Pacific Gas & Electric Co. · NYSE:PCG
Pacific Gas & Electric — PG&E — Deutsche Bank Energy & Utilities Conference 2008
41 slides from Pacific Gas & Electric's conference presentation, May 28, 2008
Slide 1: PG&E Corporation Highlights from the May Investor Conference
PG&E Corporation Highlights from the May 22 Investor Conference Christopher P. Johns Senior Vice President & CFO This presentation is not complete without the accompanying statements made by management on May 22 and May 29, 2008. A replay is available on PG&E Corporation’s homepage at www.pgecorp.co
Slide 2: Forward-looking statements
This presentation contains forward-looking statements regarding management’s guidance for PG&E Corporation’s 2008 and 2009 earnings per share from operations, targeted compound average growth rate for earnings per share from operations over the 2007-2011 outlook period, as well as management’s proje
Slide 3: PCG: Investment Case
8% CAGR in EPS PCG: Investment Case § PCG offers competitive growth in a constructive regulatory environment with an attractive valuation: § $13 billion planned CapEx 2008-2011 § 85% of CapEx approved § 11.45% weighted ROE on 52% equity § High-performing, low-carbon generation § Decoupled revenues §
Slide 4: Our Vision and Values
Our Vision and Values The leading utility in the United States Delighted Customers Energized Employees Rewarded Shareholders Operational Excellence Transformation We act with integrity and communicate honestly and openly We are passionate about meeting our customers’ needs and delivering for our sha
Slide 5: PG&E Goals
PG&E Goals § Customer Loyalty § Employee Engagement § Environmental Leadership § Deliver for Shareholders
Slide 6: Business Priorities
Business Priorities § Deliver on Financial Objectives § Focus on Customer Service and Satisfaction § Identify and Capture Operating Efficiencies § Ensure Workforce Readiness and Alignment § Improve System Reliability
Slide 7: Delivering on Financial Objectives
Delivering on Financial Objectives § Invest in needed infrastructure § Ensure adequate liquidity § Meet EPS targets § Generate strong cash flow
Slide 8: Confirming EPS Guidance
EPS from Operations* * Reg G reconciliation to GAAP for 2007 EPS from Operations, and 2008 and 2009 EPS Guidance available in Appendix and at www.pgecorp.com Confirming EPS Guidance § EPS from Operations Guidance: § 2008 guidance of $2.90-$3.00 per share § 2009 guidance of $3.15-$3.25 per share § 8%
Slide 9: Base Forecast and Guidance Range
Base Forecast Rate Base Growth (+9% to 10%) Add’l CapEx (+1 to 3%) New Shares (-3% to- 5%) $2.70- $2.80 8% CAGR 2007- 8% 10% 6% Guidance { Range % CAGR 2007-2011
Slide 10: Capital Expenditure Outlook
$ MM $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 Common Plant $260 $230 $200 $250 SmartMeter Program $260 $330 $260 $220 Gas Transmission $230 $200 $175 $200 Electric Transmission $550 $580 $660 $750 Generation $1,100 $750 $530 $260 Distribution $1,300 $1,200 $1,200 $1,350 Projects not inc
Slide 11: Rate Base Growth
• Projected 2008-2011 rate base is not adjusted for the impact of the carrying cost credit that primarily results from the second series of the Energy Recovery Bonds. Earnings will be reduced by an amount equal to the deferred tax balance associated with the Energy Recovery Bonds regulatory asset, m
Slide 12: Earnings Drivers Reconciliation
Cumulative four-year totals (pre-tax earnings in $MM) Need identified in December 2007 (2008-2011) $335- $575 Potential sources identified in December 2007 to fill need: § Additional Rate Base Investment $125- $175 § CEE Program Incentives $100- $200 § Operational Efficiencies $110- $200 $335- $575
Slide 13: Additional CapEx
Additional CapEx Proposed Projects Above 2008-2011 Base CapEx Forecast § SmartMeter TM Program Upgrade § $460 MM capital § Approval expected by year-end 2008 § Cornerstone Improvement Program (Enhanced Reliability Investment) § $800 MM capital 2008-2011 § $1.5 B capital investment beyond 2011 § CPUC
Slide 14: Improved Operational Planning
Current-state Performance Value Multi-year operating plan § Rigorous comprehensive process § Both tactical and strategic view Business Reviews § Real-time decisions § Sr. management dialogue and engagement Project governance § Holistic approach § Multi-functional business case reviews, approvals and
Slide 15: Operational Changes and Efficiencies in Current Operating Plan
Operational Changes and Efficiencies in Current Operating Plan + Economic Stimulus Act of 2008 + Resolution of outstanding tax audits + Settlement of outstanding generator claims - Delay in electric transmission project (C3ET) + Workforce reductions + Strategic sourcing + Cash cycle management + Inv
Slide 16: Energy Efficiency Incentives
Energy Efficiency Incentives § Guidance assumes: § $90 - $130 MM in Energy Efficiency Incentives 2008-2011 § 2 years in 2008, 1 year in 2009, hold-back in 2010, 2 years in § 2006-2008 Program effectiveness phase (“net-to-gross issues”) to be finalized by CPUC summer 2008 § Program goals for 2009-201
Slide 17: Cash Flow and Equity Needs
Financing Needs 2008-2011 in $MM * excludes cash from Energy Recovery Bond and Rate Recovery Bond revenues Cash Flow and Equity Needs
Slide 18: Dividend Policy
Dividend Policy § Objectives: § Flexibility § Sustainabilility § Comparability § Payout ratio range of 50% - 70% § Growth balanced with funding for additional investment opportunities
Slide 19: Financial Assumptions 2008-2011
Financial Assumptions 2008-2011 § Capital expenditure base forecast reflects projects that are highly likely or already approved § CPUC authorized ROE is 11.35% and Utility earns at least 12% at FERC on projected rate base § Ratemaking capital structure maintained at 52% equity § Additional capital
Slide 20: Key Financial Takeaways
Key Financial Takeaways § Delivering on Near-term EPS Guidance and 8% CAGR § Investing in Attractive Rate Base Opportunities § Utilizing Operating Efficiencies, Incentive Earnings and Leverage Effectively § Delivering Strong Cash Flow and Liquidity § Sustaining a Comparable Dividend
Slide 21: Business Priorities
Business Priorities § Deliver on our EPS Goals § Focus on Customer Service and Satisfaction § Identify and Capture Operating Efficiencies § Ensure Workforce Readiness and Alignment § Improve System Reliability
Slide 22: Focus on our Customers
Focus on our Customers § Improvements made in 2007 § Increase in success rate for resolving customer issues on the first visit § Sped up issue resolution by 50% § Website improvements § Resulted in Increased Customer satisfaction § Continued upward trend in 2007 § PG&E ranks in top 10% for both elec
Slide 23: JD Power Rankings
JD Power Rankings Higher than 2006
Slide 24: Innovative EE and DR programs
Innovative EE and DR programs
Slide 25: SmartMeter Program Progress
* to 2011 estimates are based on forecasted construction schedules and additional contracted resources Year-end 2008 target: 1.3 million meters installed 2007 2008 2009 2010 2011 2012 1st meter installed Billing IT infrastructure live 2Q Live AMI billing SmartMeter TM Upgrade Filing Demand Response
Slide 26: Business Priorities
Business Priorities § Deliver on our EPS Goals § Focus on Customer Service and Satisfaction § Identify and Capture Operating Efficiencies § Ensure Workforce Readiness and Alignment § Improve System Reliability
Slide 27: Identifying Operational Efficiencies
§ Strategic Sourcing § IT, Telecom, and consulting ($1.4 B in annual spend) § Contract extensions ($1.2 B in annual spend) § Labor Productivity § Timekeeping and reporting process § Asset Management § Fleet Management ($200 M in annual spend) § Real Estate Optimization ($100 M in annual spend) § Inv
Slide 28: Business Priorities
Business Priorities § Deliver on our EPS Goals § Focus on Customer Service and Satisfaction § Identify and Capture Operating Efficiencies § Ensure Workforce Readiness and Alignment § Improve System Reliability
Slide 29: Developing a High Performance Team
Developing a High Performance Team § New Channels for Labor Talent § Investment in recruiting expertise and infrastructure § Power Pathways § We’ve complimented our management ranks with additional leaders that broadens our diversity of backgrounds, expertise and thinking § Leveraging Experience § S
Slide 30: Measuring Our Performance: Compensation Aligned with Business Focus
2008 Compensation metrics Percentage weight Delivering on EPS Goals (Measurement of earnings from ongoing core operations) 40% Brand Health Index (Composite of customer surveys and marketing research) 20% Reliable Energy Delivery (Composite of various reliability metrics) 20% Employee Engagement Sur
Slide 31: Business Priorities
Business Priorities § Deliver on our EPS Goals § Focus on Customer Service and Satisfaction § Identify and Capture Operating Efficiencies § Ensure Workforce Readiness and Alignment § Improve System Reliability
Slide 32: Diablo Steam Generator Replacement
§ Steam Generator Replacement § $700 MM approved capital investment § Unit 2 replacement completed in 69 days § Unit 1 replacement scheduled for early 2009 Diablo Steam Generator Replacement
Slide 33: Gateway Generating Station
Gateway Generating Station § More than 50% complete § >1,000,000 hours with no injury § On budget, on time § Begins operations 1Q 2009
Slide 34: New Generation: Colusa & Humboldt
Colusa MW Gateway MW Humboldt MW New Generation: Colusa & Humboldt § Status § Colusa: CEC permits received; construction imminent § Humboldt: Slight delays in permitting, construction expected to begin by end of year § Strategy for execution mirrors successes at Gateway § Experienced project teams i
Slide 35: Electric Transmission Investment
Electric Transmission Investment § Palermo Transmission Substation § $15 MM interconnection for local transmission § Lakeville-Sonoma Transmission Line § $27 MM upgrade serving 60,000 customers § Central California Clean Energy Transmission (C3ET) Line § $1.2 B renewable access and increased reliabi
Slide 36: Cornerstone Improvement Program
Cornerstone Improvement Program § Proposed $2.3 B/ 6-yr. System Upgrade § Key to electric distribution system reliability improvements § Supporting distribution automation § Preparing for the grid of the future
Slide 37: Key Operations Takeaways
Key Operations Takeaways § Large scale projects are progressing smoothly § New generation projects are achieving excellent results: on time, on budget § New transmission projects are gaining momentum with project development and permitting § The Cornerstone Improvement Program is a significant step
Slide 38: PCG: Investment Case
8% CAGR in EPS PCG: Investment Case § PCG offers competitive growth and a constructive regulatory environment with an attractive valuation: § $13 billion planned CapEx 2008-2011 § 85% of CapEx approved § 11.45% ROE on 52% equity § High-performing, low-carbon generation § Decoupled revenues § Sustain
Slide 39: Appendix
Appendix Deutsche Bank Energy and Utilities Conference May 27-29, 2008
Slide 40: EPS - Reg G Reconciliation
* 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 financial performance from one period to another, exclusive of items that do not reflect the normal course of operations. EPS on an Earnings from Opera
Slide 41: EPS Guidance - Reg G Reconciliation
Low High EPS Guidance on an Earnings from Operations Basis* Estimated Items Impacting Comparability EPS Guidance on a GAAP Basis $2.90 0.00 $2.90 $3.00 0.00 $3.00 Low High EPS Guidance on an Earnings from Operations Basis* Estimated Items Impacting Comparability EPS Guidance on a GAAP Basis $3.15 0.
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