Consolidated Edison, Inc. · NYSE:ED
Consolidated Edison — UBS Natural Gas, Electric Power and MLP Conference 2013
40 slides from Consolidated Edison's conference presentation, March 2013
Slide 1: UBS Natural Gas, Electric Power and MLP Conference
Con Edison, Inc. March 5-6, 2013 UBS Natural Gas, Electric Power and MLP Conference 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation includes certain forward-looking statements intended to qualify for safe-harbor provisions of the Federal securities laws. Forward-looking statements are statements of future expectation and not facts. Words such as "expects," "estimates," "anticipates,"
Slide 3: Regulated Transmission and Distribution Focused
Regulated Transmission and Distribution Focused Con Edison, Inc. (ED) 2012 EPS $3.88* Rate Base: $21.8 billion Market Cap: $17.2 billion Regulated Utilities Orange and Rockland 2012 EPS $0.22 Con Edison of New York 2012 EPS $3.46 Competitive Energy Businesses Con Edison Con Edison Con Edison Solutio
Slide 4: Regulated Utilities are the Core of Con Edison, Inc.
Regulated Utilities are the Core of Con Edison, Inc. Con Edison of New York (CECONY) • 3.3 million electric customers • 1.1 million gas customers • 1,717 steam customers • 706 MW of regulated generation CECONY and O&R • Delivered 40% of NYS 2012 delivered 43% of electric peak consumption NYS 2012 el
Slide 5: Composition of Rate Base
Composition of Rate Base (as of December 31, 2012) Rate Base* ($ millions) Con Edison of New York Electric (NY) $ 15,978 Gas (NY) $ 3,150 Steam (NY) $ 1,496 Total CECONY $ 20,624 Orange and Rockland Pike Gas (PA) $ 2 Pike Electric (PA) $ 12 Rockland Electric (NJ) (distribution) $ 154 (transmission)
Slide 6: Consolidated Edison, Inc. Rate Base Growth
Consolidated Edison, Inc. Rate Base Growth ($ millions) Pike (PA) 21,760 21,311 RECO (NJ) 5-year CAGR 20,545 19,605 (2007-2012) 5.95% O&R Gas (NY) 18,077 16,298 O&R Electric (NY) 14,757 CECONY Steam (NY) 13,453 12,418 CECONY Gas (NY) 11,087 11,231 11,869 CECONY Electric (NY) 2001 2002 2003 2004 2005
Slide 7: Rates of Return
Rates of Return (for twelve months ended December 31, 2012) SEC Basis (excludes MTM Regulated Basis impact) CECONY Allowed Actual Electric 10.15% 10.32% Gas 9.6% 10.86% Steam 9.6% 7.24% Overall - CECONY 10.0%* 10.18% 9.81% O&R Electric 9.3% 10.5% Gas 10.4% 12.0% RECO 10.3% 11.5% Overall – O&R 9.7%*
Slide 8: 2013 Guidance and LILO Developments
2013 Guidance and LILO Developments • LILO Developments • In January 2013, the US Court of Appeals for the Federal Circuit ruling reversed an 2009 court order and disallowed company-claimed tax deductions relating to a 1997 LILO transaction • The company, in January 2013, made a $447 million deposit
Slide 9: Financing Needs – 2013 Debt and Equity Guidance
Financing Needs – 2013 Debt and Equity Guidance • Plan for 2013: Issue up to $1.0 to $1.5 billion of long-term debt including maturing securities, primarily at CECONY • Activity so far: In February CECONY issued $700 million of 30-year debentures with a 3.95% coupon • No equity issuance • Potential
Slide 10: Departmental and Other Expenses
Con Edison of New York Departmental and Other Expenses ($ millions) 1,600 1,477 1,417 1,400 1,334 1,312 1,284 1,265 1,296 1,260 1,254 253 412 1,200 1,167 1,168 315 343 1,000 902 512 800 508 676 285 503 613 553 600 449 307 291 310 400 265 652 198 558 205 478 200 364 105 307 172 78 118 0 2006 2007 200
Slide 11: 2013 Electric, Gas and Steam Rate Filings
Con Edison of New York 2013 Electric, Gas and Steam Rate Filings (13-E-0030, 13-G-0031, 13-S-0032) • Filed on January 25, 2013 • Procedural and technical conference on March 11, 2013 • Historic test year: Twelve months ended June 30, 2012 • Forward test year: January 1, 2014 – December 31, 2014 • Ne
Slide 12: Key Provisions of 2013 Electric, Steam and Gas Rate Filing
Con Edison of New York Key Provisions of 2013 Electric, Steam and Gas Rate Filing • Proposing programs intended to reduce service outages from major storms, as well as improve the storm recovery process – plans for $1 billion of storm hardening capital expenditures through 2016 (electric: $800 milli
Slide 13: System Hardening and Other Improvements
Con Edison of New York System Hardening and Other Improvements Strategies identified based on recent experience, as well as our understanding of preliminary recommendations made by new commissions established by NY Governor Cuomo following Superstorm Sandy. Our plans include: • Strategic underground
Slide 14: Summary of Electric/Gas/Steam Rate Filing
Con Edison of New York Summary of Electric/Gas/Steam Rate Filing Proposed Rate plan details Electric Gas Steam One Year Rate Proposal: Rate Increase $375 million $25 million ($5) million ROE 10.35% 10.35% 10.35% Equity Ratio 50% 50% 50% Supplemental Information: Illustrated Rate Change Year 2 $195 m
Slide 15: Major Factors Driving Revenue Increases – RY1
Con Edison of New York Major Factors Driving Revenue Increases – RY1 ($ millions) Cost Elements Electric Gas Steam Carrying cost of new infrastructure $156 $55 $(13) Pension, OPEB and employee benefits 84 25 11 Depreciation charges 75 (5) 12 Other operating expenses 72 17 (9) Higher ROE 29 23 9 Prop
Slide 16: Rate Base Actual and Proposed
Con Edison of New York Rate Base Actual and Proposed For 12 months ending ($ billions) Proposed Capital Expenditure 30.0 (millions) Electric Gas Steam Total 25.0 1.5 1.5 1.4 4.4 2014 $1,496 $497 $84 $2,077 20.0 1.5 4.0 3.6 3.2 2015 1,650 545 96 2,291 15.0 2016 1,576 549 99 2,224 10.0 18.4 19.5 16.0
Slide 17: Capital Expenditures
Capital Expenditures ($ millions) Con Edison of New York Orange and Rockland Competitive Energy Businesses $2,500 $2,291 $2,202 $2,057 $2,030 $2,077 $2,000 $1,866 $1,909 $1,778 $1,500 $1,000 $500 $492 $120 $135 $137 $253 $140 $127 $111 $142 $125 $4 $10 $28 $114 $95 $106 $0 2008 2009 2010 2011 2012 2
Slide 18: Infrastructure Investment – Orange and Rockland
Orange and Rockland Infrastructure Investment Electric Gas Depreciation Actual ($ millions) 2008 88 32 40 2009 85 42 42 2010 99 36 44 2011 79 32 48 $160 2012 98 39 53 Forecast 2013 108 34 58 $140 2014 107 33 63 2015 92 33 66 $120 $100 $80 Gas $60 Electric Depreciation $40 $20 $0 2008 2009 2010 2011
Slide 19: Infrastructure Investment – CECONY
Con Edison of New York Electric Gas Steam Depreciation Infrastructure Investment Actual 2008 1,743 338 121 672 ($ millions) 2009 1,596 339 122 744 2010 1,421 334 111 787 2011 1,354 335 89 829 2012 1,375 426 108 894 $2,500 Forecast 2013 1,447 473 110 949 2014 1,496 497 84 1,007 2015 1,650 545 96 1,06
Slide 20: Electric Delivery Infrastructure Annual Capital Investment
Con Edison of New York Electric Delivery Infrastructure Annual Capital Investment ($ millions) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20
Slide 21: 5-Year Annualized Growth Rates in Peak Usage
5-Year Annualized Growth Rates in Peak Usage 5-Year Historical Current 2002-2007 5-Year (Pre-Recession) Forecast CECONY Electric 1.8% 1.3% Gas 1.0% 4.3% Steam (0.8)% (0.5)% O&R Electric 2.6% 0.9% Gas (0.8)% 0.8% 21
Slide 22: Average Normalized Electricity Use per Customer
Con Edison of New York Average Normalized Electricity Use per Customer 16,000 Annual kWh per customer: 1990 - 2012 15,000 kWhrs 14,000 13,000 12,000 % change over prior year 5.00% 4.00% Residential Commercial 3.00% 2.00% 1.00% 0.00% 2011 1993 1996 1991 1992 1994 1995 1997 1998 1999 2000 2001 2002 20
Slide 23: Annual Multi-Family and Commercial Oil-to-Gas Conversions by Oil Type
Con Edison of New York Annual Multi-Family* and Commercial Oil-to-Gas Conversions by Oil Type 2012 figures through December 31 Number of gas service installations 400 350 343** 313 300 250 199 #2 Oil 200 #4 Oil 152 150 #6 Oil 100 92 66** 50 44 6** 23 0 2010 2011 2012 * Multi-family buildings include
Slide 24: Market for Multi-Family and Commercial Oil-to-Gas Conversions
Con Edison of New York Market for Multi-Family* and Commercial Oil-to-Gas Conversions by Oil Type January 2011 to December 2012 Completed Conversions 4,200 customers Total Conversion #6 Oil 464 converted, 11% Potential 2,800 customers #4 Oil 291 converted, 10% 14,000 customers** #2 Oil 415 converted
Slide 25: NY Energy Highway: Blueprint issued in October 2012
NY Energy Highway: Blueprint issued in October 2012 NY Public Service Commission response to Blueprint: 1. Proceeding to examine proposals for transmission upgrades and new transmission lines to address congestion on the transmission system between Utica and NYC (12- T-0502) • Six statements of inte
Slide 26: NY Transco Proposed Projects
NY Transco Proposed Projects • $1.3 billion investment for AC Transmission Upgrade • $300 million additional investment for Staten Island Un-bottling Marcy - New Scotland New Scotland - Marcy Series Leeds South Series Compensation Compensation Leeds – Oakdale - Pleasant Valley Fraser Proposed in AC
Slide 27: Proposed Timeline for Indian Point Contingency Plan
Proposed Timeline for Indian Point Contingency Plan RFP projects move forward, subject to halting Transmission Owner (TO) projects move forward, subject to halting 2013 2014 2015 2016 TO projects move to New York Transco Potential Indian Point PSC Order to start TO projects retirement (cost recovery
Slide 28: Solar Investment Portfolio
Con Edison Development Solar Investment Portfolio Actual / MW Expected Project Location (AC) PPA Offtaker PPA Term SREC Term In-service Date Operating - Projects > 3MW Shrewsbury MA 3 Customer 20 years 1 year 4Q12 Pilesgrove NJ 9 N/A N/A 3 years 3Q11 Flemington NJ 8 N/A N/A 3 years 4Q11 Frenchtown I
Slide 29: Con Edison Solutions: Retail Electric Commodity Sales Volumes by Region
Con Edison Solutions: Retail Electric Commodity Sales Volumes by Region Other 7.8% NY ISO 2012 Sales Volumes 28.6% 13,840 million kwhrs New England ISO 28.7% PJM 34.9% 29
Slide 30: Summary of Rate Plans
Summary of Rate Plans Effective Rate Rate Amortization of Other Significant Authorized Earnings Sharing Terms (a) Period Base Increases Credits/Debits Revenue Sources ROE (Shareholders/Customers) Con Edison of New York Electric(b) Apr. 2010 – Yr. 1 - $14.9 b Yr. 1 - $420.4 m $(75.3) over 3 yrs $120
Slide 31: Summary of Rate Plans — Footnotes
Summary of Rate Plans — Footnotes (continued) (a) Subject to limitation for cost reconciliation described in Note B to the financial statements in Item 8. (b) Pursuant to NYSPSC orders, a portion of the company’s revenues is being collected subject to refund. See “Other Regulatory Matters” in note B
Slide 32: New York Public Service Commission (NY PSC)
New York Public Service Commission (NY PSC) Commissioners Gregg Sayre (D) Garry Brown (D) Chairman Maureen Harris (R) Patricia Acampora (R) James Larocca (D) Feb-2018 Feb-2015 Feb-2012 Feb-2015 Feb-2012 Appointed June Appointed Dec Appointed June Appointed June 2005 2012 2007 2006 Appointed Dec 2008
Slide 33: NY PSC’s Formulaic Approach to ROE
NY PSC’s Formulaic Approach to ROE Recent Rate Decisions in New York Date Company ROE Term Date Company ROE Term 06/10 Central Hudson 10.00% 3 years 07/06 Central Hudson 9.60% 3 years 09/10 CECONY Gas 9.60% 3 years 08/06 NYSEG 9.55% 1 year 09/10 CECONY Steam 9.60% 3 years 09/06 CECONY Steam 9.80% 2
Slide 34: NY PSC Staff’s Discounted Cash Flow Model
NY PSC Staff’s Discounted Cash Flow Model • The Staff employs a dividend discount model. D1 D2 D3 Value = (1+R) + (1+R)2 + (1+R)3 +…… • Solving for an equity return, R, where: – D1 through D4 = Value Line estimates – D5 through D∞ = Value Line estimates based on future earnings retention and share g
Slide 35: NY PSC Staff’s Capital Asset Pricing Model
NY PSC Staff’s Capital Asset Pricing Model • Staff solves for an equity return, R R = RUST + (RMKT – RUST)*β • Where: – RUST is the risk-free return: average of prior three monthly yields for 10-year and 30-year Treasuries – RMKT is the market rate of return: BOfA Merrill Lynch’s monthly Quantitativ
Slide 36: Reconciliation of 2012 and 2011 Earnings Per Share
Reconciliation of 2012 and 2011 Earnings Per Share Con Con Con Edison Edison Edison 2012 CECONY O&R Development Energy Solutions Parent Total Reported EPS – GAAP basis $3.46 $0.22 $0.02 - $0.24 $(0.06) $3.88 Mark-to-Market losses/(gains) - - - 0.01 (0.14) - (0.13) Ongoing operations $3.46 $0.22 $0.0
Slide 37: Capital Structure — December 31, 2012
Capital Structure — December 31, 2012 ($ millions) Con Edison, Inc. Debt $10,062 46% Equity 11,869 54 Total $21,931 100% Con Edison of New York Orange and Rockland Competitive and Parent Debt $9,145 46% Debt $604 52% Debt $313 29% Equity 10,552 54 Equity 568 48 Equity 749 71 Total $19,697 100% Total
Slide 38: Liquidity Adequacy
Liquidity Adequacy $2,250 million CEI Consolidated revolving credit facility 2,200 Commercial paper Letters of credit 2,000 1,800 1,600 Average = $452 million 12/31/12 1,400 LOCs = $131 million CP = $539 million $ Millions 1,200 1,000 800 600 400 200 0 38
Slide 39: A Compelling Dividend Record: Consecutive Years of Dividend Increases
A Compelling Dividend Record: 39 Consecutive Years of Dividend Increases Annualized Dividend 1975 - 2013 Dividend Payout Ratio 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 39
Slide 40: Consolidated Edison, Inc. Investment Thesis
Consolidated Edison, Inc. Investment Thesis • The largest of the few publicly-traded, T&D-focused utility companies – Limited commodity exposure • Reduced regulatory lag – Forward-looking test years – Timely fuel and commodity cost recovery – Revenue decoupling mechanism in NY (electric and gas) – A
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