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8-K - UIL HOLDINGS CORPORATION 8-K 11-9-2012 - UIL HOLDINGS CORP | form8k.htm |
Exhibit 99.1
47th Annual EEI Financial
Conference
Conference
November 2012
Exhibit 99.1
Note to Investors
James Torgerson
President and Chief Executive Officer
Richard Nicholas
Executive Vice President and Chief Financial Officer
For more information, contact:
Susan Allen - V.P. IR, 203.499.2409, Susan.Allen@uinet.com
Michelle Hanson - Mgr. IR, 203.499.2481, Michelle.Hanson@uinet.com
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Today’s Topics
q Overview
§ Corporate Structure
§ Investment Highlights
§ Hurricane Sandy Update
§ CT Comprehensive Energy Strategy
q Updated Forecasts
§ CapEx
§ Average Rate Base
q Business Operations
§ Gas Distribution
§ Electric Transmission
§ Electric Distribution
q Financials
q CT & MA State Regulatory
q Conclusion
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Who We Are……
q Service territory: 335 sq
miles
miles
q ~320,000 customers
q Allowed Distribution ROE
of 8.75%
of 8.75%
q Earned ‘11 Transmission
ROE (composite) of 12.4%
ROE (composite) of 12.4%
q 50% interest in GenConn
Energy LLC
Energy LLC
The United Illuminating
Company (UI)
Company (UI)
UIL Holdings
Corporation
Corporation
Service Area Key
SCG
CNG
UI
Berkshire
Overlapping Territory
q Service territory: 716 sq
miles - Greater Hartford-
New Britain & Greenwich
miles - Greater Hartford-
New Britain & Greenwich
q ~160,000 customers
q 2,022 miles of mains with
~126,000 services
~126,000 services
q Allowed ROE of 9.41%
going forward
going forward
Connecticut Natural Gas
(CNG)
(CNG)
q Service territory: 738 sq
miles in Western MA
including Pittsfield and
North Adams
miles in Western MA
including Pittsfield and
North Adams
q ~36,000 customers
q 744 miles of mains with
~31,000 services
~31,000 services
q Allowed ROE of 10.50%
Berkshire Gas Company
(Berkshire)
(Berkshire)
q Service territory: 512 sq
miles from Westport, CT
to Old Saybrook, CT
miles from Westport, CT
to Old Saybrook, CT
q ~178,000 customers
q 2,281 miles of mains with
~133,000 services
~133,000 services
q Allowed ROE of 9.36%
going forward
going forward
Southern Connecticut Gas
(SCG)
(SCG)
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Why UIL……..
Pure-play
electric & gas
utilities
electric & gas
utilities
§ Virtually 100% regulated
§ Electric distribution & transmission and gas distribution utilities -
complementary earnings patterns
complementary earnings patterns
§ Earnings growth opportunities at both electric and gas operations
Financial
strategy
strategy
§ Commitment to investment grade credit profile
§ Consistent history of dividend payments
§ Objective is to achieve allowed ROEs
§ Focused on controlling costs
High probability
growth
growth
§ $3.5 billion 10-year capital expenditure program
§ Natural gas expansion through customer conversions
§ Growth opportunities in electric transmission and distribution
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Recent Storm Update
Hurricane Sandy
q Approximately 280,000 customer outages
§ Within 7 days of the storm ending, 99% of customers
had power restored
had power restored
q Preliminary cost estimate of approximately $35-
$40M
$40M
§ Approximately 40% capital & 60% O&M
ú A regulatory asset has been established and expect
to seek recovery of these costs in a future rate
proceeding
to seek recovery of these costs in a future rate
proceeding
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Hurricane Sandy
Impact across UI service territory
Fairfield
q Governor Malloy and the Department of Energy & Environmental Protection (DEEP)
issued a Draft of Connecticut’s CES on October 5th
issued a Draft of Connecticut’s CES on October 5th
§ Document provides a foundation for informed policy, regulatory, and legislative decisions
q Covers all fuels in all sectors with a planning horizon out to the year 2050
q Five major priority areas are:
§ Energy efficiency
§ Electricity supply, including renewable power (may increase renewable standards)
§ Industrial energy needs
§ Transportation
§ Natural Gas
q The draft includes the goal of making natural gas, a lower-cost option, available to more than
250,000 additional residential customers and potentially up to 75% of businesses in Connecticut
in the next seven years
250,000 additional residential customers and potentially up to 75% of businesses in Connecticut
in the next seven years
q Draft also provides for effective financing tools for customers
q Timeline:
§ Public hearings November 9-20
§ Technical meetings November 14-28
§ Written comments due on or before December 14th
§ Final decision expected in early 2013
Comprehensive Energy Strategy (CES)
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10-yr Capex Forecast Update (2013-2022)
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• Does not include potential to construct, own and operate up to 10MW of Class I renewable generation
• Does not include GenConn
Amounts may not add due to rounding
Identified projects with clear need & high probability
q Previous Forecast (‘12-’21) - $2.9B
q Gas, New Business ~ 120% increase, $308M to $680M
q System Hardening ~ $184M
Rate Base Forecast (2012-2017)
excluding GenConn Equity
excluding GenConn Equity
$M
2012-2017
CAGR 8.0%
Gas
Distribution:
5.2%
Electric
Transmission:
7.9%
Electric
Distribution:
12.9%
Gas forecast includes 338 (H)(10) election
Amounts may not add due to rounding
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Gas Distribution
Gas Distribution Capex 2013-2022
q Previous ‘12-’21 forecast
$961M
$961M
q Addresses replacement of
cast iron & bare steel
cast iron & bare steel
q Significant increase in New
Business
Business
Amounts may not add due to rounding
Gas Conversions
q Converted 9,233 customers YTD Oct. ’12, compared to 5,740 YTD Oct. ‘11 - a 61% increase over
the same period in ‘11
the same period in ‘11
q 2011-2013 target is to convert 30,000-35,000 customers to gas heat
§ 2013 goal is to convert approximately 12,200 customers
§ 2012 goal is to convert approximately 10,200 customers
§ Converted approximately 8,300 customers in 2011
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Gas Conversions Forecast
q Potential customers
§ The New England & CT regions have historically relied heavily on heating oil
§ 66% customer penetration on gas mains
§ Approximate number of non customers on gas mains ~154,900*
ú Low use customers on existing mains ~38,000
q On target to reach goal of converting 30,000-35,000 customers from 2011-2013
q CES could enable conversion of approximately 55,000 customers from 2014-
2016
2016
§ 2014 goal is to convert approximately 25% more customers than 2013 level
§ CES draft provides support for:
ú Statewide policy support to achieve 50% market penetration
ú Effective financing tools for consumers
ú Large system expansion projects are enabled
q Each new residential customer is anticipated to generate approximately $280-
$315 of distribution net income annually
$315 of distribution net income annually
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* Not including low use customers
Electric Transmission
Electric Transmission Capex 2013-2022
q Previous ‘12-’21 forecast
$571M
$571M
q CapEx spend for storm
preparedness - system
hardening
preparedness - system
hardening
Amounts may not add due to rounding
Examples of Electric Transmission Projects
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Shelton 115/13.8 kV
Substation
Substation
§ Meets Greater
Shelton area load
growth
Shelton area load
growth
§ In planning
§ Planned in-service
2014
2014
~ $40M*
East Shore 115 kV
Substation Upgrades
Substation Upgrades
§ Addresses condition
of infrastructure, short
circuit capability and
maintenance
of infrastructure, short
circuit capability and
maintenance
§ Phased upgrades in
engineering and in-
service
engineering and in-
service
§ Planned in-service
2013
2013
~ $25M*
Milford and Bridgeport
115kV Railroad Upgrades
115kV Railroad Upgrades
*Dollars shown are rounded/approximate expected total project CapEx (generally including both spend to date and future expected spend); excluding AFUDC.
** Based on most recent information/estimate from NU
§ Increases the capacity
of the transmission
lines
of the transmission
lines
§ Includes installing
new transmission
structures and line
reconductoring
new transmission
structures and line
reconductoring
§ Planned in-service
2013-2016
2013-2016
~ $53M
New England East-West
Solution (NEEWS)
Solution (NEEWS)
§ UI participation in
CL&P Project
CL&P Project
§ UI’s portion, greater of
$60M**or 8.4% of costs
for the CT portions
$60M**or 8.4% of costs
for the CT portions
§ Planned in-service
2012-2016
2012-2016
~ $50M
FERC-Related Development
Challenge to Regional Transmission Base ROE:
q “206” complaint filed at FERC by multiple state governmental entities in September 2011
§ Claiming that current approved base ROE on transmission investment of 11.14% is not just and reasonable
q FERC has set the matter for hearing
§ The complainants’ direct case was filed on October 1, 2012 , recommending an ROE of 9.0%
§ Respondents’ answer to the direct case is scheduled to be filed on November 20, 2012
§ Hearing scheduled for May 2013, with an initial decision from the hearing judge scheduled for September
2013
2013
§ In the event there is a reduction to the ROE, the order established a refund effective date of October 1, 2011
§ FERC decision expected in 2014
Note: A 25 basis point change in the weighted-average ROE for UI’s transmission
business would impact net income by approximately $0.6M annually
business would impact net income by approximately $0.6M annually
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Electric Distribution
Electric Distribution Capex 2013-2022
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q Previous ‘12-’21 forecast
$1.2B
$1.2B
q CapEx spend for storm
preparedness - mainly
system hardening
preparedness - mainly
system hardening
Amounts may not add due to rounding
Examples of Electric Distribution Projects
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Distribution Transformer
Replacement Program
Replacement Program
New Haven/East Haven
Load Relief Project
Load Relief Project
Bridgeport Fuel Cell
Energy Project
Energy Project
§ Infrastructure program to
replace transformers due to
physical condition,
capacity, or potentially
high levels of PCBs
replace transformers due to
physical condition,
capacity, or potentially
high levels of PCBs
§ In progress
§ Annual program for 10
years
years
~ $6M per year
§ Provide circuit relief for
areas of New Haven and
East Haven through
construction of
underground path
areas of New Haven and
East Haven through
construction of
underground path
§ In progress
~ $11.5M
§ Install 3 interconnections for
15.5 MW Fuel Cell
Generation Facility via 3
dedicated underground
express feeders
15.5 MW Fuel Cell
Generation Facility via 3
dedicated underground
express feeders
§ In progress
~ $10M**
**Customer project that is partially reimbursable
Financials
YTD 2012 Financial Results by Business
EPS
YTD ‘12 vs. YTD ‘11
Net Income
YTD ‘12 vs. YTD ‘11
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Amounts may not add due to rounding
q Reflects YTD 3Q ‘12 financial results
q ‘12 goal of converting 10,200 customers to natural gas heat
q Execution of capital expenditure plan at each of our regulated businesses
q Focused short-term O&M cost controls at each of our regulated businesses
q Assumes normal weather through the rest of ’12
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2013 earnings
expectations will
be discussed on the
4Q ‘12 earnings call
expectations will
be discussed on the
4Q ‘12 earnings call
CT & MA State Regulatory
State Regulatory Update
Connecticut
q Distribution Rate Case
§ UI is evaluating timing of distribution rate case to reflect significant investments in distribution
infrastructure
infrastructure
q Utility Company Storm Response
§ Pursuant to CT legislation, PURA will review UI’s performance following Hurricane Sandy
q GenConn
§ Filed a rate case request seeking approval of 2013 revenue requirements of $73.5M
§ Decision expected by the end of the year
q Renewable Connections Program
§ Reopened proceeding currently in progress
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Massachusetts
q Mandated rate cases every 5 years for electric utilities and 10 years for natural gas LDCs
Conclusion
Why UIL……..
Pure-play
electric & gas
utilities
electric & gas
utilities
§ Virtually 100% regulated
§ Electric distribution & transmission and gas distribution utilities -
complementary earnings patterns
complementary earnings patterns
§ Earnings growth opportunities at both electric and gas operations
Financial
strategy
strategy
§ Commitment to investment grade credit profile
§ Consistent history of dividend payments
§ Objective is to achieve allowed ROEs
§ Focused on controlling costs
High probability
growth
growth
§ $3.5 billion 10-year capital expenditure program
§ Natural gas expansion through customer conversions
§ Growth opportunities in electric transmission and distribution
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Questions?
Appendices
2012 Earnings Highlights
q 3Q ‘12 net income of $15.7M - 29% increase compared to 3Q ’11
q YTD ‘12 net income of $74.8M was below YTD ‘11 levels mainly due to warmer
weather in the first six months of ‘12
weather in the first six months of ‘12
q YTD ‘12 pre-tax earnings from UI’s equity investment in GenConn of $11.8M,
compared to $8.2M YTD ‘11, an increase of $3.6M
compared to $8.2M YTD ‘11, an increase of $3.6M
§ Middletown plant became fully operational in June ’11
q Continued progress on gas conversion growth initiative - on target to meet ‘12 goal
§ Converted 61% more customers YTD Oct. ’12, compared to YTD Oct. ’11
q YTD ‘12 pre-tax income of $1.1M on deposits in NEEWS, no income recorded YTD
’11
’11
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Debt Maturities, Liquidity & Credit Ratings
Evaluating the impact of DEEP’s
Comprehensive Energy Strategy, PURA’s
Renewable Generation Resources decision,
current business plans and market conditions
to determine potential timing and need for
external equity
Comprehensive Energy Strategy, PURA’s
Renewable Generation Resources decision,
current business plans and market conditions
to determine potential timing and need for
external equity
*
Available Liquidity
Debt Maturities ($M)
Credit Ratings
* UIL closed on an additional $100 million credit agreement on 10/31/12.
Breakdown of Gas - Rate Base (2012-2017)
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$M
Forecast includes 338 (H)(10) election
Amounts may not add due to rounding
2012-2017
CAGR 5.2%
Previous - UIL 2012-2021
Capital Expenditure Forecast
Capital Expenditure Forecast
Does not include potential to construct, own and operate up to 10MW of Class I renewable generation.
** Not including GenConn
Amounts may not add due to rounding
q Identified projects with clear need
q Full 10-yr forecast for Gas Distribution CapEx
q IT-related shared services projects are in UIL Corporate
33
Previous 2011-2016
Average Rate Base Forecast (excluding GenConn)
Average Rate Base Forecast (excluding GenConn)
GenConn Equity Investments:
$M
Amounts may not add due to rounding.
2011-2016
CAGR 6.9%
Gas
Distribution:
3.6%
Electric
Transmission:
10.2%
Electric
Distribution:
11.1%
$2,062
$2,235
$2,388
$2,535
$2,731
1%
41%
22%
36%
40%
22%
38%
40%
22%
38%
38%
24%
38%
2%
43%
22%
33%
4%
42%
21%
33%
$1,956
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CT RPS
Connecticut RPS Requirements
(Percentage of Retail Load)
Class 1 resources include energy derived from solar, wind, fuel cell, methane gas from landfills, ocean thermal, wave,
tidal, run-of-river hydropower (<5MW, began operation after July 1, 2003), sustainable biomass (NOx emission <0.075
lbs/MMBtu of heat input)
tidal, run-of-river hydropower (<5MW, began operation after July 1, 2003), sustainable biomass (NOx emission <0.075
lbs/MMBtu of heat input)
Class 2 resources include other biomass (NOx emission <0.2 lbs/MMBtu of heat input, began operation before July 1,
1998), small run-of-river hydroelectric (<5MW, began operation before July 1, 2003) and municipal solid waste trash-to-
energy facilities.
1998), small run-of-river hydroelectric (<5MW, began operation before July 1, 2003) and municipal solid waste trash-to-
energy facilities.
Class 3 include customer-sited combined heat and power (with operating efficiency >50% of facilities installed after
January 1, 2006), waste heat recovery systems (installed on or after April 1, 2007), electricity savings from conservation
and load management programs (began on or after January 1, 2006)
January 1, 2006), waste heat recovery systems (installed on or after April 1, 2007), electricity savings from conservation
and load management programs (began on or after January 1, 2006)
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