EEI Financial Conference Presentation (PowerPoint)

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EEI Financial Conference Presentation (PowerPoint)

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

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