Pacific Gas & Electric Co. · NYSE:PCG
Pacific Gas & Electric — PG&E — Morgan Stanley Utilities Conference 2010
48 slides from Pacific Gas & Electric's conference presentation, Mar 11, 2010
Slide 1: PG&E Corporation - Morgan Stanley Utilities Conference
PG&E Corporation Morgan Stanley Utilities Conference March 11-12, 2010 ®
Slide 2: Cautionary Language Regarding Forward-Looking Statements
Cautionary Language Regarding Forward-Looking Statements This presentation contains management’s guidance for PG&E Corporation’s 2010 and 2011 earnings per share from operations, projections of Pacific Gas and Electric Company’s (Utility) capital expenditures, construction work in progress (CWIP), r
Slide 3: PCG: Key Takeaways
PCG: Key Takeaways We have a solid strategy - customer focus - excellence in operations - strong regulatory relations - environmentally responsible - community oriented We execute on our strategy - a proven management team - delivering consistent solid results for our customers and shareholders 3
Slide 4: 2009 Report Card
2009 Report Card Our Plan Our Results Earnings from Operations* $3.15 - $3.25 per share $3.21 Capital Expenditures $3.6 to $3.7 B $3.9 B 15% Reduction in Injuries** 2.76 cases / 200,000 hours 2.38 cases Energy Efficiency Incentives $0 to $30 MM $33.4 MM On Time, On Budget Execution SmartMeterTM Gate
Slide 5: Customer Environment
Customer Environment PG&E is sensitive to customer needs - Proposing plan to restructure residential tiers - Making customers aware of options to tiered rates - Managing revenue changes to keep average rates flat in 2011 5
Slide 6: Electric Rates
Electric Rates System Average Electric Rates 20.0¢ 18.0¢ 16.0¢ 14.0¢ CPI 12.0¢ (¢/kWh) 10.0¢ 8.0¢ 6.0¢ 4.0¢ 2.0¢ 0.0¢ 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 19 9 1 99 1 99 199 199 199 199 199 199 200 200 200 200 200 200 200 200 200 200 201 201 6
Slide 7: Residential Bills
Residential Bills Residential Average Monthly Bills by Region $199.74 $200 $175 $150 $134.74 $125 $112.95 $115.84 $118.00 $101.44 $105.14 $100 $76.49 $82.64 $83.84 $86.04 $87.75 $75 $50 $25 $0 IA, KS, IL, IN, MI, PG&E AZ, CO, CA, OR, USA NJ, NY, CT, ME, AL, KY, DE, DC, AR, LA, AK, HI MN, MO, OH, WI
Slide 8: CPUC and Regulation
CPUC and Regulation “We want to actually work with the people of the state of California, and the utilities and the sources of “We have a need for critical capital, to effect this multi-decade infrastructure. It is crucial that transformation…” California continue to invest in critical (Commissioner
Slide 9: Impact of Election
Impact of Election Under a new governor, what changes? May Change Not Likely to Change RPS Standards for 2020 Decoupling Cap & Trade Rules Pass Through of Procurement Costs CPUC Composition ROE / Equity Ratio Remains through 2012 Previously Approved Projects and Contracts Emphasis on Energy Efficien
Slide 10: Capital Expenditure Outlook
Capital Expenditure Outlook Cap Ex Forecast ($B) 5.5 High 5 4.5 High 4 $3.9B Low 3.5 Low 3 2.5 2 2009 2010 2011 Actual Low Case $4.0B Low Case $3.2B High Case $4.6B High Case $5.3B 10
Slide 11: CapEx Forecast 2010
CapEx Forecast 2010 Capital Expenditure Forecast ($MM)* 2010 Gas & Electric Distribution $1,300 Conventional Generation $750 Common Plant $265 Natural Gas Transmission $250 Electric Transmission $800 SmartMeterTM Program $535 Low High Cornerstone Program $0 $100 PV Project $0 $160 Manzana Wind Proje
Slide 12: CapEx Forecast 2011
CapEx Forecast 2011 Capital Expenditure Forecast ($MM) 2011 Low High Gas & Electric Distribution $1,375 $1,900 Conventional Generation $360 $450 Common Plant $270 $390 Natural Gas Transmission $215 $235 Electric Transmission $775 $925 SmartMeterTM Program $165 Low High Cornerstone Program $0 $285 PV
Slide 13: Rate Base and CWIP
Rate Base and CWIP Weighted Average Rate Base* and Construction Work in Progress ($B) 28 High Construction Work 26 In Progress (CWIP) Low 24 Low Rate Base High 22 $21.6B 20 18 16 14 12 10 2009 Actual 2010 2011 Rate Base: $19.8B Rate Base Rate Base Rate Base + CWIP: $21.6B Low Case $21.4B Low Case $2
Slide 14: Energy Efficiency Incentives
Energy Efficiency Incentives Incentive Awards (pre-tax dollars $MM) 45 $41.5 MM 40 35 $33.4 MM 30 High 25 20 High 15 10 5 0 2008 2009 2010 2011 Actual Actual Low Case $0 MM Low Case $0 MM High Case $20 MM High Case $30 MM 14
Slide 15: Impact to Cash Flow from Tax
Impact to Cash Flow from Tax 400 350 300 250 200 150 100 50 0 -50 2010 2011 Low Case $0 MM Low Case $(10) MM High Case $400 MM* High Case $340 MM * Estimate of 2010 bonus depreciation impact, but amount could vary based on actual capital additions 15
Slide 16: EPS Guidance
EPS Guidance Earnings per Share from Operations* High $3.85 Low $3.65 High $3.50 Low $3.35 $3.21 $2.95 2008 2009 2010 2011 Actual Actual * Reg G reconciliation to GAAP for 2008 and 2009 EPS from Operations, and 2010-2011 EPS Guidance available in Appendix and at www.pge-corp.com 16
Slide 17: Dividend Policy
Dividend Policy Sustainable, comparable dividend Payout ratio range of 50% - 70% Dividend growth in line with EPS growth Annualized Dividends per Share $2.00 $1.90 th $1.82 $1.80 Grow 8.4 % $1.70 $1.68 $1.60 $1.56 $1.50 $1.44 $1.40 $1.32 $1.30 $1.20 $1.10 $1.00 2006 2007 2008 2009 2010 17
Slide 18: Cash Flow and Equity Needs
Cash Flow and Equity Needs (in $MM) 2010 2011 Low High Low High Cash from Operations (Total Sources) 2,765 to 3,395 3,355 to 3,930 Primary Uses Capital Expenditures (3,975) to (4,555) (3,160) to (5,265) 401k / DRIP Dividends* (675) to (725) (760) to (865) forecasted to Total Uses (4,650) to (5,280)
Slide 19: Financial Assumptions: 2010-2011
Financial Assumptions: 2010-2011 GUIDANCE REFLECTS: Capital expenditures consistent with low and high case ranges Utility earns ROE of at least 11.35% Ratemaking capital structure maintained at 52% equity CEE incentives and tax cash flow consistent with high and low case ranges Resolution of FERC ge
Slide 20: PCG Investment Case
PCG Investment Case Excellent service at reasonable cost Constructive regulatory environment Investment in infrastructure- providing solid, regulated growth Clean generation and world-class energy efficiency programs Stable capital structure and return Reliable, growing dividend 20
Slide 21: Appendix
Appendix ®
Slide 22: Pacific Gas and Electric Company (PG&E)
Pacific Gas and Electric Company (PG&E) • Provides energy to approximately 15 million people • 70,000 square-mile service territory • Four main operational units: Electric and gas distribution Electric transmission Natural gas transmission PG&E SERVICE AREA Electric generation IN CALIFORNIA 22
Slide 23: PG&E Financial Highlights
PG&E Financial Highlights 2008 2009 Revenues $14.628 billion $13.399 billion Consolidated Net Income $1.34 billion $1.22 billion Assets $40.860 billion $42.945 billion 23
Slide 24: Electric and Gas Distribution
Electric and Gas Distribution Business Scope • Retail electricity and natural gas distribution service (construction, operations and maintenance) • Customer services (call centers, meter reading, billing) • 5.1 million electric and 4.3 million gas customer accounts Primary Assets • $12.4 billion of
Slide 25: Electric Transmission
Electric Transmission Business Scope • Wholesale electric transmission services (construction, maintenance) • Operation by CA Independent System Operator Primary Assets • $3.1 billion of rate base (2009 wtd. avg.) Regulation Malin • Federal regulation (FERC) Round Mt • Cost of service ratemaking: Tr
Slide 26: Natural Gas Transmission
Natural Gas Transmission Business Scope • Natural gas transportation, storage, parking and lending services • Customers: PG&E natural gas distribution and electric generation businesses, industrial customers, California electric generators Primary Assets • $1.5 billion of rate base (2009 wtd. avg.)
Slide 27: Electric Procurement & Owned Generation
Electric Procurement & Owned Generation Business Scope • Electricity and ancillary services from owned and controlled resources • Energy procurement program Primary Assets • $2.8 billion of rate base (2009 wtd. avg.) • Diablo Canyon Nuclear Power Plant (2,240 MW) • Gateway Generating Station (530 MW
Slide 28: PG&E Generation in California
PG&E Generation in California Humboldt Generating Station Conventional Hydroelectric facilities (in construction) Colusa Generating Station (in construction) Gateway Generating Station Helms Pumped Storage Diablo Canyon Power Plant 28
Slide 29: 2009 Customer Profiles - % of Sales
2009 Customer Profiles - % of Sales Electric Customers Gas Customers (85,629 GWh delivered) (822 Bcf delivered) Agricultural & Residential Other 24% 8% Residential Industrial 36% 17% Commercial 7% Industrial 69% Commercial 39% 29
Slide 30: Existing Resource Mix
Existing Resource Mix Net Capacity Owned Generation Type Status (MW) Hydroelectric Facilities (total) Hydroelectric Power Houses On-line 3,896 Diablo Canyon Nuclear Reactors On-line 2,240 Gateway Generating Station Gas Combined Cycle Generators On-line 530 Humboldt Bay Power Plant Fossil Fired Steam
Slide 31: RPS Contracts Signed Since 2002
RPS Contracts Signed Since 2002 Over 6,000 MW in RPS Contracts Geothermal Small Hydro Solar/ Biomass Bioenergy 1.7% 0.4% Hybrid 3.5% 1.6% Wind 30.3% Solar PV 23.7% Solar Thermal 38.7% 31
Slide 32: Greenhouse Gas Emissions
Greenhouse Gas Emissions Benchmarking Greenhouse Gas Total 2008 Greenhouse Gas Emissions by Emissions for Delivered Electricity Source Category (Pounds of CO2 per MWh) (Total 27.1 million metric tons CO2-e (2)) Gas Compressor Process and Stations Transportation U.S. Average (1) 1,329 Fugitive Emissi
Slide 33: Key Regulatory Proceedings
Key Regulatory Proceedings Regulatory Case Docket # Expected Decision Date Nuclear Relicensing A.10-01-022 TBD 2011 General Rate Case (“GRC”) A.09-12-020 Final decision is requested in Q4 2010 SmartGrid Compressed Energy Storage A.09-09-019 Final decision approving PG&E's request received on Demonst
Slide 34: Cost of Capital
Cost of Capital 52% Equity Level · 11.35% ROE · Adjustment Mechanism • Decided separately from General Rate Case • Current terms in place until 2013 Mechanism • Triggers change to ROE if average Moody’s Utility (A or Baa) bond yield index over a 12 month period moves up or down by 100 basis points o
Slide 35: 2011 General Rate Case
2011 General Rate Case Docket # A. 09-12-020 Sets revenue requirements for Gas and Electric Distribution and Electric Generation businesses for 2011 – 2013 Revenue Requirement Request: $6.7B $1.048 billion increase $2.7B average capital expenditures per year Allows for necessary investments in energ
Slide 36: 2011 General Rate Case
2011 General Rate Case Filing includes a flexible attrition mechanism adjusting for: • labor cost adjustments • materials and services adjustments • capital related adjustments • other adjustments, such as changes in franchise, payroll or other taxes Attrition revenues are currently forecasted to be
Slide 37: FERC TO12 Filing
FERC TO12 Filing Docket # ER09-1521-000 Sets revenue requirements for PG&E’s Electric Transmission business in 2010-2011 Revenue Requirement Request: $946 million $800M Capital Expenditures Adds additional transmission capacity and performance of maintenance and replacement work on our substations i
Slide 38: 2011 Gas Transmission and Storage Rate Case
2011 Gas Transmission and Storage Rate Case Docket # A. 09-09-013 Sets revenue requirements, rates, terms and conditions for PG&E’s Gas Transmission and Storage services for 2011 – 2014 Revenue Requirement Request: $529M $67M Increase $235M Capital Expenditures Allows for upgrades to backbone transm
Slide 39: Cornerstone Improvement Program
Cornerstone Improvement Program Docket # A. 08-05-023 Sets revenue requirements aimed at improving the reliability of PG&E’s electric distribution system Request: $2.0 billion capital spend Enables installation of new substation transformers, feeders, conductors and other equipment to add capacity a
Slide 40: Solar PV Program
Solar PV Program Docket # A. 09-02-019 Sets revenue requirements to develop and own 250MW of PV and sign PPAs for an additional 250MW of PV over a five year period Request: $1.45 billion (all capital) for the Utility-owned 250MW PD issued on 01/26/2010 proposes: • development and installation of up
Slide 41: Manzana Wind Project
Manzana Wind Project Docket # A. 09-12-002 Sets revenue requirements to acquire, own, and operate the 189 - 246MW Manzana wind project in the Tehachapi region of Southern California Request: $900 million (all capital) at 246MW capacity Manzana Wind Project would be developed, designed and constructe
Slide 42: Dynamic Pricing
Dynamic Pricing Docket # A. 09-02-022 Sets revenue requirements to implement peak-day pricing and time-of-use pricing Request: $160 million spend in 2008-2010, approximately $110 in capital In February, CPUC issued revised PD approving $123 million of our request and approving default Peak Day Prici
Slide 43: Carrying Cost Credit Impacts
Carrying Cost Credit Impacts Estimated Average Deferred Tax Balances and Carrying Cost Credit Impacts ($MM) ($MM) 2010 2011 2012 Energy Recovery Bond Average Deferred $396 $243 $82 Tax Balance Estimated After-tax Carrying Cost Credit* $(23) $(14) $(5) * Estimated carrying cost credits include only t
Slide 44: ERB Amortization Schedule
ERB Amortization Schedule ($MM) 2010 2011 2012 Annual ERB Amortization $386 $404 $423 End-of-year ERB balance $827 $423 $0 44
Slide 45: Credit Profile
Credit Profile Current Ratings • Utility Corporate Credit/Issuer: BBB+ (S&P) and A3 (Moody’s) • Utility Senior unsecured debt: BBB+ (S&P) and A3 (Moody’s) Average Utility Metrics (2010-2012)* • S&P Business Profile Rating: Excellent • Total Debt to capitalization (EOY): 55.1% • Funds from Operations
Slide 46: 2008 EPS - Reg G Reconciliation
2008 EPS - Reg G Reconciliation 2008 EPS on an Earnings from Operations Basis* $2.95 Items Impacting Comparability** 0.68 EPS on a GAAP Basis $3.63 * Earnings per share from operations is a non-GAAP measure. This non-GAAP measure is used because it allows investors to compare the core underlying fin
Slide 47: 2009 EPS – Reg G Reconciliation
2009 EPS – Reg G Reconciliation 2009 (1) EPS on an Earnings from Operations Basis $3.21 (2) Items Impacting Comparability (3) Tax Benefit 0.18 (4) Recovery of hydro divestiture costs 0.07 (5) Accelerated work on gas system (0.16) (6) Severance costs (0.10) EPS on a GAAP Basis $3.20 (1) Earnings per
Slide 48: EPS Guidance – Reg G Reconciliation
EPS Guidance – Reg G Reconciliation Guidance Range 2010 Low High EPS Guidance on an Earnings from Operations Basis(1) $3.35 $3.50 Estimated Items Impacting Comparability(2) (0.09) ($0.06) Estimated EPS on a GAAP Basis $3.26 $3.44 Guidance Range 2011 Low High EPS Guidance on an Earnings from Operatio