Williams Companies, Inc. (the) · NYSE:WMB
Williams Companies, Inc. (the) — Investor Presentation (November 2004)
95 slides from Williams Companies, Inc. (the)'s investor presentation, Nov 19, 2004
Slide 1: Williams Power Tutorial
Williams Power Tutorial November 18, 2004 Exhibit 99.2
Slide 2: Forward Looking Statements
Forward Looking Statements Williams' reports, filings, and other public announcements might contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are "forward-looking statements" with in the meaning of Private Securities Litiga
Slide 3: The Road Ahead
The Road Ahead 2004 2005 2006 2007 & beyond Risk Reduction Spark spreads improve Continue to reduce risk, generate cash, meet contractual commitments 3Q '04 Earnings Call
Slide 4: Key Points
Key Points Portfolio continues to generate positive cash flows Market conditions continue to slowly rebound Improving market liquidity Spark spreads are stabilizing Favorable political messages from California and FERC Cash management continues to improve New risk-reducing contracts Favorable Califo
Slide 5: Today's Agenda
Today's Agenda Business overview Accounting discussion Terms History Revenue recognition standards Financial measures Examples Updated financials Q&A
Slide 6: Business Overview
Business Overview
Slide 7: Physical Natural Gas
Physical Natural Gas Average annual requirements 2.8 Bcf/d with peak of 3.5 Bcf/d 40% for Power 20% power-plant supply 20% third-party transactions 60% for Williams' core businesses Transportation 2.5 Bcf/d 30% for gas marketing (including power-generation fuel) 70% for Williams' core businesses Sto
Slide 8: Power Portfolio
Power Portfolio Owned: Milagro 60 MW Natural-gas fired Tolling: AES 4000 4,141 MW Forward Power Sale: CDWR A, B, C 50-700 MW max Resale of Toll: CDWR D 1,045-1,175 MW Tolling: Cleco Evangeline 765 MW Forward Power Sale: Cleco Evangeline 100-250 MW Tolling: Kinder Morgan - Jackson 541 MW Full Require
Slide 9: Portfolio Characteristics
Portfolio Characteristics Asset-based power business with long-term contractual commitments 6 tolling contracts and 2 owned facilities Approximately 7,900 megawatts Approximately $400 million in annual demand charges 8 key offsetting contracts Over-the-counter (OTC) hedges Current estimated demand p
Slide 10: Regional Discussions
Regional Discussions
Slide 11: Key Messages West
Key Messages West Pro-competitive environment Demonstrated political support of stable, competitive markets CPUC vote to accelerate by 2 years reserve margin requirements of 15 percent CPUC order for utilities to secure capacity to ensure reliability instead of relying on CaISO Potential for financi
Slide 12: Key Messages Mid-Continent
Key Messages Mid-Continent Favorable market developments, but no significant impact on portfolio value expected Kinder Morgan Jackson Midwest ISO expected to begin locational marginal pricing (LMP)- based market in 1Q05 Capacity and ancillary markets likely in 2006 Grid redesign allows access to new
Slide 13: Key Messages East
Key Messages East Pennsylvania-New Jersey-Maryland (PJM) footprint continues to expand, increasing market size, efficiency and liquidity Market redesign will improve capacity prices and recognize locational value of capacity Filing expected mid-2005 Potential significant impact to portfolio value; n
Slide 14: FAQs: View of Re-regulation
FAQs What is your view of re-regulation? Re-regulation really means utilities build/acquire generation RTOs, market-based rates and wholesale competition are here to stay Existing capacity with current locational advantages may not be replaced by new generation Formal competitive solicitation rules
Slide 15: FAQs: Imputed Debt for Purchased Power Agreements
FAQs What about the imputed debt for purchased power agreements? S&P formula imputes debt in 'buy' scenario; burdens 'build' scenarios with debt as projects are financed Other 'build' risk factors and costs must be considered Properly structured requests for offer (RFOs) will include build and buy r
Slide 16: FAQs: Higher Gas Prices Impact
FAQs How will higher gas prices impact your power portfolio? Current hedges reduce impact Generally power and gas prices have moved in tandem, minimizing the impact to the portfolio Williams manages natural gas risk at the enterprise level
Slide 17: Accounting Discussion
Accounting Discussion
Slide 18: Power Portfolio History
Power Portfolio History* SFAS 133 - adopt hedge accounting** SFAS 133 - derivatives still marked-to- market, but not eligible for hedge accounting due to stated intent to exit business EITF 02-3 - non-derivatives (tolling, full requirements, etc.) changed to accrual accounting SFAS 133 - derivatives
Slide 19: Pre-Hedge Accounting
Pre-Hedge Accounting Power did not previously qualify for cash flow hedge accounting because of stated intent to exit Derivative instruments accounted for on a fair value (MTM) basis Changes in the forward value of these instruments are recorded as unrealized gains / losses on the income statement a
Slide 20: Adoption of Hedge Accounting
Adoption of Hedge Accounting Hedge accounting has no impact on cash flows or economic value Application of hedge accounting will significantly reduce Power's mark-to-market (MTM) earnings volatility But MTM earnings will not be eliminated Economic hedges that do not qualify for SFAS 133 hedge accoun
Slide 21: Hedge Accounting Example: Dec. 1, 2003
Hedge Accounting Example Event 1 on Dec. 1, 2003: Tolling agreement in place; no fixed-price hedge Forecast of Jan05 Sale Est. Tutorial Cash Flows Financial Statement Recognition Var. Cost of Gen. Market Price Fixed- Price Hedge Tolling CF Assoc. w/Hedges OTC Hedges Net Accr. Rev. Unreal Gain/ (Loss
Slide 22: Hedge Accounting Example: Jan. 1, 2004
Hedge Accounting Example Event 2 on Jan. 1, 2004: Enter into fixed-price derivative to hedge power Est. Tutorial Cash Flows Financial Statement Recognition Dec03 15 40 - 25 - - 25 - - - - - - Jan04 15 40 40 - 25 - 25 - 0 - - 0 - Income Statement Bal. Sheet Cash Flow Stmt. Var. Cost of Gen. Market Pr
Slide 23: Hedge Accounting Example: Sept. 30, 2004
Hedge Accounting Example Event 3 on Sept. 30, 2004: Report market movement since date of hedge Est. Tutorial Cash Flows Financial Statement Recognition Dec03 15 40 - 25 - - 25 - - - - - - Jan04 15 40 40 - 25 - 25 - 0 - - 0 - Sep04 15 30 40 - 15 10 25 - 10 - - 10 - Income Statement Bal. Sheet Cash Fl
Slide 24: Hedge Accounting Example: Dec. 31, 2004
Hedge Accounting Example Event 4 on Dec. 31, 2004: Adoption of hedge accounting on Oct. 1 reported in year-end results Est. Tutorial Cash Flows Financial Statement Recognition Dec03 15 40 - 25 - - 25 - - - - - - Jan04 15 40 40 - 25 - 25 - 0 - - 0 - Sep04 15 30 40 - 15 10 25 - 10 - - 10 - Dec04 15 22
Slide 25: Hedge Accounting Example: Jan. 31, 2005
Hedge Accounting Example Event 5 on Jan. 31, 2005: Settle and realize the hedge and the forecasted sale of power Est. Tutorial Cash Flows Financial Statement Recognition Dec03 15 40 - 25 - - 25 - - - - - - Jan04 15 40 40 - 25 - 25 - 0 - - 0 - Sep04 15 30 40 - 15 10 25 - 10 - - 10 - Dec04 15 22 40 -
Slide 26: Hedge Accounting Example: Summary
Hedge Accounting Example Events 1 through 5: Summary Est. Tutorial Cash Flows Financial Statement Recognition Dec03 15 40 - 25 - - 25 - - - - - - Jan04 15 40 40 - 25 - 25 - 0 - - 0 - Sep04 15 30 40 - 15 10 25 - 10 - - 10 - Dec04 15 22 40 - 7 18 25 - - - 8 18 - Income Statement Bal. Sheet Cash Flow S
Slide 27: Key Takeaways from Example
Key Takeaways from Example Cash flows unaffected Residual MTM impact lowers future reported earnings Disconnect between cash flows and income statement Example: 2005 segment profit guidance of ($200) million to ($100) million; cash flow from operations of $50 million to $150 million
Slide 28: Revenue Recognition Today
Revenue Recognition Today Summary of Accounting Treatment by Contract Type Contract Type Acctg Acctg Income Revenues "Bucket" Method =Cash? Gross/Net Tolling Non-Derivative Accrual Yes Gross Full Requirements Non-Derivative Accrual Yes Gross Storage Non-Derivative Accrual Yes Gross Transportation No
Slide 29: Financial Discussion
Financial Discussion
Slide 30: Financial Measures
Financial Measures Segment profit Segment profit after MTM adjustments Cash flows from operations Portfolio cash flows
Slide 31: Segment Profit
3rd Quarter YTD 2004 2003 2004 2003 Segment Profit Dollars in millions Gross Margin $131 $60 $202 $198 SG&A (20) (26) (56) (107) Op. Exp. & Other Inc / (Exp) (3) 4 (25) 150 Equity Earnings (Losses) 1 (1) 0 (5) Segment Profit $109 $37 $121 $236 Includes: Aux Sable Impairment - 6 - 14 Regulatory Settl
Slide 32: Segment Profit After MTM Adjustments
Segment Profit After MTM Adjustments What does this measure mean and why do we use it? Reflects financial results as if Power had never recorded any prior mark-to-market earnings; that is, if Power had always used accrual-based accounting for its portfolio Because hedges had value on date of hedge d
Slide 33: Segment Profit After MTM Adjustments Forecast
Dollars in millions 1Schedule of expected realization of MTM gains/losses previously recognized is included in the Appendix. 3Q '04 Earnings Call Segment Profit After MTM Adjustments Forecast
Slide 34: Segment Profit to Cash Flow
Segment Profit to Cash Flow Dollars in millions 3Q '04 Earnings Call
Slide 35: Undiscounted Cash Flows Combined Segment Portfolio
Undiscounted Cash Flows Combined Segment Portfolio
Slide 36: Undiscounted Cash Flows Residual (Legacy) Portfolio
1Some positions within these portfolios will be part of on-going business operations going forward. Undiscounted Cash Flows Residual (Legacy) Portfolio
Slide 37: 2004-2006 Guidance
2004 2005 2006 Previous Segment Profit Guidance $0 - $150 $50 - $150 $50 - $200 Current Forecast: Segment Profit after MTM Adjustment (20) 100 154 MTM Adjustments 67 (254) (269) Segment Profit $47 ($154) ($115) Revised Segment Profit Guidance $0 - $100 ($200) - ($100) ($200) - ($50) Cash Flow from O
Slide 38: Summary
Summary
Slide 39: Summary
Summary Portfolio continues to generate positive cash flows Market conditions continue to slowly rebound Cash management continues to improve New risk-reducing contracts Favorable California PUC decision Adoption of hedge accounting Lowers earnings volatility Residual MTM impact lowers future report
Slide 40: Q&A
Q&A
Slide 41: Appendix
Appendix
Slide 42: Business Background
Business Background
Slide 43: Tolling Concept
Tolling Concept Input Output Heat Rate (Fuel Conversion Efficiency) Natural Gas, Coal, Fuel Oil, Steam Power Power Generation (Fuel Converter) Tolling - Fuel conversion arrangement. Williams supplies fuel to plants and markets electricity output. Plant owner receives fixed fee and retains operationa
Slide 44: Heat Rate Concept
Heat Rate Concept Heat rate - The amount of fuel a power plant requires to produce one unit of power. A measure of the efficiency of generating plants. MMBtu MWh Key concepts The lower the heat rate, the more efficient the power-generation unit. Heat rate, when considered in conjunction with a unit'
Slide 45: Spark Spread Concept
Power Cost: Power Price Fuel Cost Heat Rate Spark Spread Example: $42/Mwh $4/MMBtu 10MMBtu/MWh $2/MWh Spark Spread Concept Spark spread - The difference between the price of power and the cost it takes to produce it at a given facility. Key concepts The higher the spark spread, the higher the margin
Slide 46: Types of Hedging Transactions: Resale of Tolling Rights
Types of Hedging Transactions Resale of Tolling Rights Resale of all or part of rights under tolling arrangements Example California Department of Water Resources (CDWR) Product D Essentially mirrors underlying tolling contract
Slide 47: Types of Hedging Transactions: Full Requirements
Counterparty-tailored arrangement where Williams ... Serves counterparty's power demand requirements Dispatches counterparty's power plants / resources Markets excess energy produced by these resources and covers short positions Examples Georgia Electric Membership Corporations Four individual contr
Slide 48: Types of Hedging Transactions: Forward Power Sales
Physical or financial sale of a defined quantity of power over a set period of time Examples CDWR Products A, B and C Cleco Utility Group Standard OTC transactions Typical counterparties Power marketers Financial institutions Utilities Time horizon for hedging with forward contracts has lengthened a
Slide 49: Types of Hedging Transactions: Mid-Market Structured Sales
Non-standardized, near-term transactions Customized to meet customer/counterparty needs Term less than 3 years Examples Resale of tolling, full requirements, load serving, capacity Typical counterparties Utilities, municipalities and cooperatives Power marketers and retail aggregators Financial inst
Slide 50: NERC Regions
NERC Regions Red Oak Ironwood Hazelton Tenaska Evangeline AES 4000 KM Jackson
Slide 51: West
West
Slide 52: AES 4000 Tolling Arrangement
AES 4000 Tolling Arrangement Capacity: 4,141 MW* Base term: June 2013 5-year option for either party to extend to 2018 Annual demand payment: $153 million in 2004-05 Escalates 1.0% annually until 2013; flat after 2013 Variable O&M payment $2.28/MWh in 2004 Annual escalator is lesser of 2.5% or CPI O
Slide 53: AES 4000 Capacities and Heat Rates
AES 4000 Capacities and Heat Rates Alamitos Unit 1 184 10.7 Unit 2 184 10.6 Unit 3 336 9.5 Unit 4 336 9.7 Unit 5 * 504 9.4 Unit 6 * 504 9.5 Unit 7 ** 133 16.5 Huntington Beach Unit 1 * 226 9.8 Unit 2 226 9.8 Unit 5 ** 133 16.5 Redondo Beach Unit 5 184 11.8 Unit 6 184 11.8 Unit 7 504 9.4 Unit 8 504 9
Slide 54: AES 4000 Offsetting Contracts: CDWR Products A, B, C
AES 4000 Offsetting Contracts CDWR Products A, B, C Forward power sale Product A 200 MW - July 1, 2003 to Dec 31, 2007 7x24 @ $62.50/MWh Product B 450 MW - July 1, 2003 to Dec 31, 2007 275 MW - Jan 1, 2008 to Dec 31, 2010 6x16 @ $87.00 to $74.07/MWh Product C July 1, 2003 to Dec 31, 2010 50 MW 6x16
Slide 55: AES 4000 Offsetting Contracts: CDWR Product D
CDWR Product D Resale of tolling rights Essentially, a mirror-image toll Term Jan. 2003 to Dec. 31, 2010 Quantity 1,175 MW through Dec. 31, 2007 1,045 MW through Dec. 31, 2010 Price $140/kW-year (to Dec. 31, 2007) to $117/kW-year (Jan. 1, 2008, to Dec. 31, 2010) Includes availability guarantees and
Slide 56: Fuel Management West
AES 4000 Transportation agreements cover 95% of 650,000 MMBtu/d peak need Kern: 107,625 MMBtu/d El Paso: 5,484 MMBtu/d SoCal: 506,794 MMBtu/d CDWR contract CDWR Product D contract gas management Fuel Management West
Slide 57: AES 4000 Locational Advantages
AES 4000 Locational Advantages AES 4000 generation "in-city" with premium Los Angeles locations Serves constrained load pocket Williams sells critical ancillary services to California ISO AES 4000-generated energy could benefit from accelerated schedule to enhance reserve margins and/or locational m
Slide 58: California Contract Expirations
California Contract Expirations 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 CDWR 0 50 25 50 75 750 2000 1900 4900 100 QF 0 25 50 50 1000 0 1000 0 0 0 Utility 1100 0 1000 0 1000 3200 0 0 0 0 Source: CA PUC Staff Report, A Core/Noncore Structure for Electricity on California. March 15th 2004. P.
Slide 59: Forward Spark-Spreads SP-15 (AES4000)
Forward Spark-Spreads SP-15 (AES4000) Spark-spread represents the variable net margin per MWh of energy production Curve assumes a 7 heat rate conversion efficiency and assumes no VO&M Spark-Spread = Power Price - (7 ? Gas Price) Note: Current curves presented above represent market conditions as of
Slide 60: Mid-Continent
Mid-Continent
Slide 61: Portfolio Characteristics Mid-Continent
Tolling agreements 1,306 MW 7,700 average heat rate Accounts for approximately 22% of approximately $400 million annual demand charges Tolling: Cleco Evangeline 765 MW Through 2020 Forward Power Sale: Cleco Evangeline 100-250 MW Through 2005 Tolling: Kinder Morgan - Jackson 541 MW Through 2018 Portf
Slide 62: Offsetting Contracts Mid-Continent
Forward power sales Capacity sold from Cleco Evangeline 250 MW through 2004 Call option from Cleco Evangeline 200 MW through 2004 100 MW through 2005 Offsetting Contracts Mid-Continent
Slide 63: Fuel Management Mid-Continent
Cleco Evangeline (Entergy) 145,000 MMBtu/d Columbia Gulf firm transportation capacity Peak day needs of 110,000 MMBtu/d 1 Bcf Egan (storage) KM Jackson (ECAR) 75,000 MMBtu/d full-requirements supply agreement Balancing account provided Gas Daily index price Fuel Management Mid-Continent
Slide 64: Forward Spark-Spreads Entergy (Cleco Evangeline)
Forward Spark-Spreads Entergy (Cleco Evangeline) Spark-spread represents the variable net margin per MWh of energy production Curve assumes a 7 heat rate conversion efficiency and assumes no VO&M Spark-Spread = Power Price - (7 ? Gas Price) Note: Current curves presented above represent market condi
Slide 65: Forward Spark-Spreads ECAR/MI (KM Jackson)
Forward Spark-Spreads ECAR/MI (KM Jackson) Spark-spread represents the variable net margin per MWh of energy production Curve assumes a 7 heat rate conversion efficiency and assumes no VO&M Spark-Spread = Power Price - (7 ? Gas Price) Note: Current curves presented above represent market conditions
Slide 66: East
East
Slide 67: Portfolio Characteristics East
Portfolio Characteristics East Tolling agreements 2,276 MW 7,000 average heat rate Accounts for approximately 40% of approximately $400 million annual demand charges Full Requirements: Allegheny Electric Co-op 515-600 MW Through 2008 Tolling: AES Ironwood 666 MW Through 2021 Tolling: AES Red Oak 766
Slide 68: Offsetting Contract East - PJM
Offsetting Contract East - PJM Full requirements Agreement with Allegheny Electric Cooperative Not affiliated with Allegheny Energy Supply (AYE) Term December 2008 Capacity sold Approximately 600 MW peak demand
Slide 69: Offsetting Contracts East - SERC
Offsetting Contracts East - SERC Full requirements 4 agreements with Walton, Colquitt, Satilla and Rayle EMCs Term December 2015 Capacity sold 600 MW in 2005, growing to 1,500 MW in 2015
Slide 70: Fuel Management East
Fuel Management East AES Ironwood (PJM) Peak daily requirement - 130,000 MMBtu/d 80,000 MMBtu/d no-notice supply agreement AES Red Oak (PJM) Peak daily requirement - 130,000 MMBtu/d 50,000 MMBtu baseload supply agreement Supplemental supply agreement Tenaska Lindsay Hill (SERC) Peak daily requiremen
Slide 71: Forward Spark-Spreads PJM-West (Red Oak / Ironwood)
Forward Spark-Spreads PJM-West (Red Oak / Ironwood) Spark-spread represents the variable net margin per MWh of energy production Curve assumes a 7 heat rate conversion efficiency and assumes no VO&M Spark-Spread = Power Price - (7 ? Gas Price) Note: Current curves presented above represent market co
Slide 72: Forward Spark-Spreads Southern (Tenaska)
Forward Spark-Spreads Southern (Tenaska) Spark-spread represents the variable net margin per MWh of energy production Curve assumes a 7 heat rate conversion efficiency and assumes no VO&M Spark-Spread = Power Price - (7 ? Gas Price) Note: Current curves presented above represent market conditions as
Slide 73: Financials & Accounting
Financials & Accounting
Slide 74: Estimated Demand Payment Coverage
Dollars in millions Estimated Demand Payment Coverage
Slide 75: Undiscounted Cash Flows Line Item Clarification
Tolling cash flows associated with hedges Represents a percentage of the value of the underlying tolling option Includes value associated with optionality, such as volatility, that is not effectively hedged with all products; thus, actual cash flows may vary from estimates provided Merchant cash flo
Slide 76: Total Undiscounted Cash Flows West Power Portfolio
Total Undiscounted Cash Flows West Power Portfolio Note: Actual cash flows realized upon liquidation or sale of the portfolio may differ materially from those shown. Also, please note that proprietary positions, storage, transportation, transmission, crude and refined products, interest rates, optio
Slide 77: Total Undiscounted Cash Flows Mid-Continent Power Portfolio
Total Undiscounted Cash Flows Mid-Continent Power Portfolio Note: Actual cash flows realized upon liquidation or sale of the portfolio may differ materially from those shown. Also, please note that proprietary positions, storage, transportation, transmission, crude and refined products, interest rat
Slide 78: Total Undiscounted Cash Flows East Power Portfolio
Total Undiscounted Cash Flows East Power Portfolio Note: Actual cash flows realized upon liquidation or sale of the portfolio may differ materially from those shown. Also, please note that proprietary positions, storage, transportation, transmission, crude and refined products, interest rates, optio
Slide 79: Undiscounted Cash Flows Variance Analysis
Undiscounted Cash Flows Variance Analysis Dollars in millions Dollars in millions Note: Q3 2004 forecast estimated as of 6/30/04. Combined Power Portfolio Actual Q3'04 v. Forecast Q3'04 3Q04 A 3Q04 F YTD'04 A YTD'04 F Tolling Demand Payment Obligations ($126) ($125) ($313) ($307) Resale of Tolling 2
Slide 80: Key Terms & Definitions: Accounting Methodologies
Key Terms & Definitions Accounting Methodologies Mark-to-Market Accounting is the process of estimating, recording, and reporting the fair value of physical and financial transactions. SFAS 133 requires that all derivatives be accounted for at fair value under mark-to- market accounting. Accrual Acc
Slide 81: Key Terms & Definitions: Derivatives
Key Terms & Definitions Derivatives Non-Derivative contracts are those not meeting SFAS 133 derivative criteria. Power's non-derivative contracts include tolling, full requirements, storage, transportation, and transmission. Non- derivative contracts may include executory contracts as well as leases
Slide 82: Key Terms & Definitions: Revenue-Related Terms
Key Terms & Definitions Revenue-Related Terms Recognized Revenue is the amount of revenue reported or "recognized" in the financial statements for a given period. Recognized revenue may include both unrealized and realized revenue from both mark-to-market and accrual accounting. Unrealized Gains/Los
Slide 83: Key Terms & Definitions: Other
Key Terms & Definitions Other Fair Value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Hedged Item is a either a recognized asset or liability or a forecasted transaction meeting certain
Slide 84: SFAS 133 Overview
SFAS 133 All derivatives recognized on balance sheet at fair value, and unrealized gains/losses on derivatives reported in earnings. Hedge accounting is an option, not a requirement. To elect hedge accounting, certain criteria must be met and formal hedge documentation required. Hedge accounting can
Slide 85: SFAS 133 Hedge Accounting Criteria
SFAS 133 To qualify for hedge accounting treatment, the derivative instruments must meet the following criteria: High historical correlation with instruments being hedged High prospective correlation with instruments being hedged High probability that forecasted hedged transactions will occur (i.e.
Slide 86: EITF 02-3
EITF 02-3 EITF 02-3 eliminated use of MTM accounting for all non-derivative contracts: Tolling Full requirements & load serving Storage Transportation Transmission These types of contracts are now accounted for on an accrual basis after January 1, 2003 charge for cumulative change in accounting prin
Slide 87: EITF 02-3 Derivative and Non-Derivative Instruments
EITF 02-3 Derivative instruments Financial transactions Options Swaps Futures Forward physical transactions Non-derivative instruments Tolling CDWR Product D Full requirements Storage Transportation Transmission Firm service Spot physical transactions
Slide 88: Other Changes Mandated by EITF 02-3
Other changes mandated by EITF 02-3 EITF 02-3 Before EITF 02-3 Inventory accounted for on MTM basis All trading revenues reported on a net basis After EITF 02-3 Inventory accounted for on a Lower of Cost or Market (LCM) basis Revenue reporting mixed Unrealized derivative revenues reported net Financ
Slide 89: Normal Purchases & Sales Election
Normal Purchases & Sales Election Special election under SFAS 133 Permits certain qualifying derivative contracts to be accounted for on an accrual basis Elected for CDWR ABC & Gas contracts effective April 1, 2003 Fair value at time of election frozen on balance sheet and rolled-off as realized Sub
Slide 90: Future Hedge Realization
Dollars in millions (estimated as of 9/30/04) Future Hedge Realization 1Represents the fair value and expected future realization of those derivatives which qualify for hedge accounting under SFAS 133. Future changes in fair value will be reported in OCI on the balance sheet, and then re-classified
Slide 91: Derivative Net Asset Reconciliation
Dollars in millions Derivative Net Asset Reconciliation Balance at 9/30/04 Power - Fair Value of Designated FAS 133 Hedges1 $979 Power - Other Derivatives (134) E&P - Fair Value of Designated FAS 133 Hedges (612) Corporate 12 Net Derivative Assets Per Balance Sheet $244 1Represents the fair value of
Slide 92: Non-GAAP Reconciliation Schedule
Non-GAAP Reconciliation Schedule Dollars in millions except for per share amounts 2004 2003 1Q 2Q 3Q 1Q 2Q 3Q Recurring income from continuing operations available to common shareholders 3 $ 54 $ 136 $ (44) $ (12) $ (0) $ Recurring diluted earnings per common share 0.00 $ 0.10 $ 0.26 $ (0.08) $ (0.0
Slide 93: Mark to Market Adjustments
Mark to Market Adjustments Dollars in millions, except for per-share amounts 3rd Quarter YTD 2004 2003 2004 2003 Recurring income from continuing operations available to common shareholders 136 $ (0) $ 193 $ (56) $ Recurring diluted earnings per common share 0.26 $ (0.00) $ 0.37 $ (0.10) $ Mark-to-M
Slide 94: Segment Profit After MTM - Example
Segment Profit After MTM - Example Note: Assumes no hedge accounting treatment
Slide 95: Power Accounting Summary
a 3 Power Accounting Summary Wiliams. AOC] beginning Bambi zoo1.20ce | acnaoos | iovvzona [10K ret [Goveming Document SFAS 1s | sFas 122 | _SFAS 122 enposio | eirrozce | Hedge aoe [Rocaunina Teeamert Bewsies J racing Ted eeu ead [nat [tT] Non-vading oer rT FS a TTT is. (oF Hednes Fase Fa Tee at nana
Williams Companies — Investor Presentation (November 2004) on 6ix