Consolidated Edison, Inc. · NYSE:ED
Consolidated Edison — Debt Investor Presentation (February 2014)
40 slides from Consolidated Edison's debt investor presentation, Feb 25, 2014
Slide 1: Bank of America Merrill Lynch-Hosted Fixed-Income Investor Meetings
Con Edison, Inc. February 25 , 2014 Bank of America Merrill Lynch-Hosted Fixed- Income Investor Meetings in New York and Boston 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) 2013 EPS $3.62* Rate Base: $22.7 billion Market Cap: $16.2 billion Regulated Utilities Orange and Rockland 2013 EPS $0.22 Con Edison of New York 2013 EPS $3.48 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) • 3.4 million electric customers • 1.1 million gas customers • 1,703 steam customers • 702 MW of regulated generation CECONY and O&R • Delivered 40% of NYS 2013 delivered 43% of electric peak consumption NYS 2013 el
Slide 5: 2014 Guidance and Financing Needs
2014 Guidance and Financing Needs • Earnings from ongoing operations to be in range of $3.65 to $3.85 per share* (excludes any mark-to-market effects from competitive business) • Capital expenditure of $2,608 million (CECONY - $2,223 million, O&R - $142 million, CEB - $243 million) • Plan for 2014:
Slide 6: Reconciliation of 2013 and 2012 Earnings Per Share
Reconciliation of 2013 and 2012 Earnings Per Share Con Con Con Edison Edison Edison 2013 CECONY O&R Development Energy Solutions Parent Total Reported EPS – GAAP basis $3.48 $0.22 $(0.23) $0.02 $0.13 $- $3.62 Lease In/Lease transactions - - 0.32 - - - 0.32 Mark-to-Market losses/(gains) - - - - (0.14
Slide 7: Summary of Rate Plans
Summary of Rate Plans Amortization To Income Authorized Effective of Net Regulatory Return on Equity Period Rate Changes Rate Base (Assets) and Liabilities (ROE) (a) (Millions of Dollars, except percentages) CECONY– Electric (b) January 2014 - Yr. 1 - $(76.2) Yr. 1 - $17,323 $(37) over 2 yrs. 9.2% D
Slide 8: Other Major Provisions of Current Electric, Gas and Steam Rate Plans
Con Edison of New York Other Major Provisions of Current Electric, Gas and Steam Rate Plans • Allowed equity ratio of 48%. • Recovery of deferred storm charges of $107 million annually over three years (including costs for Sandy). Subject to potential refund following NYSPSC staff review of the cost
Slide 9: Rate Base Actual and Approved
Con Edison of New York Rate Base Actual and Approved Average rate base for 12 months ($ billions) $30 $25 $1.5 $1.5 $1.5 $20 $3.9 $3.5 $3.4 $15 Steam Gas Electric $10 $17.3 $18.1 $16.6 $5 $1.6 $4.2 $0 Dec-13 Dec-14 Dec-15 Dec-16 $21.5 * $22.3 $23.5 $5.8 ** * Actual; ** There is no Electric rate base
Slide 10: Capital Expenditures
Capital Expenditures ($ millions) Con Edison of New York Orange and Rockland Competitive Energy Businesses $3,000 $2,481 $2,500 $2,347 $2,223 $2,135 $2,057 $2,000 $1,866 $1,909 $1,778 $1,500 $1,000 $492 $500 $378 $360 $365 $243 $127 $135 $111 $137 $135 $142 $160 $158 $10 $28 $114 $0 2009 2010 2011 2
Slide 11: Infrastructure Investment
Con Edison of New York Electric Gas Steam Depreciation Infrastructure Investment Actual 2008 1,743 338 121 672 ($ millions) 2009 1,596 339 122 744 2010 1,421 334 111 787 2011 1,354 335 89 829 $3,000 2012 1,375 426 108 894 2013 1,471 536 128 946 Steam Forecast Gas 2014 1,617 524 82 993 $2,500 2015 1,
Slide 12: Infrastructure Investment: Orange and Rockland
Orange and Rockland Infrastructure Investment Electric Gas Depreciation ($ millions) Actual 2009 85 42 42 2010 99 36 44 2011 79 32 48 2012 98 39 53 $180 2013 98 37 56 Forecast 2014 107 35 62 $160 2015 121 39 68 2016 120 38 73 $140 $120 $100 $80 Gas Electric $60 Depreciation $40 $20 $0 2009 2010 2011
Slide 13: Composition of Rate Base
Composition of Rate Base (as of December 31, 2013) Rate Base* ($ millions) Con Edison of New York Electric (NY) $ 16,574 Gas (NY) $ 3,423 Steam (NY) $ 1,504 Total CECONY $ 21,501 Orange and Rockland Pike Gas (PA) $ 2 Pike Electric (PA) $ 14 Rockland Electric (NJ) (distribution) $ 175 (transmission)
Slide 14: Consolidated Edison, Inc. Rate Base Growth
Consolidated Edison, Inc. Rate Base Growth ($ millions) Pike (PA) 22,691 21,760 21,311 RECO (NJ) 5-year CAGR 20,545 19,605 (2008-2013) 4.65% O&R Gas (NY) 18,077 O&R Electric (NY) 16,298 14,757 CECONY Steam (NY) 13,453 CECONY Gas (NY) 11,86912,418 11,087 11,231 CECONY Electric (NY) 2001 2002 2003 200
Slide 15: 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 2013 15
Slide 16: Rates of Return and Equity Ratio
Rates of Return and Equity Ratio (for twelve months ended December 31, 2013) SEC Basis (excludes MTM Regulated Basis and LILO impact) CECONY Allowed Actual Electric 10.15% 8.7% Gas 9.6% 9.8% Steam 9.6% 11.8% Overall - CECONY 10.0%* 9.1% 9.6% CECONY Equity Ratio 48.0% 51.3% O&R Electric 9.4% 11.6% Ga
Slide 17: New York Public Service Commission (NY PSC)
New York Public Service Commission (NY PSC) Commissioners Audrey Zibelman (D) Gregg Sayre (D) Diane Burman (R) Garry Brown (D) Patricia Acampora (R) Chair Feb-2018 Feb-2018 Feb-2015 Feb-2015 Feb-2018 Appointed June Appointed June Appointed Dec Appointed June 2013 2007 Appointed June 2005 2012 2013 P
Slide 18: 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 (most) – Pensions and Other Post-employment Benefits – Property taxes (partial) – Environmental clean-up costs – Interest on long-term borrowing • Reve
Slide 19: 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 09/10 CECONY Steam 9.60% 3 years 09/06 CECONY Steam 9.80% 2 years 09/10 Energy East (RGE/NYSEG) 10.00% 40 months 10/06 O&R Gas 9.80% 3 years 06/11 Niagara Mohawk Electric 9.30% 2 years 08
Slide 20: 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 21: 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 22: New York City Economy Continues to Show Resilience
New York City Economy Continues to Show Resilience • 94,500 jobs added in NYC during 2013 • NYC is becoming a high-tech hub with job growth and four science campuses under development • Tourism is NYC’s fifth largest industry with a record-breaking 54 million tourists in 2013 With projects underway
Slide 23: Number of Permits Issued
Con Edison of New York CECONY Residential Building Permits 40,000 36-year high occurred due to extension 35,000 and then expiration of NYC tax abatement program 30,000 Number of Permits Issued 25,000 30-Yr Average 20,000 15,000 10,000 5,000 0 1994 1997 2000 2001 2004 2007 2008 2011 1995 1996 1998 19
Slide 24: New York City Employment By Sector
New York City Employment By Sector ('000) 4000 3500 Other Service - 4% 3000 Trans/Utilities - 3% Trade - 12% 2500 Prof & Bus. Svcs. - 16% Manufacturing - 2% Leisure & Hospitality - 9% 2000 Information - 4% Government - 14% Financial Activities - 11% 1500 Edu & Health Svcs. - 21% Construction - 3% 10
Slide 25: Employment Growth in CECONY Service Area
Con Edison of New York Employment Growth in CECONY Service Area CECONY Service Area PNM Employment (Thousands) Source: NYS Dept of Labor (Bureau of Labor Statistics) and Moody’s Economy.com 25
Slide 26: Average Normalized Electricity Use per Customer
Con Edison of New York Average Normalized Electricity Use per Customer 16,000 Annual kWh per customer: 1990 - 2013 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% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 20
Slide 27: Historical Electricity Peak Demand
Con Edison of New York Historical Electricity Peak Demand* 14,000 13,000 9/11 The Great (2001) Recession 12,000 Electric Peak (MW) Decline (2009-2012) Enlightened 11,000 Energy Program Stock Market Crash 10,000 (1987) Oil Embargo (1973) Oil Shock 9,000 Iranian Revolution Iran/Iraq War (1979) 8,000 N
Slide 28: 5-Year Annualized Growth Rates in Peak Usage
5-Year Annualized Growth Rates in Peak Usage 5-Year Historical Current 5-Year 2002-2007 Forecast (Pre-Recession) (2013-2018) CECONY Electric 1.8% 1.4% Gas 1.0% 3.8% Steam (0.8)% (0.6)% O&R Electric 2.6% 0.9% Gas (0.8)% 0.7% 28
Slide 29: 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 December 2013 Completed Conversions 4,200 customers Total Conversion Potential #6 Oil 985 converted, 23% as of December 2010 2,800 customers #4 Oil 550 converted, 20% 14,000 customers**
Slide 30: 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 2013 figures through December 31 Number of gas service installations 600 513** 520 500 400 343** 313 #2 Oil 300 260 #4 Oil 200 199 #6 Oil 152 66** 91 100 44 6** 23 0 2010 2011 2012 2013 YTD * Multi-family b
Slide 31: NY PSC Response to NY Energy Highway Blueprint: AC Transmission
NY Public Service Commission Response to NY Energy Highway Blueprint: New & Upgraded AC Transmission Proceeding to examine proposals for AC transmission upgrades to address congestion on the transmission system between Utica and NYC (12-T-0502) • Transmission projects proposed by NY Transco, NextEra
Slide 32: NY PSC Response to NY Energy Highway Blueprint: Indian Point Contingency
NY Public Service Commission Response to NY Energy Highway Blueprint: Indian Point Contingency Proceeding soliciting Indian Point Contingency Plan (12-E-0503) • The plan included two parallel solution paths: a) Transmission Owner Transmission Solutions (TOTS) - three transmission projects (NY Transc
Slide 33: NY Transco Proposed Projects for Indian Point Contingency and AC Transmission Upgrades
NY Transco Proposed Projects for Indian Point Contingency and AC Transmission Upgrades • $1.3 billion investment for AC Transmission Upgrade • $250 million additional investment for Staten Island Un-bottling Edic to Pleasant Marcy Valley South Series Compensation Oakdale - Fraser Proposed only in AC
Slide 34: 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 Pilesgrove NJ 9 N/A N/A 3 years 3Q11 Flemington NJ 8 N/A N/A 3 years 4Q11 Frenchtown II NJ 3 N/A N/A 3 years 4Q11 Frenchtown I NJ 3
Slide 35: Retail Electric Commodity Sales Volumes by Region
Con Edison Solutions Retail Electric Commodity Sales Volumes by Region Texas 9.1% NY ISO 2013 Sales Volumes 27.7% 12,167 million kwhrs New England ISO 28.4% PJM 34.8% 2013 breakdown of volumes by customer class: 88% Commercial & Industrial; 12% Mass Market 35
Slide 36: Liquidity Adequacy
Liquidity Adequacy $2,250 million CEI Consolidated revolving credit facility 2,200 Commercial paper Letters of credit 2,000 12/31/13 1,800 LOCs = $26 million CP = $1,451 million 1,600 Average = $552 million 1,400 $ Millions 1,200 1,000 800 600 400 200 0 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-
Slide 37: Debt Maturity Profile
Debt Maturity Profile Debt by Entity As of December 31, 2013 CECONY: $9,841 89.7% O&R: 604 5.5% CEI/CEBs: 529 4.8% Total $10,974 100% 1,400 CECONY O&R CEI/CEBs 1,200 1,000 800 ($ in millions) 600 400 200 - 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 37
Slide 38: Capital Structure — December 31, 2013
Capital Structure — December 31, 2013 ($ millions) Con Edison, Inc. A3 / BBB+ / BBB+ Debt $10,974 47% Equity 12,245 53 Total $23,219 100% Con Edison of New York Orange and Rockland Competitive and Parent A2 / A- / A- A3 / A- / A- Debt $9,841 48% Debt $604 49% Debt $529 40% Equity 10,847 52 Equity 62
Slide 39: A Compelling Dividend Record: 40 Consecutive Years of Dividend Increases
A Compelling Dividend Record: 40 Consecutive Years of Dividend Increases Annualized Dividend 1975 - 2014 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 recovery of most fuel and commodity costs – Revenue decoupling mechanism in NY (electric and
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