Attached files

file filename
8-K - PACIFICORP FORM 8-K - PACIFICORP /OR/pfc8k10302009.htm

2009 EEI Financial Conference
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:
 
  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;
  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;
 
  the outcome of general rate cases and other proceedings conducted by regulatory commissions or other
 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;
 
  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;
 
  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;
 
  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;
 
 
 

 
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;
  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;
  changes in the residential real estate brokerage and mortgage industries that could affect brokerage transaction
 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;
  the impact of new accounting pronouncements or changes in current accounting estimates and assumptions on
 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
  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.
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.
 
 

 
MidAmerican Energy Holdings
Company Energy Assets
 $42 billion of assets as of
 June 30, 2009
 
 $11.8 billion of revenue(1)
 
 7 million electric and
 natural gas customers
 worldwide
 
 Nearly 17,000 miles of
 interstate natural gas
 pipeline with
 approximately 7.0 bcf
 capacity
 
 Approximately 18,000
 megawatts(2) of owned
 generation
 
 Approximately 23 percent
 of this generation is
 renewable or noncarbon
 
___________________________
(1) $11.8 billion of revenue for the twelve
 months ended June 30, 2009
 
(2) Net owned megawatts in operation and
 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
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
  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
 Berkshire Hathaway ownership
  Access to capital from Berkshire Hathaway allows us to take advantage of market
 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
 
 

 
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
 BYD investment of $232 million in July 2009 is valued at more than $1.8
 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
  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
___________________________
(1) Net owned megawatts in operation and under construction as of
 June 30, 2009
 Headquartered in Portland, Oregon
 6,568 employees
 1.7 million electricity customers in six western
 states
 10,595 megawatts(1) of owned generation
 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
  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
  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
  Utah general rate case - $66.9 million annual increase requested June 23, 2009; new rates
 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
 
 

 
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)
 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
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
 
 

 
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
 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
  Total wind capacity under long-term contract is projected to be 682 megawatts
 by year-end 2010
 Populus-to-Terminal segment of Energy Gateway Transmission Expansion
 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
 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
 On September 1, 2009, MidAmerican Energy Company became a transmission-
 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
 Continue to receive high J.D. Power and Associates customer satisfaction ratings
 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
  73 Bcf firm storage capacity
  78% of 2008 revenue based on
 demand charges
Major Accomplishments
  Northern Lights project  growth in
 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
  65% of 2008 revenue based on demand
 charges
Major Accomplishments
  Received FERC approval for 2010
    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
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
  2008 Distribution Revenue (£ millions)
Accomplishments
  Continuing negotiations with Ofgem in
 preparation for next price control period; final
 proposals expected in December 2009
  Improvement in customer service standards
 continues
  Excellent safety performance in each of the last
 five years
  Financial performance remains stable despite
 economic climate
CE Electric UK
Northern Electric service territory
Yorkshire Electricity service territory
 
 

 
Financial Results
 
 

 
A2/A-/A
Regulated Gas and
Electric Utility
Independent
Electric Power
Producer
A2/A/A
Regulated Gas
Transmission
A3/A-/A-
Regulated Gas
Transmission
Real Estate
Brokerage
Baa1/BBB+/BBB+
Holding Company
A2/A/A-(2)
Regulated Electric
Utility
Aa2(1)/AAA/AA+(1)
A3/A-/A
U.K. Regulated
Electric
Distribution
A3/A-/A
U.K. Regulated
Electric
Distribution
“Forever is our holding period” - Berkshire ownership philosophy
___________________________
(1) Moody’s and Fitch ratings for Berkshire Hathaway Inc.
  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
(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
 
 

 
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%