Pacific Gas & Electric Co. · NYSE:PCG
Pacific Gas & Electric — PG&E — Lehman Brothers CEO Energy/Power Conference 2008
33 slides from Pacific Gas & Electric's conference presentation, Sep 2, 2008
Slide 1: PG&E Corporation at Lehman Brothers CEO Energy/Power Conference
PG&E Corporation Christopher P. Johns Senior Vice President and CFO Lehman Brothers CEO Energy/Power Conference September 2 - 4, 2008 New York City This presentation is not complete without the accompanying statements made by management on September 3, 2008. A replay is available on PG&E Corporation
Slide 2: 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 the 2007-2011 outlook period, as well as management’s proje
Slide 3: PCG: Investment Case
Targeted 8% CAGR in EPS (2007 - - 2011) 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 generati
Slide 4: Delivering on Financial Objectives
Delivering on Financial Objectives § Invest in needed infrastructure § Ensure adequate liquidity § Meet EPS targets § Generate strong cash flow
Slide 5: Confirming EPS Guidance
EPS from Operations* * Reg G reconciliation to GAAP for 2007 EPS from Operations, and 2008 and 2009 EPS Guidance available in Appendix and at www.pgecorp.com 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%
Slide 6: Base Forecast and EPS Growth
Base Forecast Rate Base Growth (+9% to 10%) Add’l CapEx (+1% to 3%) New Shares (-3% to- 5%) $2.70- $2.80 8% CAGR 2007- 8% 10% 6% Guidance { Range % CAGR 2007-2011
Slide 7: Capital Expenditure Outlook
$ MM 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Projects not included in forecasts include: SmartMeter TM Upgrade, Cornerstone Improvement Program, additional generation and gas pipeline investments, and BC Transmission $3.7 B $3.3 B $3.0 B $3.0 B Capital Expenditure Outlook
Slide 8: Rate Base Growth
* Projected 2008-2011 rate base is not adjusted for the impact of the carrying cost credit that primarily results from the second series of the Energy Recovery Bonds. Earnings will be reduced by an amount equal to the deferred tax balance associated with the Energy Recovery Bonds regulatory asset, m
Slide 9: Financing Plan 2008-2011
(1) Pacific Gas and Electric Company issued $600 million of senior notes in March Financing Plan 2008-2011 Objective: Maintain strong investment grade ratings at Pacific Gas and Electric Company and PG&E Corporation • Strong financial profile that will support growth plan • Ensure adequate liquidity
Slide 10: Additional CapEx - Proposed Projects
Additional CapEx - Proposed Projects Above 2008-2011 Base Forecast § SmartMeter TM Program Upgrade § Cornerstone Improvement Program § Tesla Power Plant § British Columbia (“BC”) Electric Transmission Line § Pacific Connector LNG Pipeline
Slide 11: SmartMeter Program Progress
* 2008 to 2011 estimates are based on forecasted construction schedules and additional contracted resources 2007 2008 2009 2010 2011 2012 1st meter installed Billing IT infrastructure live 2Q Live AMI billing SmartMeter TM Upgrade Filing Demand Response Interval Billing Live Upgrade technology insta
Slide 12: SmartMeter Program Upgrade
SmartMeter TM Program Upgrade § Funding request of $572 MM - $463 MM additional capital § CPUC decision expected by year end § New capabilities - Integrated connect/disconnect switches - Solid state meter technology - Home area network gateway device
Slide 13: Cornerstone Improvement Program
PG&E seeking CPUC approval for a six-year program to improve reliability of our electric distribution system. § Enhances overall reliability of energy delivery § Increases grid flexibility to mitigate outages § Sets higher performance expectations as measured by a proposed set of metrics Proposed $2
Slide 14: Cornerstone Program Costs
Cornerstone Program Costs $2.3 B total capital investment with revenue requirement true-up $2.3 B total capital investment with revenue requirement true-up
Slide 15: Tesla Generating Station
Tesla Generating Station § Total Estimated Project Cost of $850MM § 560 MW capacity § Located in PG&E’s service territory § Currently awaiting CPUC approvals § Interim order pending § Final CPCN decision requested 1 st Quarter
Slide 16: Transmission Opportunities
Transmission Opportunities BC Transmission Line § Recovery of development costs approved by FERC § Working on multi-utility partnership for development of the project § $5 B forecasted in total capital costs, with PG&E’s share at 51% or greater Pacific Connector LNG Pipeline § $50 MM capital forecas
Slide 17: 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 18: Key Financial Takeaways
Key Financial Takeaways § Delivering on Near-term EPS Guidance and Targeted 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 19: PCG: Investment Case
Targeted 8% CAGR in EPS (2007 - -2011) 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 generatio
Slide 20: Appendix
Appendix CEO Energy/Power Conference September 2 - 4, 2008
Slide 21: PG&E Service Area in California
PG&E SERVICE AREA IN CALIFORNIA Pacific Gas and Electric (PG&E) § Provides energy to nearly 1 in 20 people in the U.S. § 70,000 square-mile service territory § Four main operational units: § Electric and gas distribution § Electric transmission § Gas transmission § Electric generation § Forward test
Slide 22: Electric and Gas Distribution
(1) Authorized revenues = operating costs + (rate of return x rate base) Rate base = net plant ± adjustments to approximate invested capital Business Scope § Retail electricity and natural gas distribution service (construction, operations and maintenance) § Customer services (call centers, meter re
Slide 23: Electric Transmission
Midway Los Banos Moss Landing Diablo Canyon Gates Dixon Malin Round Mt Tesia Vaca Business Scope § Wholesale electric transmission services (construction, maintenance) § Operation by CA Independent System Operator Primary Assets § $2.6 billion of rate base (2007 wtd. avg.) Regulation § Federal regul
Slide 24: Natural Gas Transmission
Business Scope § Natural gas transportation, storage, parking and lending services § Customers: PG&E natural gas distribution and electric generation businesses, industrial customers, California electric generators Primary Assets § $1.5 billion of rate base (2007 wtd. avg.) Regulation § California s
Slide 25: Electric Procurement & Owned Generation
Business Scope § Electricity and ancillary services from owned and controlled resources § Energy procurement program Primary Assets § $1.7 billion of rate base (2007 wtd. avg.) § Diablo Canyon nuclear power plant (2,240 MW) § Largest privately owned hydro system (3,896 MW) § Funded nuclear plant dec
Slide 26: Financing Structure
PG&E Corporation LTD Debt Outstanding: $0.3 Bn Credit Rating: Baa1 (1) /NR PG&E Energy Recovery Funding LLC LTD Debt Outstanding: $1.8 Bn Credit Rating: Aaa/AAA (2) Pacific Gas and Electric Company LTD Debt Outstanding: $8.1 Bn Credit Rating: A3/BBB+ (1) (1) Corporate Credit / Issuer rating (2) Ener
Slide 27: Pacific Gas and Electric Long-Term Debt Portfolio
Issue Size (MM) Coupon Issue Date Maturity Date Tax Status Senior Notes $600 3.60% 3/23/2004 3/1/2009 Taxable Senior Notes $500 4.20% 3/23/2004 3/1/2011 Taxable Senior Notes $1,000 4.80% 3/23/2004 3/1/2014 Taxable Senior Notes $3,000 6.05% 3/23/2004 3/1/2034 Taxable Senior Notes $700 5.80% 3/13/2007
Slide 28: PG&E Corporation Long-Term Debt Portfolio
Issue Size (MM) Coupon Issue Date Maturity Date Conversion Price Shares Convertible Subordinated Notes $280 9.50% 6/25/2002 6/30/2010 $15.0873 18,558,059 • The convertible notes can be converted into PG&E Corporation common shares at the conversion price of $15.0873 per share at any time prior to th
Slide 29: Long-Term Debt Maturity Schedule
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 Senior Notes PC Bonds Convertible Notes • Staggered debt maturities reduce refinancing risk • Flexibility to issue benchmark tenors that match long-lived nature of assets Long-Term Debt Maturity Schedule
Slide 30: Financial Metrics and Ratings
Metric Expected Average 2008-2012 S&P Business Profile Total Debt / Capitalization 54.3% FFO / Interest Coverage 5.2x FFO / Average Total Debt 23% Financing Objective: Expect to maintain solid, investment grade credit metrics Ratings S&P Moody’s Fitch Pacific Gas and Electric Company Senior Unsecure
Slide 31: Debt Profile
(1) PG&E Corporation and Pacific Gas and Electric Company (2) Fixed-floating mix is 90.9% / 9.1% if $156 million of commercial paper outstanding on June 30, 2008 is included Long-Term Debt Mix 82.7% 6.5% 7.4% 3.4% Senior Notes Tax-Exempt (Fixed) Tax-Exempt (Floating) Convertible Notes Fixed-Floating
Slide 32: EPS - Reg G Reconciliation
* Earnings per share from operations is a non-GAAP measure. This non-GAAP measure is used because it allows investors to compare the core underlying financial performance from one period to another, exclusive of items that do not reflect the normal course of operations. EPS on an Earnings from Opera
Slide 33: EPS Guidance - Reg G Reconciliation
Low High EPS Guidance on an Earnings from Operations Basis* Estimated Items Impacting Comparability EPS Guidance on a GAAP Basis $2.90 0.00 $2.90 $3.00 0.00 $3.00 Low High EPS Guidance on an Earnings from Operations Basis* Estimated Items Impacting Comparability EPS Guidance on a GAAP Basis $3.15 0.
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