Consolidated Edison, Inc. · NYSE:ED
Consolidated Edison — Bank of America Merrill Lynch Power and Gas Leaders Conference 2012
48 slides from Consolidated Edison's conference presentation, Sep 19, 2012
Slide 1: Bank of America Merrill Lynch Power and Gas Leaders Conference
Con Edison, Inc. September 19, 2012 Bank of America Merrill Lynch Power and Gas Leaders Conference 1
Slide 2: Forward-Looking Statements; Non-GAAP Financial Measure
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: 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 commodity recovery – Revenue decoupling mechanism in NY – Adjustment mechanisms for several
Slide 4: Regulated Transmission and Distribution Focused
Regulated Transmission and Distribution Focused Con Edison, Inc. (ED) 2011 EPS $3.59* Rate Base: $21.3 billion Market Cap: $18.2 billion Regulated Utilities Orange and Rockland 2011 EPS $0.18 Con Edison of New York 2011 EPS $3.34 Competitive Energy Businesses Con Edison Con Edison Con Edison Solutio
Slide 5: Regulated Utilities are the Core of Con Edison, Inc.
Regulated Utilities are the Core of Con Edison, Inc. Con Edison of New York (CECONY) • 3.3 million electric customers • 1.1 million gas customers • 1,735 steam customers • 709 MW of regulated generation CECONY and O&R • Delivered 39% of NYS 2011 delivered 42% of electric peak consumption NYS 2011 el
Slide 6: Breakdown of Utility Operating Income by Service
Breakdown of Utility Operating Income by Service (for the twelve months ended December 31, 2011) Con Edison of New York Orange and Rockland Electric 71% Electric 81% Gas 29% Gas 14% Steam 5% 6
Slide 7: Composition of Rate Base
Composition of Rate Base (as of June 30, 2012) Rate Base ($ millions) Con Edison of New York Electric (NY) $ 15,965 Gas (NY) $ 3,105 Steam (NY) $ 1,515 Orange and Rockland Pike Gas (PA) $ 1 Pike Electric (PA) $ 11 Rockland Electric (NJ) (distribution) $ 153 (transmission) $ 20 O&R Gas (NY) $ 333 O&R
Slide 8: Symbols of the Vitality and Diversity of the Local Economy
Con Edison of New York Symbols of the Vitality and Diversity of the Local Economy PLACEHOLDER PHOTOS TO BE EDITED World Trade Center in Downtown Manhattan due to be The Barclays Center sports and entertainment completed in 2013. complex in Downtown Brooklyn is scheduled to be completed in September
Slide 9: New York City Private Non-Manufacturing Employment
Con Edison of New York New York City Private Non-Manufacturing Employment (millions) 3,300 Record 3,217.6 million jobs 3,200 3,100 3,000 2,900 2,800 2,700 2,600 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD July 2012 9
Slide 10: New York City Annual Residential Construction Spending
Con Edison of New York New York City Annual Residential Construction Spending ($ millions) 8,000 7,000 All-time peak of $6.4 billion in 2007 6,000 5,000 4,000 3,000 2,000 1,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Forecast Forecast 10 Source: New York Building Congress
Slide 11: New York City Annual Construction Spending
Con Edison of New York New York City Annual Construction Spending ($ millions) 35,000 Government Non-Residential 30,000 Residential 25,000 20,000 15,000 10,000 5,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Forecast Source: New York Building Congress 11
Slide 12: 5-Year Annualized Growth Rates in Peak Usage
5-Year Annualized Growth Rates in Peak Usage 5-Year Historical Current 2003-2007 5-Year (Pre-Recession) Forecast CECONY Electric 1.8% 1.2% Gas 1.0% 4.3% Steam (0.6)% 0.03% O&R Electric 2.3% 1.1% Gas (0.8)% 1.0% 12
Slide 13: Natural Gas Market Penetration by Number of Buildings
Con Edison of New York Natural Gas Market Penetration by Number of Buildings (as of December 31, 2011) Multi-Family, Commercial & Industrial Residential: 1-4 Family Natural Gas 48% Natural Gas 65% Oil/Other 52% Oil/Other 35% 13
Slide 14: Clean Air Goals and Low Gas Prices Influence Oil-to-Gas Conversions
Con Edison of New York Clean Air Goals and Low Gas Prices Influence Oil-to-Gas Conversions New York City Clean Air Price Advantage of Delivered Imperatives Natural Gas Versus Oil* • Reduce greenhouse gas • 50-55% discount to #2 oil emissions by 30% below 2005 levels by 2030 • 45-55% discount to #4 o
Slide 15: Rising Monthly New Gas Business Service Requests
Con Edison of New York Rising Monthly New Gas Business Service Requests* January 2010 to August 2012 Other New Business Oil to Gas - #2 or Non-Regulated Oil to Gas - # 4 Oil Oil to Gas - # 6 Oil 600 500 400 Number of Requests 300 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Slide 16: Market for Multi-Family and Commercial Oil-to-Gas Conversions by Oil Type
Con Edison of New York Market for Multi-Family* and Commercial Oil-to-Gas Conversions by Oil Type January 2011 to August 2012 Completed Conversions 4,200 customers Total Conversion #6 Oil 379 converted, 9% Potential 2,800 customers #4 Oil 149 converted, 5.3% 14,000 customers** #2 Oil 353 converted,
Slide 17: 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 August 31 Number of gas service installations 350 300 287** 250 227 200 #2 Oil 150 152 #4 Oil #6 Oil 100 92 66** 57 50 44 23 6** 0 2010 2011 2012 YTD * Multi-family buildings include 5
Slide 18: Gas Distribution Infrastructure Investment
Con Edison of New York Gas Distribution Infrastructure Investment ($ millions) Oil-to-gas conversions Accelerated $450 annual main replacement $400 $350 $300 $250 $200 $150 $100 $50 $0 2007 2008 2009 2010 2011 2012 2013 2014 Budget Forecast Forecast $217 $338 $339 $334 $335 $400 $404 $401 18
Slide 19: Forecast of Weather-Normalized Electricity Peak Use
Con Edison of New York Forecast of Weather-Normalized Electricity Peak Use MWs 15,000 14,000 13,000 12,000 11,000 Energy 10,000 Efficiency 9,000 Adjusted 8,000 Peak 7,000 6,000 2012 2013 2014 2015 2016 19
Slide 20: Average Normalized Electricity Use per Customer
Con Edison of New York Average Normalized Electricity Use per Customer 16,000 Annual kWh per customer: 2001 - 2011 15,000 kWhrs 14,000 13,000 12,000 % change over prior year 4.00% 3.00% Residential 2.00% Commercial 1.00% 0.00% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 -1.00% -2.00% -3.0
Slide 21: Major Substation Construction Program (1950 – 2024)
Con Edison of New York Major Substation Construction Program (1950 – 2024) Based on November 2011 Forecast 21
Slide 22: Electric Infrastructure Investment
Con Edison of New York Electric Infrastructure Investment ($ millions) $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 2007 2008 2009 2010 2011 2012 2013 2014 Budget Forecast Forecast $1,567 $1,743 $1,596 $1,421 $1,354 $1,404 $1,356 $1,256 22
Slide 23: New York State Energy Highway Task Force
New York State Energy Highway Task Force Goals • Reduce constraints and expand supply options • Provide long-term reliability • Encourage renewables • Promote economic development Task Force members • NY Power Authority • NY Department of Environmental Conservation • NY Economic Development Council
Slide 24: New York Transco Proposed
New York Transco Proposed Response to NY Energy Highway Task Force Request for Information • 18 projects proposed to upgrade and modernize NY’s transmission grid • $1.9 billion financed through NY Transco • $1.0 billion financed by host transmission owners NY transmission-owner partners • Con Edison
Slide 25: NYS Energy Highway Timetable
NYS Energy Highway Timetable • January 2012: Gov. Cuomo State of the State Address announced Energy Highway initiative • April 4, 2012: Energy Highway Summit • April 11, 2012: Request for Information (RFI) issued • April 30, 2012: STARS* Phase II Study Report released • May 30, 2012: RFI responses s
Slide 26: 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 27: Features of New York Regulation
Features of New York Regulation • Forward-looking test year for expenses and rate base • True-ups for major expenses: – Fuel and power cost recovery – Pensions and Other Post-employment Benefits – Property taxes (partial) – Environmental clean-up costs • Revenue decoupling • Performance penalties •
Slide 28: Recent Rate Decisions in New York
Recent Rate Decisions in New York Date Company ROE Term Date Company ROE Term 07/06 Central Hudson 9.60% 3 years 03/10 CECONY Electric 10.15% 3 years 08/06 NYSEG 9.55% 1 year 06/10 Central Hudson 10.00% 3 years 09/06 CECONY Steam 9.80% 2 years 09/10 CECONY Gas 9.60% 3 years 10/06 O&R Gas 9.80% 3 yea
Slide 29: Summary of Rate Plans and Filings
Summary of Rate Plans and Filings Company Service Term Authorized ROE* CECONY Electric 3-year plan effective Apr. 1, 2010 10.15% ROE CECONY Gas 3-year plan effective Oct. 1, 2010 9.6% ROE CECONY Steam 3-year plan effective Oct. 1, 2010 9.6% ROE O&R Electric 3-year plan effective July 1, 2012 9.4%, 9
Slide 30: 2012 Electric, Gas and Steam Rate Filings
Con Edison of New York 2012 Electric, Gas and Steam Rate Filings • Preparing to file in November 2012 • Historic test year: 12 months ended June 2012 • Forward test year: October 1, 2013 – September 30, 2014 • New rates in effect October 1, 2013 November February March April Nov. – Dec. July August
Slide 31: Capital Expenditures
Capital Expenditures ($ millions) Con Edison of New York Orange and Rockland Competitive Energy Businesses $2,500 $2,202 $2,057 $2,000 $1,943 $1,899 $1,879 $1,866 $1,778 $1,746 $1,500 $1,000 $500 $450 $112 $120 $127 $135 $111 $156 $143 $147 $6 $4 $10 $28 $114 $86 $110 $0 2007 2008 2009 2010 2011 201
Slide 32: Consolidated Edison, Inc. Rate Base Growth
Consolidated Edison, Inc. Rate Base Growth ($ millions) Pike (PA) 21,311 RECO (NJ) 5-year CAGR 20,545 19,605 (2006-2011) 7.63% 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 2006 2
Slide 33: A Compelling Dividend Record: Consecutive Years of Dividend Increases
A Compelling Dividend Record: 38 Consecutive Years of Dividend Increases Annualized Dividend 1975 - 2012 Dividend Payout Ratio 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 33
Slide 34: Appendix
Appendix ED GconEdison, inc. NYSE
Slide 35: Infrastructure Investment
Con Edison of New York Infrastructure Investment Electric Gas Steam Depreciation Actual ($ millions) 2007 1,567 217 95 593 2008 1,743 338 121 672 2009 1,596 339 122 744 2010 1,421 334 111 787 $2,500 2011 1,354 335 89 829 Forecast 2012 1,404 400 139 874 2013 1,356 404 139 934 2014 1,256 401 89 1,003
Slide 36: Orange and Rockland Infrastructure Investment
Orange and Rockland Infrastructure Investment ($ millions) Electric Gas Depreciation Actual $180 2007 80 32 38 2008 88 32 40 2009 85 42 42 $160 2010 99 36 44 2011 79 32 48 $140 Forecast 2012 109 38 53 2013 121 35 57 $120 2014 108 35 61 $100 $80 Gas Electric $60 Depreciation $40 $20 $0 2007 2008 2009
Slide 37: New York PSC Methodology for Setting Equity Returns
New York PSC Methodology for Setting Equity Returns Historic book investment (“Rate Base”) Earnings base x Rate of return x Equity ratio = $ of Income 2/3 Discounted Cash Flow model + 1/3 Capital Asset Pricing model 37
Slide 38: 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 39: 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 40: NY PSC Staff's Proxy Group for 2011-2012 O&R Electric Proceeding
NY PSC Staff’s Proxy Group for 2011-2012 O&R Electric Proceeding ALLETE Hawaiian Electric Industries Alliant Energy IDACORP Ameren MGE Energy American Electric Power Pepco Avista PG&E Black Hills Pinnacle West Capital Center Point Portland General Electric CH Energy SCANA Cleco Sempra Energy Consoli
Slide 41: Reconciliation of 1st Half 2012 and 1st Half 2011 Earnings Per Share
Reconciliation of 1st Half 2012 and 1st Half 2011 Earnings Per Share Con Con 6 months ending June 30, Con Edison Edison Edison 2012 CECONY O&R Development Energy Solutions Parent Total Reported EPS – GAAP basis $1.49 $0.10 $0.01 $- $0.11 $(0.03) $1.68 Mark-to-Market losses/(gains) - - - 0.01 (0.07)
Slide 42: Reconciliation of 2011 and 2010 Earnings Per Share
Reconciliation of 2011 and 2010 Earnings Per Share Con Con Con Edison Edison Edison 2011 CECONY O&R Development Energy Solutions Parent Total Reported EPS – GAAP basis $3.34 $0.18 $0.01 $0.03 $0.07 $(0.04) $3.59 Mark-to-Market losses/(gains) - - - (0.03) 0.08 - 0.05 Ongoing operations $3.34 $0.18 $0
Slide 43: Rates of Return
Rates of Return (for twelve months ended June 30, 2012) SEC Basis (excludes Regulated Basis MTM impact) CECONY Allowed Earned Electric 10.15% 10.0% Gas 9.6% 10.1% Steam 9.6% 7.0% Overall - CECONY 10.0% * 9.8% 9.7% O&R - NY Electric 9.2% 9.0% Gas 10.4% 10.0% RECO 10.3% 13.1% Overall – O&R 9.7% * 9.9%
Slide 44: Departmental and Other Expenses
Con Edison of New York Departmental and Other Expenses ($ millions) 1,600 1,481 1,400 1,309 267 1,284 1,265 1,296 1,260 1,254 1,200 1,167 1,168 315 343 1,000 902 524 800 676 702 285 503 613 630 553 133 600 449 307 291 310 250 400 689 265 198 205 478 200 364 307 319 105 172 78 118 0 2006 2007 2008 20
Slide 45: Long-term Debt Maturities
Long-term Debt Maturities ($ millions) 2012 2013 2014 2015 2016 Con Edison, Inc. – parent company $ 1 $ 1 $ 2 $ 2 $ 2 Con Edison of New York 525 700 475 350 650 Orange and Rockland 3 3 4 142 79 Competitive energy businesses 1 1 - 1 - Total $ 530 $ 705 $ 481 $ 495 $ 731 2012 2016 • CECONY $300 millio
Slide 46: 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 = $449 million 6/30/12: 1,400 LOCs = $252 million CP = $800 million $ Millions 1,200 1,000 800 600 400 200 0 Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-1
Slide 47: Capital Structure June 30, 2012
Capital Structure June 30, 2012 ($ millions) Con Edison, Inc. Debt $9,840 46% Preferred * - - Equity 11,579 54 Total $21,419 100% Con Edison of New York Orange and Rockland Competitive and Parent Debt $8,919 46% Debt $606 52% Debt $315 31% Equity 10,314 54 Equity 553 48 Equity 712 69 Total $19,233 1
Slide 48: Leader in Sustainability
Leader in Sustainability • 6th consecutive year of listing in the worldwide Carbon Disclosure Project Index • 1st among utilities in the 2011 Newsweek 500 Green Rankings for environmental and social performance • Member of Corporate Responsibility Magazine’s “Best 100 Corporate Citizens” for 2012 48
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