9.3 billion at December 31, 2007, to $11 billion as of
June 30, 2009
has grown from $9.3 billion at December 31, 2007, to $11 billion as of
June 30, 2009
– BYD
after-tax gain will be reflected in September 30, 2009,
results
9
PacifiCorp
Calif.
Nev.
Ariz.
Utah
Wyo.
Ore.
Wash.
Mont.
Colo.
Idaho
Pacific
Power Service Territory
Coal
Plants
Natural
Gas Plants
Wind
Projects
Coal
Mines
Geothermal
and Other
Hydro
Systems
Rocky
Mountain Power Service
Territory
Territory
___________________________
(1) Net
owned megawatts in operation and under construction as of
June 30, 2009
June 30, 2009
• Headquartered
in Portland, Oregon
• 6,568
employees
• 1.7
million electricity customers in six western
states
states
• 10,595
megawatts(1)
of owned
generation
capacity
capacity
• Generating
capacity by fuel type
06/30/09(1) 03/31/06
– Coal 58% 72%
– Natural
gas 21% 13%
– Hydro 11% 14%
– Wind and
geothermal
10% 1%
10
PacifiCorp
- Business Update
Regulatory
• Active
regulatory agenda including rate cases, power cost adjustment mechanisms
and
renewable adjustment clauses
renewable adjustment clauses
– Completed
in 2009
– Power cost
adjustment mechanism approved in Idaho effective July 1, 2009
– Utah
general rate case completed - $45.0 million annual revenue increase effective
May 8, 2009
– Oregon
renewable cost recovery - $30.8 million effective January 21, 2009
– Oregon
Senate Bill 408 tax surcharge - $20.1 million effective June 1,
2009
– Oregon
transition adjustment mechanism - $9.2 million effective January 1,
2009
– Wyoming
general rate case - $18.0 million annual revenue increase effective May 24,
2009
– Wyoming
power cost adjustment mechanism settlement - $7.0 million effective April 1,
2009
– Idaho
general rate case - $4.4 million annual revenue increase effective April 18,
2009
– Pending
– Power cost
adjustment mechanism requested in Utah
– Oregon
rate case and transition adjustment mechanism settlement - $50.0 million annual
increase
for general rates and power costs; settlement filed and order pending
for general rates and power costs; settlement filed and order pending
– Oregon
Senate Bill 408 tax surcharge - $45.1 million filed October 15,
2009
– Washington
rate case settlement - $13.5 million base rate increase and $18.0 million
Chehalis
deferral; new rates expected to be effective January 1, 2010
deferral; new rates expected to be effective January 1, 2010
– Utah
general rate case - $66.9 million annual increase requested June 23, 2009; new
rates
expected to be effective February 18, 2010
expected to be effective February 18, 2010
– Wyoming
general rate case - $70.9 million annual increase requested October 2, 2009; new
rates
expected to be effective August 1, 2010
expected to be effective August 1, 2010
11
PacifiCorp
- Regulatory Environment
Utah
• Integrated
resource planning
• As part of
RFP process, regulatory approval of investment prudence may be obtained prior to
construction/acquisition
• Rates
effective no later than eight months after filed date
• Regulators
have accepted use of forecast test periods
• Regulators
are required to allow utility to use single issue rate case or deferred
accounting for major plant additions (>1% of
rate base)
rate base)
• Regulators
may approve power cost recovery mechanisms - PacifiCorp filed an application in
2009 for approval of a mechanism
Oregon
• Integrated
resource planning
• Rate case
test periods are based on forecast data
• 10-month
time limit on consideration of proposed rate increase
• Regulators
authorized to approve power cost recovery mechanisms
• Annual
update to forecast power costs outside of general rate case; i.e. transition
adjustment mechanism
• Annual
renewable resource cost recovery outside of general rate case with deferral of
cost of renewable resources that come on-line
between annual proceedings
between annual proceedings
Washington
• Integrated
resource planning
• Rate case
test periods are based on historical data with known and measurable
adjustments
• 11-month
time limit on consideration of proposed rate increase
• Regulators
authorized to approve power cost recovery mechanisms
• Commission
required to allow deferral of costs related to eligible base-load and renewable
generation resources
between rate
cases
for future recovery
for future recovery
12
PacifiCorp
- Regulatory Environment
Idaho
• Integrated
resource planning
• Rates
effective no later than seven months after filed date
• Rate case
test periods based on historic data with known and measurable
adjustments
• Ability to
use single issue rate cases for significant new investment when filed within
approximately six months of prior rate change
• PacifiCorp
application for power cost adjustment mechanism approved; effective July 1,
2009, with annual true-up to actual costs
• New
legislation implemented that allows pre-construction regulatory approval and
binding rate-making principles (as in Iowa)
Wyoming
• 10-month
time period on consideration of proposed rate increase
• Rate case
test periods may be historical with known and measurable adjustments or
forecasted data based on each case circumstance
• Power cost
adjustment mechanism in place with annual true-up
California
• Rate case
test periods are based on forecast data
• Three-year
rate case cycle with adjustment mechanisms
– Dollar-for-dollar
recovery of power costs and annual update to forecast power costs
– Annual
inflation-based adjustment mechanism
– Single-item
filings provide for recovery
of costs of capital additions in excess of $50 million total
company
13
PacifiCorp
- Business Update
• Retail
load for the six-month period ended June 30, 2009, was 25,313
gigawatt hours, a 4.8% decrease versus the first six months of 2008
gigawatt hours, a 4.8% decrease versus the first six months of 2008
• 377
megawatts of new wind generation to be added in 2009-2010
– Total
owned wind generation capacity projected to be 1,033 megawatts by
year-end 2010
year-end 2010
– Total wind
capacity under long-term contract is projected to be 682 megawatts
by year-end 2010
by year-end 2010
• Populus-to-Terminal
segment of Energy Gateway Transmission Expansion
Project under construction
Project under construction
– Expected
to be in-service during 2010
– $905
million project on budget
14
MidAmerican
Energy
Iowa
Ill.
Kan.
Neb.
S.D.
Wis.
Minn.
Mo.
___________________________
(1) Net
owned megawatts in operation as of June 30, 2009
• Headquartered
in Des Moines, Iowa
• 3,565
employees
• 1.4
million electric and natural gas customers in
four Midwestern states
four Midwestern states
• 6,443 net
megawatts generation capacity(1)
• Generating
capacity by fuel type
06/30/09(1) 12/31/00
– Coal 52% 70%
– Natural
gas 20% 19%
– Wind
20% 0%
– Nuclear
and
other
8%
11%
15
MidAmerican
Energy - Business Update
• Retail
load for the six-month period ended June 30, 2009, was 9,889 gigawatt
hours, a 3.5% decrease versus the first six months of 2008
hours, a 3.5% decrease versus the first six months of 2008
• On
September 1, 2009, MidAmerican Energy Company became a transmission-
owning member of MISO
owning member of MISO
• Update on
environmental capital expenditures
– Walter
Scott, Jr. Energy Center Unit 3 scrubber in-service May 2009
– 1,679
megawatts of coal generation in-service with scrubbers
• Regulatory
approval pending for up to 1,001 megawatts (nameplate ratings) of
additional wind development in Iowa for potential construction through 2012
additional wind development in Iowa for potential construction through 2012
• Continue
to receive high J.D. Power and Associates customer satisfaction ratings
for gas and electric service
for gas and electric service
16
Business
Overview
• 15,200
miles of natural gas pipeline
• 5.3 Bcf
per day of market area design
capacity, plus 2.0 Bcf per day field
area capacity
capacity, plus 2.0 Bcf per day field
area capacity
• 73 Bcf
firm storage capacity
• 78% of
2008 revenue based on
demand charges
demand charges
Major
Accomplishments
• Northern
Lights project — growth
in
market-area transportation business
market-area transportation business
2007 400,000
Dth/day
2008 100,000
Dth/day
2009/2010 150,000
Dth/day
• Firm gas
storage expansions
2006 — 6
Bcf
2008 — 8
Bcf
Northern
Natural Gas
Minn.
Wis.
Iowa
S.D.
Neb.
Kan.
Okla.
Texas
17
Business
Overview
• 1,700
miles of natural gas pipeline
• 1.8
million Dth/day of natural gas to
markets in Utah, Nevada and California
markets in Utah, Nevada and California
• 65% of
2008 revenue based on demand
charges
charges
Major
Accomplishments
• Received
FERC approval for 2010
Expansion for 145,000 Dth/day,
in-service anticipated December 31, 2009
Expansion for 145,000 Dth/day,
in-service anticipated December 31, 2009
• Anticipate
FERC approval in December
2010 for Apex expansion for 266,000
Dth/day
2010 for Apex expansion for 266,000
Dth/day
Kern
River
Calif.
Nev.
Ariz.
Utah
Wyo.
Business
Overview
• 3.8
million end-users in northeast England
• 57,000
miles of distribution lines
• 72% of
2008 distribution revenue from
residential and commercial customers
residential and commercial customers
2008
Distribution Revenue (£ millions)
Accomplishments
• Continuing
negotiations with Ofgem in
preparation for next price control period; final
proposals expected in December 2009
preparation for next price control period; final
proposals expected in December 2009
• Improvement
in customer service standards
continues
continues
• Excellent
safety performance in each of the last
five years
five years
• Financial
performance remains stable despite
economic climate
economic climate
CE
Electric UK
Northern
Electric service territory
Yorkshire
Electricity service territory
Financial
Results
A2/A-/A
Regulated
Gas and
Electric Utility
Electric Utility
Independent
Electric Power
Producer
Electric Power
Producer
A2/A/A
Regulated
Gas
Transmission
Transmission
A3/A-/A-
Regulated
Gas
Transmission
Transmission
Real
Estate
Brokerage
Brokerage
Baa1/BBB+/BBB+
Holding
Company
A2/A/A-(2)
Regulated
Electric
Utility
Utility
Aa2(1)/AAA/AA+(1)
A3/A-/A
U.K.
Regulated
Electric
Distribution
Electric
Distribution
A3/A-/A
U.K.
Regulated
Electric
Distribution
Electric
Distribution
“Forever
is our holding period” - Berkshire ownership philosophy
___________________________
(1) Moody’s and Fitch
ratings for Berkshire Hathaway Inc.
are Issuer Ratings
are Issuer Ratings
(2) PacifiCorp ratings
are Senior Secured
Organizational
Structure
MEHC
Growth Summary
Net
Income Attributable to MEHC
MEHC
Shareholders’ Equity
Property,
Plant and Equipment (Net)
Cash
Flows From Operations
CAGR
= 18.1%
CAGR
= 16.1%
CAGR
= 28.2%
CAGR
= 19.6%
(1) $646m and $668m
after-tax gains are related to the termination fee and profit from investment
in
Constellation Energy; CAGR calculation excludes this amount
Constellation Energy; CAGR calculation excludes this amount
(2) $2,587m and $3,077m
cash flows from operations include $175 and $303 for 2008 and LTM 6/30/09,
respectively, related
to the termination fee and profit from investment in Constellation Energy; CAGR calculation excludes this amount
to the termination fee and profit from investment in Constellation Energy; CAGR calculation excludes this amount
22
Business
Information ($ millions)
23
Business
Information ($ millions)
24
Business
Information ($ millions)
25
Business
Information ($ millions)
26
Business
Information ($ millions)
27
Business
Information ($ millions)
28
Business
Information ($ millions)
29
Capitalization
($ millions)
• As of June
30, 2009, approximately 96% of total debt was fixed rate debt
• As of June
30, 2009, long-term debt had a weighted average life of approximately
16.6 years and a weighted average interest rate of approximately 6.0%
16.6 years and a weighted average interest rate of approximately 6.0%
