Pepco — Williams Capital Group Midwest Utilities Seminar (April 2014)
35 slides from Pepco's conference presentation, Apr 9, 2014
Slide 1: Well Positioned to Deliver Value
Williams Capital Group Midwest Utilities Seminar Well Positioned to Deliver Value April 10, 2014 Kevin McGowan, Vice President, Regulatory Affairs
Slide 2: Safe Harbor Statement/Regulation G Information
Safe Harbor Statement/Regulation G Information Some of the statements contained in today’s presentation with respect to Pepco Holdings, Pepco, Delmarva Power and Atlantic C ity Electric, including each of their respective subsidiaries, are forward - looking statements within the meaning of the U.S.
Slide 3: Strategic Focus
2 Pepco Delmarva Power Atlantic City Electric Pepco Energy Services Strategic Focus ▪ Invest in T&D infrastructure ▪ Achieve operational excellence, focused on reliability and exceeding customer expectations ▪ Operationalize and enhance the Smart Grid ▪ Achieve reasonable regulatory outcomes ▪ Enabl
Slide 4: Power Delivery Service Territory
3 Commercial 47% Power Delivery Service Territory Residential 36% Government 9% Industrial 6% Commercial 49% Customer Diversity, 2013 Electric Sales NJ 15% DE 16% FERC 16% DC 19% MD 34% Regulatory Diversity, 2013 Revenues
Slide 5: 2014 Objectives
4 2014 Objectives Continue to Improve the Customer Experience Deliver Value to Customers and Investors with Emerging Technologies and Services Grow Earnings and Achieve Above Average Total Return Achieve Regulatory Outcomes that Improve Earned Returns ▪ Exceed customer expectations ▪ Invest $1.3 bil
Slide 6: Capital Expenditures 2014-2018 Forecast
5 Load $704 Customer Driven $682 Reliability & Aging Infrastructure $2,339 Transmission - Reliability $633 Transmission - Other $775 Other $681 $0 $500 $1,000 $1,500 2014 2015 2016 2017 2018 Notes: See Appendix for detailed construction forecast Amounts shown exclude expenditures anticipated for the
Slide 7: Infrastructure Investment – The Driver of Growth
6 $4,630 $5,273 $5,779 $6,145 $6,587 $7,008 $7,341 $240 $266 $274 $284 $292 $298 $303 $1,514 $1,509 $1,656 $1,882 $2,009 $2,154 $2,274 $6,384 $7,048 $7,709 $8,311 $8,888 $9,460 $9,918 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 2012A 2013E 2014P 2015P 2016P 2017P 2018P Electric Distribution Gas D
Slide 8: Planned and Potential Additions to Construction Expenditure Forecast
7 Project Timeframe Status Anticipated Cost Recovery Cost District of Columbia Undergrounding Program 2015 – 2021 Legislation Signed Surcharge $500M* NJ Grid Resiliency Program 2014 – 2020 Proposal Presented Surcharge $600 - $800M Artificial Island Transmission Project 2014 – 2020 Under Consideratio
Slide 9: Pepco Undergrounding Status – District of Columbia
8 Pepco Undergrounding Status – District of Columbia ▪ On March 3, 2014, the Mayor of the District of Columbia signed into law the $1 billion undergrounding legislation initially recommended by the District of Columbia’s Power Line Undergrounding Task Force; funding will be split 50/50 between Pepco
Slide 10: Power Delivery Operation and Maintenance Expense
9 Power Delivery Operation and Maintenance Expense * Includes various items that are customer reimbursed or recoverable through rates in the same year, including costs associated with default electricity supply, customer reimbursed service work, claims, Atlantic City Electric bad debt expense, and r
Slide 11: 2013 Reliability Performance
10 2013 Reliability Performance (1 ) Regulatory Jurisdiction SAIFI (3) Component SAIDI (4) ( or CAIDI (5) ) Component 2013 State Mandate 2013 Actual Performance (2) 2013 State Mandate 2013 Actual Performance (2) Atlantic City Electric – NJ 1.71 1.45 15% 144* 93* 35% Delmarva Power – MD 1.65 1.92 ( 1
Slide 12: Smart Grid Implementation
11 Smart Grid Implementation ▪ Advanced Metering Infrastructure • DPL DE – Meter installation and activation complete for electric customers • DPL MD – Meter installation and activation underway • Pepco – Meter installation and activation complete • Recovery through rates in DE (70% as of June 2013)
Slide 13: Executing Our Regulatory Strategy
12 ▪ Post - test period reliability plant additions ▪ CTA Generic Proceeding in NJ ▪ MAPP settlement ▪ Timely recovery of incremental capex • GRC in MD • DC Undergrounding ▪ Multi - year rate p lan p roposal in DE ▪ Engaging regulatory community ▪ Net e nergy metering ▪ Microgrid & distributed g ene
Slide 14: Regulatory Distribution Returns on Equity
13 Regulatory Distribution Returns on Equity Company/Jurisdiction 12 Month Measurement Period Estimated Rate Base (Millions of Dollars) 2013 Estimated Per Books ROE Authorized ROE in 2013 2012 (1) Estimated Per Books ROE Pepco – MD 9/30/13 (Avg. Rate Base) $1,278 7.50% 9.36% 5.24% Pepco – DC 12/31/1
Slide 15: Distribution Rate Cases – Recent Decision (Pepco DC)
14 Distribution Rate Cases – Recent Decision Pepco – District of Columbia Rate Case Request FC Case No. 1103 Initial Filing Date 3/8/13 Revenue Requirement Increase (Updated on 12 /3/13) $44.8M Adjusted Rate Base $1.4B Common Equity Ratio 49.2% Return on Equity 10.25% Residential Total Bill % Increa
Slide 16: Distribution Rate Cases – Recent Decision (Delmarva Delaware)
15 Distribution Rate Cases – Recent Decision Delmarva Power – Delaware Electric Rate Case Request Docket No. 13 - 115 Initial Filing Date 3/22/13 Revenue Requirement Increase (Updated on 9 /20/13) $39.0M Adjusted Rate Base $745.6M Common Equity Ratio 49.2% Return on Equity 10.25% Residential Total B
Slide 17: Distribution Rate Cases – Pending (Pepco Maryland)
16 Distribution Rate Cases – Pending Pepco – Maryland Rate Case Request Case No. 9336 Initial Filing Date 12/4/13 Test Year October 2012 – September 2013 Adjusted Rate Base $1.4B Common Equity Ratio 49.9% Requested Return on Equity 10.25% Revenue Requirement Increase $43.3M* Residential Total Bill %
Slide 18: Distribution Rate Cases – Pending (Atlantic City Electric NJ)
17 Distribution Rate Cases – Pending Atlantic City Electric – New Jersey Rate Case Request ER14030245 Initial Filing Date 3/14/14 Test Year January 2013 – December 2013 Adjusted Rate Base $1.4B Common Equity Ratio 50.0% Requested Return on Equity 10.25% Revenue Requirement Increase $61.7M Residentia
Slide 19: Regulatory Schedule
18 Regulatory Schedule Q1 2014 Q2 2014 Q3 2014 Q4 2014 Pepco Distribution Rates - DC Delmarva Power Distribution Rates - DE Atlantic City Electric Distribution Rates - NJ Pepco Distribution Rates - MD Delmarva Power Distribution Rates - MD Transmission Formula Rates DC Formal Case No. 1103 Final Ord
Slide 20: Pepco Energy Services – Overview
19 Pepco Energy Services – Overview ESCO business Provides government and institutional customers with competitive energy efficiency services ▪ Designs, builds, and operates energy efficiency and combined heat and power (CHP) projects ▪ Most contracts are performance based in which PES guarantees a
Slide 21: Pepco Energy Services - 2014 Outlook
20 Pepco Energy Services - 2014 Outlook * Excludes impairments; see Appendix for reconciliation of GAAP earnings to adjusted earnings ▪ ESCO market continues to improve in 2014 ▪ Underground T&D construction activity expected to continue to be driven by utility infrastructure and reliability spendin
Slide 22: 2014 Financing Activity
21 • Utility long - term debt issuance of $750 - $850 million Debt Issuance • Direct Stock Purchase and Dividend Reinvestment Plan (approximately $43 million) Equity Issuance Issuance Maturing Pepco $400 million 3.60% First Mortgage Bonds due 2024 issued March 18 $175 million Delmarva Power $200 - $
Slide 23: Power Delivery Earnings Support Annual Dividend
22 Power Delivery Earnings Support Annual Dividend Power Delivery Earnings versus Annual Dividend $0.93 $1.02 $1.18 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 2011 2012 2013 Earnings Per Share Power Delivery Earnings Annual Dividend P rogressing to a payout r atio in line with peers $1.08 Note:
Slide 24: 2014 Earnings Guidance
23 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 2013 Adjusted* 2014E Guidance 2014 Earnings Guidance Earnings Per Share $ 1.12 - $1.27 $1.14 The guidance range excludes: ▪ The results of discontinued operations and the impact of any special, unusual or extraordinary items ▪ The effect of adopting
Slide 25: Well Positioned to Deliver Value
24 Well Positioned to Deliver Value Committed to the Dividend Attractive yield Stable Earnings Base 98% of forecasted operating income from Power Delivery Long - term Earnings Growth Rate base growth and reduction of regulatory lag Financial Strength Strong balance sheet, ample liquidity, solid inve
Slide 26: Appendix
Appendix
Slide 27: Construction Expenditure Forecast Detail
26 (Millions of Dollars) 2014 2015 2016 2017 2018 Total Distribution: Customer Driven (new service connections, 129$ 129$ 143$ 145$ 136$ 682$ meter installations, highway relocations) Reliability and Aging Infrastructure 502 467 451 450 469 2,339 (facility replacements/upgrades for system reliabilit
Slide 28: Projected Year-End Rate Base by Utility
27 (Millions of Dollars) 2013 2014 2015 2016 2017 2018 Estimated Projected Projected Projected Projected Projected Distribution – Electric Pepco $2,805 $3,146 $3,425 $3,727 $4,010 $4,228 Delmarva Power 1,272 1,363 1,442 1,512 1,582 1,642 Atlantic City Electric 1,196 1,270 1,278 1,348 1,416 1,471 Tot
Slide 29: Sales and Customer Growth
28 Sales and Customer Growth 2012 2013 2014 2013 - 2014 2014 - 2018 2013 - 2014 2014 - 2018 Actual* Actual* Projected Pepco 26,021 25,822 25,964 0.6% 0.3% 1.1% 1.2% Delmarva Power 12,732 12,434 12,282 (1.2%) (0.2%) 0.6% 0.6% Atlantic City Electric 9,429 9,221 9,117 (1.1%) (0.1%) 0.6% 0.7% Total Powe
Slide 30: Proposed Forward Looking Rate Plan Filing – Delmarva Power Delaware
29 Proposed Forward Looking Rate Plan Filing – Delmarva Power – Delaware Electric ▪ On October 2, 2013, Delmarva Power filed a unique Forward Looking Rate Plan (FLRP) in Delaware (electric) • Filing proposes annual rate increases over a four - year period • FLRP provides the opportunity for Delmarva
Slide 31: Transmission Update
30 Transmission Update ▪ MAPP Abandonment Costs • On February 28, 2014, FERC approved a settlement agreement approving recovery of $80.5 million over three years, and allows PHI to retain title to all real property interests ▪ ROE and Protocol Complaint • On February 27, 2013, a Section 206 complain
Slide 32: 2014 Earnings Guidance: 2013 Adjusted vs. 2014 Guidance
31 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 2013 Adjusted Annualization of 2013 Rate Case Outcomes Transmission Revenue PES Other, net Interest Expense Dilution Income Tax Adjustments O&M Depreciation & Amortization(2) 2014E Guidance $1.14 ($0.11) ($0.05) ( $0.03) ( $0.02) $ 0.01 $ 0.03 ( $0.
Slide 33: 2014 Earnings Guidance Assumptions
32 Power Delivery ▪ Normal weather and operating conditions ▪ Reasonable regulatory outcomes for pending electric distribution base rate cases ▪ Projected growth in number of total customers of 0.8% ▪ Forecasted sales decline of 0.2% ▪ Utility total O&M expense of $890 - $910 million ▪ Construction
Slide 34: Reconciliation of GAAP EPS to Adjusted EPS – PHI
33 Reconciliation of GAAP EPS to Adjusted EPS – PHI Note: See Regulation G Information at the beginning of today’s presentation. Three Months Ended December 31, Year Ended December 31, 2013 2012 2013 2012 Reported (GAAP) Earnings per Share from Continuing Operations $ 0.23 $ 0.15 $ 0.45 $ 0.95 Adjus
Slide 35: Reconciliation of GAAP Earnings to Adjusted Earnings – Pepco Energy Services
34 Reconciliation of GAAP Earnings to Adjusted Earnings – Pepco Energy Services Note: See Regulation G Information at the beginning of today’s presentation. (Millions of Dollars) 2013 Net Income from Continuing Operations (GAAP) $ 3.0 Adjustments (after - tax ): Impairment charges 3.0 Adjusted Net I
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