Pacific Gas & Electric Co. · NYSE:PCG
Pacific Gas & Electric — PG&E — Investor Day (May 2008)
52 slides from Pacific Gas & Electric's investor day presentation, May 22, 2008
Slide 1: PG&E Corporation Investor Conference
PG&E Corporation Investor Conference May 22, 2008 Sonoma, California Investor Conference May 22, 2008 Sonoma, California This presentation is not complete without the accompanying statements made by management on May 22, 2008. A replay is available on PG&E Corporation’s homepage at www.pge-corp.com.
Slide 2: Cautionary Language Regarding Forward-Looking Statements
Cautionary Language Regarding 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 th
Slide 3: Agenda For Today
Agenda For Today May 22, Morning Session 9:00 a.m. -Noon Performance Outlook (Peter Darbee, Chairman, CEO, President, PG&E Corporation) Financial Review (Chris Johns, Sr. VP, CFO and Treasurer PG&E Corporation) Break Operational Performance (Bill Morrow, CEO and President, Pacific Gas and El
Slide 4: Performance Outlook
Performance Outlook Peter Darbee Chairman, CEO and President, PG&E Corporation
Slide 5: Today's Key Takeaways
Today’s Key Takeaways PG&E has a plan to deliver on its financial objectives Management is committed to execute on plan PG&E is on track to achieve its guidance
Slide 6: Top Analyst Questions
Top 5 Analyst Questions 1. How will you achieve 8% growth rate? 2. What are the risks to your growth targets? 3. How are you achieving your efficiency improvements? 4. What is the CapEx outlook? 5. What are your equity and financing needs?
Slide 7: PCG: Investment Case
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 Sustainable di
Slide 8: PG&E Vision
PG&E Vision Our Vision and Values OUR VISION The leading utility in the United States OUR GOALS Delighted Customers Energized Employees Rewarded Shareholders OUR STRATEGIES Operational Excellence Transformation OUR VALUES We act with integrity and communicate honestly and openly We are passionate ab
Slide 9: PG&E Goals
PG&E Goals Customer Loyalty Employee Engagement Environmental Leadership Deliver for Shareholders
Slide 10: Environmental Leadership
Environmental Leadership Climate change, GHG legislation and energy independence Founding member of U.S. Climate Action Partnership and a leading voice in global climate change Commitment to renewable energy sources Over 1,000 MW of contracted solar capacity “First look” at new technologie
Slide 11: Customer and Community Focus
Customer and Community Focus Climate Smart Corporate Citizenship Supplier Diversity Award E-Source: Website ranked 1 of 111 Habitat for Humanity $1.2 M in solar installations
Slide 12: 2008 Business Priorities
2008 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 13: Financial Objectives
Financial Objectives Chris Johns Senior Vice President, CFO, Treasurer, PG&E Corporation
Slide 14: 2008 Business Priorities
2008 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 15: Delivering on Financial Objectives
Delivering on Financial Objectives Invest in needed infrastructure Ensure adequate liquidity Meet EPS targets Generate strong cash flow
Slide 16: Confirming EPS Guidance
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% targeted CAGR 2007-2011 EPS from Operations* $3.60 $3.20 $2.80 $2.40 $2.00 2007 2008 Estimated 2009 Estimated Guidance Range * Reg G reconciliation to GAAP f
Slide 17: Achieving 8% Growth Target
Achieving 8% Growth Target Components of Compound Average Growth Rate 2007-2011 % CAGR 2007-2011 Other Drivers (0% to +1%) New Shares (-3% to- 5%) Add’l CapEx Efficiency Savings 10% (+1 to 3%) CEE Incentives Holding Company Leverage 8% 8% CAGR Base 2007- 2011 6% 2007 Forecast Guidance { Rate Base Ra
Slide 18: Capital Expenditure Outlook
Capital Expenditure Outlook Prior Forecast Levels $ MM $4,000 $3.7 B $3.6B $3,500 $3.3 B $3.3 B $3.4 B $3.2 B $3.0 B $3.0 B $3,000 $2,500 $2,000 $1,500 $1,000 $500 2008 2009 2010 2011 Common Plant $260 $230 $200 $250 SmartMeter Program $260 $330 $260 $220 Gas Transmission $230 $200 $175 $200 Electri
Slide 19: Rate Base Growth
Rate Base Growth Weighted Average Annual Rate Base* Prior Vs. Current Forecast Prior Forecast** Current Forecast $B 30.0 22.6 24.1 23.9 25.0 20.8 22.1 20.4 18.6 18.3 20.0 15.0 10.0 5.0 0.0 2008 2009 2010 2011 • Projected 2008-2011 rate base is not adjusted for the impact of the carrying cost credit
Slide 20: Additional Earnings Drivers
Additional Earnings Drivers Pre-Tax Earnings ($ MM) Cumulative Earnings Included in Additional Drivers December 2007 Opportunities Current Forecast 2008-2011 Operating Plan Additional Rate Base $125- $175 - $200- $250 Investment CEE Program $100- $200 $90- $130 - Incentives Operational Changes $110-
Slide 21: Additional CapEx
Additional CapEx Proposed Projects Above 2008-2011 Base CapEx Forecast SmartMeterTM 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 22: Improved Operational Planning
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 busine
Slide 23: 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 24: 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 2011 2006-2008 Program effectiveness phase (“net-to-gross issues”) to be finalized by CPUC summer 2008 Program goals for 200
Slide 25: Cash Flow Projections
Cash Flow Projections Cash Flow Cashflow From Operations CapEx Net Cash Flow $4,000 $3,000 $2,000 $ MM $1,000 $0 -$1,000 -$2,000 2007 2008 2009 2010 2011 *Net cash flow = Cash flow from ops less CapEx, values reflect the mid-point of forecast range
Slide 26: Cash Flow and Equity Needs
Cash Flow and Equity Needs Financing Needs 2008-2011 in $MM 2007 2008 2009 2010 2011 Actual Low High Low High Low High Low High Cash from operations* 1,953 3,225 to 3,125 2,275 to 2,175 2,400 to 2,250 2,825 to 2,675 Capital Expenditures (2,768) (3,650) to (3,750) (3,275) to (3,375) (2,975) to (3,125
Slide 27: Dividend Policy
Dividend Policy Objectives: Flexibility Sustainabilility Comparability Payout ratio range of 50% - 70% Growth balanced with funding for additional investment opportunities
Slide 28: 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 29: 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 30: Managing the Business
Managing the Business Bill Morrow President and CEO, Pacific Gas and Electric Company
Slide 31: 2008 Business Priorities
2008 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: 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 33: JD Power Rankings
JD Power Rankings 2007 Higher than 2006 Residential Electric Residential Gas Business Gas Business Electric 0 2 5 4 10 11 20 20 30 # Utilities Ranked 40 38 2006 2007 43 50 46 51 55 60 58 70 80 76
Slide 34: Innovative EE and DR programs
Innovative EE and DR programs
Slide 35: SmartMeter Program Progress
SmartMeterTM Program Progress Over 550,000 meters installed 270,000 meters being read electronically Year-end 2008 target: 1.3 million meters installed Live AMI billing 12/07 Demand Response Interval Billing Live Billing IT infrastructure 05/08 live 2Q 2007 Upgrade technology Deployment (incl.up
Slide 36: 2008 Business Priorities
2008 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 37: Identifying Operational Efficiencies
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 Optimi
Slide 38: 2008 Business Priorities
2008 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 39: 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 40: Measuring Our Performance
Measuring Our Performance Compensation Aligned with Business Focus Percentage 2008 Compensation metrics weight Delivering on EPS Goals 40% (Measurement of earnings from ongoing core operations) Brand Health Index 20% (Composite of customer surveys and marketing research) Reliable Energy Delivery 20%
Slide 41: Focusing on Operations
Focusing on Operations Jack Keenan Chief Operating Officer, Pacific Gas and Electric Company
Slide 42: 2008 Business Priorities
2008 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 43: Major Project Highlights
Major Project Highlights Diablo Canyon Steam Generator Replacement New Generation Gateway Generating Station Colusa Generating Station Humboldt Generating Station Electric Transmission Investment Cornerstone Improvement Program
Slide 44: Diablo Steam Generator Replacement
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
Slide 45: Diablo Canyon Capacity Factor
Diablo Canyon Capacity Factor* % Historical Diablo Capacity Factors (Total Plant) 100 95.1 95.3 94.8 93.2 86.0 90.2 86.0 87.9 85.6 90.8 88.1 88.0 90.5 88.9 89.6 90 83.6 80.7 79.7 79.6 80 74.1 69.4 70 60.5 60 50 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 U
Slide 46: Gateway Generating Station
Gateway Generating Station More than 50% complete On budget, on time >1,000,000 hours with no injury Begins operations 1Q 2009
Slide 47: New Generation: Colusa & Humboldt
New Generation: Colusa & Humboldt Humboldt Status 163 MW Colusa: CEC permits received; construction imminent Colusa Humboldt: Slight delays in permitting, 657 MW construction expected to begin by end of year Gateway 530 MW Strategy for execution mirrors successes at Gateway Experienced pro
Slide 48: 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 49: 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 50: 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 51: Conclusion
Conclusion Peter Darbee
Slide 52: PCG: Investment Case
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 Sustainable dividend,