Pacific Gas & Electric Co. · NYSE:PCG
Pacific Gas & Electric — PG&E — Morgan Stanley 12th Annual Global Electricity and Energy Conference (March 2005)
25 slides from Pacific Gas & Electric's conference presentation, Mar 10, 2005
Slide 1: PCG: A Value Opportunity
PCG: A Value Opportunity Peter A. Darbee President and CEO Morgan Stanley 12th Annual Global Electricity and Energy Conference The Westin New York at Times Square March 10, 2005
Slide 2: Cautionary Statement Regarding Forward-Looking Information
Cautionary Statement Regarding Forward-Looking Information This presentation contains forward-looking statements regarding projected earnings, cash flows, capital expenditures, rate base and rate base growth, stock repurchases, and dividends for the 2005 - 2009 period based on assumptions, including
Slide 3: PG&E Corporation: A Value Opportunity
PG&E Corporation: A Value Opportunity • A pure-play utility offering a stable platform and regulated growth Stability: • minimum equity ratio and ROE • predictable revenue through 2006 • union agreements through 2007 • pass-through for procurement costs • balancing account for sales variability Regu
Slide 4: Regulatory Stability
Regulatory Stability • Chapter 11 settlement through 2012 • 2003 GRC settlement sets base revenue through 2006 • Gas Accord III settlement through 2007 • Pass through for procurement costs and trigger mechanism on Energy Resource Recovery Account (ERRA) • Balancing account for sales variability 4 4
Slide 5: 2005 Priorities
2005 Priorities 1. Complete financial restoration 2. Transform the way we do business 3. Address electric procurement and owned generation 4. Enhance communications 5. Invest in utility infrastructure 5 5
Slide 6: Priority 1: Financial Restoration
Priority 1: Financial Restoration • Authorized utility equity ratio of 52% achieved • Restored common dividend • $1.9B of energy recovery bonds (ERBs) issued February 10, up to $1.1B of additional ERBs targeted for November 2005 • Approximately $1B of customer savings over the life of the regulatory
Slide 7: Priority 2: Transforming the Way We Do Business
Priority 2: Transforming the Way We Do Business • A reinvention of how we deliver energy • Enterprise-wide effort to focus on the customer – Meeting customers’ increasing expectations – Providing employees with the right tools and business processes – Capturing cost efficiencies for customers • Alig
Slide 8: Transforming Service and Operations
Transforming Service and Operations • Areas of immediate focus – Electric and Gas Delivery (T&D assets) – Customer Management (e.g., call centers, field services, metering, billing) – Supply Chain (materials, procurement, logistics) – Information Technology – Performance Culture 8 8
Slide 9: Transformation Timeline
Transformation Timeline We Achieve and Are Deliver Here Accelerate Implementation 2007 Forward Plan, Design and Implement 2006 Strategize • Implement design • Realize immediate opportunities • Mission & Vision 2005 • Current State • Benchmarking/Field Visits • End state of vision • Opportunities def
Slide 10: Stakeholder Benefits
Stakeholder Benefits New infrastructure with less Operational rate pressure Excellence Improved service & customer satisfaction Additional process improvements Better tools & processes for employees Revenue requirement expense dollar for dollar trade-off Additional Constructive relationships Infrast
Slide 11: Priority 3: Electric Procurement and Owned Generation
Priority 3: Electric Procurement and Owned Generation • Priority is to meet customer demand cost effectively • Near-term stability – Adequate resources to meet forecast demand – Cost recovery in place • Long-term focus – Implementation of procurement plan – Mirant settlement provides additional capa
Slide 12: Priority 4: Communications
Priority 4: Communications • Strengthening communications with our stakeholders: – Employees – Customers – Policymakers – Investors Effective communications are key to achieving our priorities 12 12
Slide 13: Priority 5: Investment in Utility Infrastructure
Priority 5: Investment in Utility Infrastructure • Base capital expenditures average $2.0B through 2009 • Assessing additional investment opportunities driven by regulatory mandates and utility needs for: – New generation – Electric transmission – Advanced metering – Reliability enhancements Average
Slide 14: Investment Drivers
Investment Drivers • Load growth – 2,200 MW of new generation in 2008-2010 – Contra Costa 8 project in 2009 – Diablo Canyon steam generator replacement – Electric transmission expansion and new generation interconnection • Reliability and technology-driven enhancements – Advanced metering • Nine mil
Slide 15: Capital Expenditure Outlook
Capital Expenditure Outlook • Base capital expenditure plan averages $2.0B from 2005-2009 Total Base Capital Expenditure Outlook ($MM) $2,500 $2,000 $1,500 $1,000 $500 2005 2006 2007 2008 2009 Generation $300 $340 $300 $380 $700 Gas Transmission $140 $130 $135 $110 $125 Elec Transmission $525 $425 $
Slide 16: EPS Guidance
EPS Guidance • EPS from operations*: 2005 guidance of $2.15-$2.25 per share 2006 guidance of $2.30-$2.40 per share EPS from Operations Operating EPS Assumptions $2.50 ($ in millions) 2005 2006 $2.30 Rate base $15,350 $16,000 Equity ratio 52% 52% $2.10 Auth. ROE 11.22% 11.22% Carrying cost credits ($
Slide 17: Additional Investment Opportunities
Additional Investment Opportunities • Potential incremental capital expenditures of up to $2.0B over 2005-2009 period depending on utility infrastructure needs $3,000 $2,000 $1,000 $0 2005 2006 2007 2008 2009 Distribution $35 $270 $425 $345 $410 Transmission $5 $30 $45 $80 $45 Generation - - - $300
Slide 18: Rate Base Growth
Rate Base Growth • Average annual rate base growth ranges from 4.5%-6.5% 2005-2009 depending on utility infrastructure needs Average Annual Rate Base ($B)* $20.0 $17.5 $15.0 $12.5 2005 2006 2007 2008 2009 Base Potential Incremental * 2006-2009 rate base is not adjusted for the impact of the carrying
Slide 19: EPS Growth
EPS Growth • Average EPS growth from operations of 4%-6% from 2005-2009 based on mid-point of 2005 guidance and depending on infrastructure needs $2.75 4%-6% growth $2.50 $2.15-$2.25 $2.25 $2.00 2005E 2006 2007 2008 2009 * Reg G reconciliation to GAAP for 2005 EPS Guidance from Operations available
Slide 20: Dividend Policy
Dividend Policy • Objectives – Flexibility – Sustainability – Comparability • Payout ratio range of 50%-70% • Growth balanced with funding for additional investment opportunities 20 20
Slide 21: Summary
Summary • PG&E Corporation: A Value Opportunity – A focus on the utility and operational excellence – Average EPS growth of 4%-6% from 2005-2009 – Strong cash flow – Share repurchases of approximately $1.6B in 2005 21 21
Slide 22: Appendix
Appendix • Reg G Reconciliation • Carrying Cost Credit Impacts
Slide 23: Reg G Reconciliation
Reg G Reconciliation 2004 2004 EPS on an Earnings from Operations Basis $2.12 Items Impacting Comparability Gain resulting from prior year impact and recognition of reg. asset from 2003 GRC approval $0.28 Recovery of previously incurred costs related to electric industry restructuring implementation
Slide 24: Reg G Reconciliation
Reg G Reconciliation 2005 Low-end High-end Year 2005 Year 2005 EPS Guidance on an Earnings from Operations Basis $2.15 $2.25 Estimated Items Impacting Comparability * Incremental interest expense ($0.08) ($0.05) EPS Guidance on a GAAP Basis $2.07 $2.20 * The range of potential outcomes is developed
Slide 25: Carrying Cost Credit Impacts
Carrying Cost Credit Impacts Estimated Average Deferred Tax Balances and Carrying Cost Credit Impacts ($MM) 2005 2006 2007 2008 2009 2010 2011 2012 RRB & ERB Average Deferred Tax Balances $295 $1,200 $945 $740 $590 $430 $265 $90 Est.Carrying Cost Credit $17 $70 $55 $43 $34 $25 $15 $5 * Rate Reductio
PG&E — Morgan Stanley 12th Annual Global Electricity and Energy Conference (March 2005) on 6ix