EEI Financial Conference Presentation (PowerPoint)
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EEI Financial Conference Presentation (PowerPoint)

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  • 1. Focused on the Basics 37 th EEI Financial Conference October 20-23, 2002
  • 2. Company Representatives
    • Steve Reynolds President and Chief Executive Officer
    • Steve McKeon Senior Vice President Finance and Legal, Chief Financial Officer
    • Don Gaines Vice President Finance & Treasurer
    • Durga Waite Director Investor Relations
  • 3.
    • Investment Thesis
    • Corporate Strategy
    • Business Segments
      • Puget Sound Energy
      • InfrastruX
    • Financial Summary
    • Conclusion
    Agenda
    • Investment Thesis
  • 4. Investment Thesis Attractive Combination of Yield & Growth
    • Predictable earnings from core regulated utility business
      • 90% of earnings from regulated operations
    • Low operating costs
    • Favorable rate case settlement
    • Improving financial position
    • Potential P/E multiple expansion
    • Total return potential of 10 to 11%
      • Sustainable dividend policy
      • Utility customer growth above industry average
      • Upside from nonregulated subsidiary InfrastruX
  • 5.
    • Investment Thesis
    • Corporate Strategy
    • Business Segments
      • Puget Sound Energy
      • InfrastruX
    • Financial Summary
    • Conclusion
    Agenda
    • Corporate Strategy
  • 6. Overview of Puget Energy
    • Largest gas and electric utility headquartered in Washington state
    • Service territory covering approximately 6,000 square miles of Puget Sound region
    • Provides gas & electric construction & maintenance services
    • Primarily operating in the Eastern U.S., Texas and the Midwest
  • 7. Corporate Strategy
    • Focus on regulated utility business
      • Gas & electric cost-recovery mechanisms
      • No merchant energy trading or marketing activities
    • Low-risk unregulated business
      • Electric & gas construction & maintenance services
    • Improving balance sheet flexibility & strength
  • 8. Technologically Advanced
    • Largest automated meter-reading installation in the country
    • State-of-the-art customer information and billing system
    • Personal Energy Management
      • Over 280,000 on time-of-use rates
      • Web-based customer usage data updated daily
      • Enables customers to manage their energy costs
  • 9. Energy Supply
    • The Pacific Northwest region is short energy in low stream-flow years
    • PSE will become short as contracts begin to expire in 2004
    • Recent cancellations of merchant power plants in the region
  • 10. Regional Generation Update
    • 36 projects totaling about 19,000 MW were being permitted in the Northwest
    • 7 plants may be on line by end of 2003
      • 3 on the west side of Cascades
      • 4 on the east side of Cascades
    • 2 could connect directly to PSE
  • 11. Merchant Generation Total 3,277
  • 12. Potential Impact to PSE
    • Unreliable merchant power market
    • Reversion to utilities as energy provider
    • Resources may be available at distressed prices
    • Potential minimal rate impact
    • Recovery of rate-based generation grows PSE earnings
  • 13.
    • Investment Thesis
    • Corporate Strategy
    • Business Segments
      • Puget Sound Energy
      • InfrastruX
    • Financial Summary
    • Conclusion
    Agenda
    • Business Segments
      • Puget Sound Energy
  • 14. Rapidly Growing Region Washington State Puget Energy
    • 6,000-square-mile service area covers over half state’s population
      • Includes Seattle, Tacoma, Bellevue and fast growing suburbs
      • From 1990 to 2000, Washington’s population grew more than 21%
    • Washington ranks 20th in energy consumption per person
    Sierra Pacific Resources Scottish Power PLC IDACORP PGE Avista Corp Aquila NorthWestern Corp
  • 15. Vibrant Service Territory
  • 16. Above-average Customer Growth Gas Gas Gas Electric Electric Electric Electric Gas 1996-2001 National average electric customer growth = 1.5%
  • 17. Electric Utility: No Concentration of Industrial Customers YTD Sept 2002 at Sept 30 2002 Energy Sales $933 million Commercial 38% Residential 46% Industrial & Transportation 16% Number of Customers 952,000 customers Commercial 10% Residential 89% Industrial & Transportation 1%
  • 18. Gas Utility: Highly Diversified Customer Base YTD Sept 2002 at Sept 30 2002 $525 million Energy Sales Residential 47% Industrial & Transportation 23% Commercial 28% 615,000 customers Number of Customers Residential 92% Commercial 8% Industrial & Transportation >1%
  • 19. Low-cost Operations 33 U.S. combination gas/electric utilities reported 2001 Energy-Delivery Cost per Customer PSE $161 Industry Average $271
  • 20. Constructive Regulatory Climate
    • Favorable Electric and Gas Rate Settlements
    • Power Cost Adjustment mechanism for sharing power supply costs
    • Purchased Gas Adjustment mechanism for passing through gas procurement costs
    • Hypothetical 40% equity ratio in rates
    • 11% return on equity
    • Expedited ‘New Resource’ only rate mechanism
  • 21.
    • Investment Thesis
    • Corporate Strategy
    • Business Segments
      • Puget Sound Energy
      • InfrastruX
    • Financial Summary
    • Conclusion
    Agenda
    • Business Segments
      • InfrastruX
  • 22. InfrastruX: Business Overview Provides gas and electric construction and maintenance services to the utility industry Since its formation in 2000, InfrastruX has acquired ten companies Geographic Footprint
  • 23. InfrastruX: Market Opportunity
    • Significant Long-term Growth Drivers, Including:
    • Potential benefit from utility outsourcing
    • Aging & insufficient electric & gas infrastructure
    • Highly fragmented industry
    • Trend toward utility cost-reduction initiatives
    • Benefits accrued to those with scale
  • 24. InfrastruX: Progress-to-Date
    • Completed 10 acquisitions
    • Avoided telecommunications business
    • Grown to 2,400 dedicated employees nationwide
    • Strong ongoing relationships with a diverse group of major utilities including:
    • American Electric Power
    • Alliant Energy
    • Carolina Power & Light
    • Florida Power & Light
    • Madison Gas & Electric
    • Oncor
    • Dominion Virginia Power
    • Washington Gas Light
    • Wisconsin Energy
  • 25.
    • Investment Thesis
    • Corporate Strategy
    • Business Segments
      • Puget Sound Energy
      • InfrastruX
    • Financial Summary
    • Conclusion
    Agenda
    • Financial Summary
  • 26. Positive Earnings Outlook Puget Energy earnings per share “ PSE Spells EPS” $1.00 Dividend $1.10-$1.15 $1.60-$1.70 $0.15 - $0.20 $.10 $1.20-$1.25 $1.75-$1.90 Puget Sound Energy InfrastruX
  • 27. Sustainable Dividend
    • Dividend reduced March 20, 2002
    • Board established dividend at 60% of expected utility earnings
    • Payout ratio would be 60.6% using mid-point of 2003 PSE earnings guidance
    • Current dividend sustainable solely from utility results
  • 28. Favorable Liquidity Position
    • $121 million of short-term debt outstanding at Sept. 30, 2002
    • $375 million credit facility expires February 2003
    • Will be replaced with:
      • receivables securitization
      • 364-day bank facility
    Current liquidity position No bank ratings ‘triggers’ A3/P2 Short-term rating BBB-/Baa3 Corporate rating BBB/Baa2 Senior secured Credit ratings
  • 29.
    • Investment Thesis
    • Corporate Strategy
    • Business Segments
      • Puget Sound Energy
      • InfrastruX
    • Financial Summary
    • Conclusion
    Agenda
    • Conclusion
  • 30. Investment Thesis Attractive Combination of Yield & Growth
    • Predictable earnings from core regulated utility business
      • 90% of earnings from regulated operations
    • Low operating costs
    • Favorable rate case settlement
    • Improving financial position
    • Potential P/E multiple expansion
    • Total return potential of 10 to 11%
      • Sustainable dividend policy
      • Utility customer growth above industry average
      • Upside from nonregulated subsidiary InfrastruX
  • 31. Question & Answers
  • 32. Forward Looking Statements
    • Certain statements contained in this presentation are “forward looking statements” within the meaning of the federal securities laws.
    • Although Puget Energy and Puget Sound Energy believe that the expectations reflected in such statements are reasonable, there can be no assurance that the expected results will be achieved.
    • For additional information concerning certain assumptions, risks, and uncertainties involved in the forward looking statements contained herein, please refer to Puget Energy’s reports on file with the SEC.