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8-K - UIL FORM 8-K DATED AUGUST 9, 2011 - UIL HOLDINGS CORP | uil_form8kdated08102011.htm |
EX-99 - UIL EXHIBIT 99 - PRESS RELEASE - UIL HOLDINGS CORP | uil_exh99.htm |
1
Williams Capital Group
East Coast Seminar
August 10, 2011
Exhibit 99.1
2
James P. Torgerson
President and Chief Executive Officer
Safe Harbor Provision
Certain statements contained herein, regarding matters that are not historical facts, are forward-looking statements (as defined in the
Private Securities Litigation Reform Act of 1995). These include statements regarding management’s intentions, plans, beliefs,
expectations or forecasts for the future. Such forward-looking statements are based on UIL Holdings’ expectations and involve risks and
uncertainties; consequently, actual results may differ materially from those expressed or implied in the statements. Such risks and
uncertainties include, but are not limited to, general economic conditions, legislative and regulatory changes, changes in demand for
electricity, gas and other products and services, unanticipated weather conditions, changes in accounting principles, policies or
guidelines, and other economic, competitive, governmental, and technological factors affecting the operations, markets, products and
services of UIL Holdings’ subsidiaries, The United Illuminating Company, The Southern Connecticut Gas Company, Connecticut
Natural Gas Corporation and The Berkshire Gas Company. Such risks and uncertainties with respect to UIL Holdings’ recent acquisition
of The Southern Connecticut Gas Company, Connecticut Natural Gas Corporation and The Berkshire Gas Company include, but are not
limited to, the possibility that the expected benefits will not be realized, or will not be realized within the expected time period. The
foregoing and other factors are discussed and should be reviewed in UIL Holdings’ most recent Annual Report on Form 10-K and other
subsequent periodic filings with the Securities and Exchange Commission. Forward-looking statements included herein speak only as of
the date hereof and UIL Holdings undertakes no obligation to revise or update such statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events or circumstances.
Note to Investors
3
UIL - Corporate Structure, Service Areas
› Service territory: 335 sq
miles
miles
› ~325,000 customers
› 1,095 employees
› Allowed Distribution ROE
of 8.75%
of 8.75%
› Earned ’10 Transmission
ROE (composite) of 12.5%
ROE (composite) of 12.5%
› 50% interest in GenConn
Energy LLC
Energy LLC
The United Illuminating
Company (UI)
Company (UI)
UIL Holdings
Corporation
Corporation
Service Area Key
SCG
CNG
UI
Berkshire
Overlapping Territory
› Service territory: 716 sq
miles - Greater Hartford-
New Britain & Greenwich
miles - Greater Hartford-
New Britain & Greenwich
› ~160,000 customers
› 319 employees
› 2,011 miles of mains with
~124,000 services
~124,000 services
› 2011 settlement allowed
ROE of 9.41%
ROE of 9.41%
Connecticut Natural Gas
(CNG)
(CNG)
› Service territory: 738 sq
miles in Western MA
including Pittsfield and
North Adams
miles in Western MA
including Pittsfield and
North Adams
› ~36,000 customers
› 120 employees
› 738 miles of mains
› Allowed ROE of 10.50%
Berkshire Gas Company
(Berkshire)
(Berkshire)
› Service territory: 512 sq
miles from Westport, CT to
Old Saybrook, CT
miles from Westport, CT to
Old Saybrook, CT
› ~178,000 customers
› 290 employees
› 2,273 miles of mains with
~131,000 services
~131,000 services
Southern Connecticut Gas
(SCG)
(SCG)
4
Investment Highlights
Transmission Focus
(FERC Regulated)
› 2011 estimated overall allowed weighted-average ROE of 12.3%-12.5%
› Identified future investment opportunities reaching beyond service territory
› Reviewing FERC Order 1000: Transmission Planning & Cost Allocation
Attractive Regulated
Electric and Gas
Utility
Electric and Gas
Utility
› Proven ability to earn allowed electric & gas rate of returns
› Average ROEs as of 6/30/11: D& CTA 10.13%, preliminary SCG 9.00-9.10%, CNG 10.55
-10.65%
-10.65%
› GenConn - 9.75%
Notes: (1) As of November 2010. The annual long-term capital spending will be updated in the Fall of 2011.
(2) As of 8/5/11.
Conservative
Financial Strategy
Financial Strategy
(5.4% Yield)(2)
› Commitment to investment grade credit profile
› Consistent history of dividend payments
› Disciplined capital investment program
Visible Growth
Opportunities
Opportunities
› Significant opportunity exists to switch households to natural gas
› Conversions growth plan is in place
› Projected $2.2B (2011-2019) electric & gas capital expenditure plan
› GenConn: cost-of-service electric peaking generation is complete and operating in the ISO-
markets
markets
5
Gas Operations Integration
Closed on the acquisitions of Southern Connecticut Gas, Connecticut
Natural Gas and Berkshire Gas Company on November 16, 2010
Natural Gas and Berkshire Gas Company on November 16, 2010
Working diligently internalizing the Transition Services Agreement (TSA)
Ø Support services such as IT, Finance and Human Resources provided by
Iberdrola, USA (IUSA) with the ability to terminate any service given 90 days
notice
Iberdrola, USA (IUSA) with the ability to terminate any service given 90 days
notice
Integration activities are well underway
Ø Implementation of these initiatives is expected to continue through this year
with most completed before 2012
with most completed before 2012
2012 savings opportunities - identified & quantified
Ø IUSA 2009 allocated corporate overheads, support costs and shared services
totaled $23M
totaled $23M
› $11.6M of expected savings to be in place in 2012
6
Expected $11.6M of Identified Savings
($M)
Exit from transition services agreement is on schedule
Ø Successful, major SAP system cut
over from IUSA to UIL occurred
on 8/1/11
over from IUSA to UIL occurred
on 8/1/11
› Finance
› Human Resources
› Supply Chain
› Work Management
Integration
7
American Community Survey’s selected housing characteristics estimates show a large percentage of
households in Connecticut do not use natural gas for heating
households in Connecticut do not use natural gas for heating
Potential for Gas Heating in CT
Litchfield
62%
13%
16%
4%
5%
Fairfield
47%
35%
15%
2%
1%
Connecticut
50%
31%
15%
2%
1%
New Haven
46%
35%
16%
2%
2%
Middlesex
63%
11%
18%
4%
3%
New London
63%
11%
19%
3%
4%
Windham
68%
9%
11%
8%
4%
Tolland
67%
9%
13%
5%
4%
Hartford
41%
42%
13%
1%
2%
Fuel oil, kerosene
Electricity
Utility gas
Bottled, tank or LP gas
Other¹
Source: U.S. Census Bureau; Average data for 2005-2009
1 Other includes coal or coke, wood, solar, no fuel used and other
# Occupied
housing units:
1,327,482
housing units:
1,327,482
73,704
339,516
52,993
42,653
104,468
65,476
322,752
325,920
(0)
(17)
(2)
(12)
(0)
(0)
(4)
(9)
The # in parentheses represents
the number of cities or towns in
that county that are served by a
UIL gas company.
UIL gas company.
Approximately 37% of businesses & households on UIL gas mains are not currently natural gas customers
8
Gas Operations
Ø Capitalize on the competitive advantage of natural gas heating use as the
economical, abundant and environmentally friendly fuel of choice for
customers
economical, abundant and environmentally friendly fuel of choice for
customers
Ø Aggressively pursue new gas heating customers
Ø Generate incremental revenue to support infrastructure expansion and
replacement
replacement
Ø 2011 multi-media campaign - launched in April
› Cost savings associated with natural gas heating use compared to other energy sources
› Momentum of interest in conversions - even in off-peak heating season
9
Gas Operations
Ø Historical customer additions(1) 2009 2010
Heating conversions 5,535 5,728
New construction 901 1,071
Total 6,436 6,799
Ø Targeting 30,000-35,000 additional gas heating customers over the next 3 years
› ’11 - 25% increase over ‘10 levels
› ’12 - 50% increase over ’10 levels
Ø Conversions are 9% ahead of 2010 levels
› 3,190 conversions through June ‘11
› On track to achieve ’11 goal
Ø New customers are anticipated to generate approximately $280-$315 dollars of
distribution net operating income per customer
distribution net operating income per customer
Ø Approx. capital spending (2012-2015) associated with customer additions
› Base - $54M
› Incremental - $52M
(1) Businesses & households
10
*2010 Gas distribution capex reflects the full year amount; UIL ownership was for 6 weeks effective with the closing on the acquisition.
** Updated - February 23, 2011
*** Information as of November 2010, except for Gas distribution
Amounts may not add due to rounding.
The annual long-term capital spending will be updated in the Fall of 2011
$M
UIL 2010-2019 CapEx Profile
11
Electric transmission investments
Electric distribution investments
31%
12%
26%
11%
50%
19%
27%
4%
20%
2011 Electric Distribution & Transmission CapEx Detail
12
Gas distribution investments
47%
22%
12%
8%
8%
3%
2011 Gas Distribution CapEx Detail
13
Central Facility - UI Office &
Operations Building
Operations Building
Splice Chamber Remediation
Paper Insulated Lead Cable (PILC)
Replacement
Replacement
Distribution Transformer Replacement
Program
Program
› Consolidate all UI “Work Centers” onto a single
site referred to as the Central Facility
site referred to as the Central Facility
› Under construction
› Planned in-service
2012
2012
~ $115M*
› Rebuild deteriorated underground splicing chambers
› Under construction
› Annual program
over 10 years
over 10 years
~ $7M per year
› Under construction
› Annual program
over 10 years
over 10 years
~ $3M per year
› Infrastructure program to replace transformers due
to poor physical condition, inadequate capacity,
and/or contain unacceptable levels of PCB's
to poor physical condition, inadequate capacity,
and/or contain unacceptable levels of PCB's
› Under construction
› Annual program over
10 years
10 years
~ $7M per year
* Dollars shown are rounded/approximate expected total project capex (generally including both spend to date and future expected spend).
Examples of Current Distribution Projects
14
Grand Avenue 115 kV Switching
Station Rebuild
Station Rebuild
New Shelton 115/ 13.8 kV
Substation
Substation
New Union Avenue 115/ 26.4 kV
Substation
Substation
East Shore 115 kV Substation Upgrades
› Addresses short circuit capability issues and
aged/obsolete infrastructure
aged/obsolete infrastructure
› Under construction
› Planned in-service
2012
2012
~ $60M*
› Meets Greater Shelton area load growth
› In Planning
› Planned in-service
2015
2015
~ $20M*
› In engineering
› Planned in-service
2012
2012
~ $15M*
› Addresses infrastructure condition, maintenance
short circuit capability concerns
short circuit capability concerns
› Phased upgrades,
in engineering and
construction
in engineering and
construction
› Planned in-service
2011-2013
2011-2013
~ $25M*
* Dollars shown are rounded/approximate expected total project capex (generally including both spend to date and future expected spend); excluding AFUDC.
Near-term Electric Transmission Reliability Upgrades
15
Ø Began operating in the ISO-NE
markets in June ‘11
markets in June ‘11
50/50 Joint Venture between UI and NRG
Devon Facility
Ø Operating
Ø Contractual requirements met in
September ‘10
September ‘10
GenConn Energy
16
Near-Term Average Rate Base Profile
28%
23%
7%
30%
22%
5%
36%
2%
40%
1%
23%
38%
38%
39%
43%
22%
38%
23%
37%
40%
23%
Electric distribution
CTA
Gas distribution*
Electric transmission
UI’s 50% Share ($M)**: 2010A 2011P 2012P 2013P 2014P 2015P
Avg. GenConn RB Equivalent: $ 51 $ 148 $ 183 $ 174 $ 165 $ 157
Avg. Gen Conn Equity “Rate Base” $ 25 $ 75 $ 94 $ 89 $ 84 $ 80
Rate Base (Excluding GenConn Equity Investments):
GenConn Equity Investments:
* 2010 Gas distribution average rate base reflects the full year; UIL ownership was for 6 weeks effective with the closing on the acquisition. For comparability purposes, Gas distribution
excludes the impacts of 338(h)(10) election.
excludes the impacts of 338(h)(10) election.
** Per ’12 revenue requirement filed on 7/29/11
Amounts may not add due to rounding.
42%
$2,309
17
UI Transmission - NEEWS Investment
UI Participation in CL&P Project:
Ø UI’s portion of investment: greater of
$60M or 8.4% of CL&P’s costs for the
CT portions …
$60M or 8.4% of CL&P’s costs for the
CT portions …
› Greater Springfield Reliability
Project
Project
› Interstate Reliability Project
› Central CT Reliability Project
Ø 8.4% currently estimated at
approximately $65M*
approximately $65M*
Ø UI deposits through June ‘11 - $8.3M
› Remaining investments expected
to be made over a period of 3 to 5
years
to be made over a period of 3 to 5
years
* Previously NU had projected the cost of the Connecticut portion of these projects would be approximately $779M. UI will update its projected investment once the revised
estimate is provided by NU.
estimate is provided by NU.
18
Renewable-Enabling Transmission
Collaborative effort: UI, NU, NSTAR and NGrid …
to research / identify the most economical means of satisfying future RPS obligations
Significant Region-Wide Need:
› RPS requirement > 3x current
available renewables*
available renewables*
› CT requirement is > UI’s entire load
› Gap will be filled by renewables
remote from load
remote from load
N.E. Governors’ Blueprint:
› Significant transmission build-out
indicated
indicated
› Potential $7 to $10B range - could be
higher or lower to satisfy a 4,000 to
12,000 MW need
higher or lower to satisfy a 4,000 to
12,000 MW need
› Cost to New England likely much less
than Midwestern wind
than Midwestern wind
Potential Solutions Under Study
› Need will likely be satisfied by a portfolio
of projects
of projects
› One promising example is shown below
* From ISO-NE presentation dated 5/15/09 - driven by 2008 data.
Vast majority of
potential onshore
renewables (wind)
potential onshore
renewables (wind)
are in northern NE
North-South Interface:
80% of NE electric
load is below this line
load is below this line
19
Ø On 3/24/11, CNG, SCG & the OCC filed a motion with
the DPUC to reopen the CNG & SCG rate cases for the
purposes of reviewing and approving a settlement
agreement (DN 08-12-06RE02 & DN 08-12-07RE02)
the DPUC to reopen the CNG & SCG rate cases for the
purposes of reviewing and approving a settlement
agreement (DN 08-12-06RE02 & DN 08-12-07RE02)
Ø Final decision issued on 8/3/11, approving settlement
with minor modifications
with minor modifications
› Resolves all pending issues related to the rate case
appeals
appeals
› Removal of the 10 basis point ROE penalty
› Authorized ROEs: CNG - 9.41%, SCG - 9.36%
› Terminates the SCG potential overearnings
investigation
investigation
› Companies are allowed to recover carrying charges
on the excess interim rate decrease over-credited to
customers during rate cases stay
on the excess interim rate decrease over-credited to
customers during rate cases stay
|
|
|
|
SCG Potential Overearnings
Generic ROE Proceeding
UI Electric Decoupling
SCG/CNG Rate Case Appeals
DPUC schedule has not been updated
Ø Draft decision issued on 8/1/11
› Approved decoupling credit for 2010 rate year
› Allows decoupling mechanism to continue unadjusted
until next general rate case proceeding
until next general rate case proceeding
Ø Written exceptions due 8/15/11, Oral arguments on
8/29/11, Final decision expected 8/31/11
8/29/11, Final decision expected 8/31/11
Ø Filed on 7/29/11 for 2012 revenue requirement
Ø Potential for UI to file distribution rate case for rates in effect in 2012 to reflect significant investments in
distribution infrastructure
distribution infrastructure
GenConn ’12 Revenue Requirement
Regulatory Update
20
Legislative Highlights
Session ended June 8th
Ø UIL was actively engaged in legislative process
Highlights of Public Act 11-80
Ø Department of Energy & Environmental Protection (DEEP) was created, effective
July 1
July 1
› Merged the Department of Environmental Protection and the Department of Public
Utility Control (DPUC)
Utility Control (DPUC)
4 Will result in reorganization and reassignment of existing DPUC staff
› Charged with:
4 Creating a new energy future for CT
4 Protecting CT’s environmental and natural resources
Ø Former DPUC has become the Public Utilities Regulatory Authority (PURA)
› 3 out of the 5 former DPUC commissioners are now PURA directors
Ø Allows each electric distribution company to develop and own up to 10 MW of
renewable source generation
renewable source generation
21
22
2Q ’11 vs. 2Q ’10
YTD ‘11 vs. YTD ’10
*
* 2010 - fees associated with acquisition, 2011 - interest on Oct. ’10 issuance of $450M of public debt
*
2Q & YTD ’11 Financial Results by Business
Net Income ($M)
Net Income ($M)
23
2Q & YTD ‘11 Financial Results - Details
Electric distribution, CTA, GenConn & other
Ø 18% increase in net income for the quarter & 12% increase on a YTD basis
› Increase in earnings primarily attributable to income from the investment in GenConn, partially offset
by lower CTA rate base
by lower CTA rate base
› Both GenConn Devon & Middletown are now operating in the ISO-NE markets
4 Contributed $2.6M and $4.7M on a pre-tax basis for the 2Q and first six months of ’11, respectively
Electric transmission
Ø 18% increase in net income for the quarter, 19% on a YTD basis
› Increase in income was primarily attributable to an increase in AFUDC
Gas distribution
Ø 2Q loss of $1.5M due to seasonality of earnings, YTD income of $35.9M
› Typical second quarter for gas distribution
› YTD - colder than normal winter season in New England in ‘11
Corporate
Ø After tax costs in 2Q ‘11 of $3.3M, a decrease of $1.3M compared to 2Q ‘10
› After tax costs of $7.1M on a YTD basis, an increase of $1.9M compared to ‘10
› The decrease in the quarter was primarily attributable to absence in ’11 of after-tax acquisition related
costs that occurred in 2Q ’10, partially offset by interest on the Oct. ‘10 issuance of $450M of public debt
costs that occurred in 2Q ’10, partially offset by interest on the Oct. ‘10 issuance of $450M of public debt
› YTD increase attributable to $6.3M interest expense on the $450M of public debt
24
* $30M to be refinanced - in 3Q ‘11
** To be remarketed
Amounts may not add due to rounding.
Based on current plans - expect no need for external equity at least through 2013
UI Pollution Control Revenue Bonds
UI Equity Bridge Loan repaid in July
UIL Debt retired in Feb
SCG, CNG & Berkshire
Near-Term Debt Maturities
($M)
**
$3
Berkshire note repaid in May
*
Debt Maturity
25
Assumptions
› Regulated businesses are expected to earn the allowed return
on an aggregate basis
on an aggregate basis
› GenConn expected to earn $0.12-$0.14 per share
› CTA earnings are expected to decline by $0.07-$0.09 per
share from 2010 as rate base continues to be amortized
share from 2010 as rate base continues to be amortized
› Incorporates full year of gas distribution earnings
› Bonus depreciation is expected to have a net impact of ($0.03)
-($0.05) per share
-($0.05) per share
› Includes one-time costs for the transition of the gas
distribution business support services from IUSA, as well as
the on-going integration costs
distribution business support services from IUSA, as well as
the on-going integration costs
,
2011
› Integration of all of the regulated businesses with an emphasis on process integration initiatives and best practices
› Exiting the TSA by year-end for vast majority of services
› Positioned to realize half of IUSA’s ‘09 allocated corporate charges of $23M à expected savings of $11.6M in 2012
› Implementing plans for growth in gas conversions
› Execution of capital expenditure plan at each of our regulated businesses
› Continued focus on management of O&M expenses at each of our regulated businesses
26
Credit Ratings
Maintenance of investment grade credit ratings is an important objective
Issuer
|
S&P
|
Moody’s
|
UIL Holdings
|
BBB
(Stable) |
Baa3
(Stable) |
United
Illuminating |
BBB
(Stable) |
Baa2
(Stable) |
SCG
|
BBB
(Stable) |
Baa2
(Stable) |
CNG
|
BBB
(Stable) |
Baa1
(Stable) |
Berkshire
|
BBB
(Stable) |
Baa2
(Stable) |
27
Investment Highlights
Transmission Focus
(FERC Regulated)
› 2011 estimated overall allowed weighted-average ROE of 12.3%-12.5%
› Identified future investment opportunities reaching beyond service territory
› Reviewing FERC Order 1000: Transmission Planning & Cost Allocation
Attractive Regulated
Electric and Gas
Utility
Electric and Gas
Utility
› Proven ability to earn allowed electric & gas rate of returns
› Average ROEs as of 6/30/11: D& CTA 10.13%, preliminary SCG 9.00-9.10%, CNG 10.55
-10.65%
-10.65%
› GenConn - 9.75%
Notes: (1) As of November 2010. The annual long-term capital spending will be updated in the Fall of 2011.
(2) As of 8/5/11.
Conservative
Financial Strategy
Financial Strategy
(5.4% Yield)(2)
› Commitment to investment grade credit profile
› Consistent history of dividend payments
› Disciplined capital investment program
Visible Growth
Opportunities
Opportunities
› Significant opportunity exists to switch households to natural gas
› Conversions growth plan is in place
› Projected $2.2B (2011-2019) electric & gas capital expenditure plan
› GenConn: cost-of-service electric peaking generation is complete and operating in the ISO-
markets
markets
28
Q&A
29
Appendix
30
* RPS = Renewable Portfolio Standard.
** From ISO-NE Presentation dated 5/15/09 - driven by 2008 data.
*** From ISO-NE Presentation dated 5/25/10 - “existing” includes RPS obligations through 2009. Total RPS Requirement excludes Vermont renewables, combined heat & power, and energy
efficiency obligations.
efficiency obligations.
Region-Wide
Compliance Gap
Compliance Gap
(v. “existing” renewable resources**)
forecasted/estimated at
~ 18,000GWh
Region-Wide RPS Obligation thru 2020:
› Unlikely to be
satisfied by
renewables currently
in the ISO-NE queue
satisfied by
renewables currently
in the ISO-NE queue
› Will require
significant additional
transmission
significant additional
transmission
Satisfaction will likely require significant new transmission in the region.
Region-Wide RPS* Obligations
31
Connecticut RPS Requirements
(Percentage of Retail Load)
Class I resources include energy derived from solar, wind, fuel cell, methane gas from landfills, ocean thermal, wave,
tidal, run-of-river hydropower (<5MW, began operation after July 1, 2003), sustainable biomass (NOx emission <0.075
lbs/MMBtu of heat input)
tidal, run-of-river hydropower (<5MW, began operation after July 1, 2003), sustainable biomass (NOx emission <0.075
lbs/MMBtu of heat input)
Class II resources include other biomass (NOx emission <0.2 lbs/MMBtu of heat input, began operation before July 1,
1998), small run-of-river hydroelectric (<5MW, began operation before July 1, 2003) and municipal solid waste trash-to-
energy facilities
1998), small run-of-river hydroelectric (<5MW, began operation before July 1, 2003) and municipal solid waste trash-to-
energy facilities
Class III include customer-sited combined heat and power (with operating efficiency >50% of facilities installed after
January 1, 2006), waste heat recovery systems (installed on or after April 1, 2007), electricity savings from conservation
and load management programs (began on or after January 1, 2006)
January 1, 2006), waste heat recovery systems (installed on or after April 1, 2007), electricity savings from conservation
and load management programs (began on or after January 1, 2006)
CT RPS Requirements