Attached files
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| 8-K - UIL HOLDINGS CORPORATION 8-K 11-3-2011 - UIL HOLDINGS CORP | form8-k.htm |
| EX-99 - EXHIBIT 99 - UIL HOLDINGS CORP | ex99.htm |
3Q ‘11 Earnings Conference Call
November 4, 2011
Exhibit 99.1
2
3Q ’11 Earnings
James P. Torgerson
President and Chief Executive Officer
Richard J. Nicholas
Executive Vice President and Chief Financial 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
3Q ’11 Earnings
3Q & YTD 2011 Highlights
YTD ’11 consolidated earnings of $78.4M was $34M higher than YTD ’10,
primarily due to net income from the gas companies
primarily due to net income from the gas companies
3Q ’11 consolidated earnings of $12.2M were $4.8M lower than 3Q ’10, primarily
due to mark to market and tax rate adjustments
due to mark to market and tax rate adjustments
Ø These non-operational charges were partially offset by an increase in income from
GenConn
GenConn
First full quarter in which both GenConn plants were in operation
Gas integration progressing on schedule - substantially exited Transition Services
Agreement with Iberdrola USA as of the end of September
Agreement with Iberdrola USA as of the end of September
Tropical Storm Irene caused damage to UI’s electric distribution system, causing
approximately 50% of UI’s customers to lose power
approximately 50% of UI’s customers to lose power
Ø UIL team and mutual assistance crews from around the country repaired the system and
power was restored to 99.8% of UI’s customers within one week
power was restored to 99.8% of UI’s customers within one week
Ø As of 9/30/11, the cost estimate was approximately $20M, of which approximately $4M
has been capitalized
has been capitalized
› Expects to seek recovery in future rate proceedings
4
3Q ’11 Earnings
Gas Conversions
Momentum of interest in conversions increasing as heating season begins
Ø Direct mail marketing deployed in October to increase customers’ awareness of conversion
benefits
benefits
Ø Financing options are being expanded to assist customers with up-front conversion costs
Approximately 6,800 customer(1) additions in 2010
Ø Targeting 30,000-35,000 additional gas heating customers over the next 3 years
› ’11 - approximately 25% increase over ‘10 levels
› ’12 - approximately 50% increase over ’10 levels
Ø YTD 9/30/11, there were 4,129 conversions, compared to 3,654 conversions for YTD 9/30/10
Through September, residential conversions are 13% ahead of 2010 levels
New residential customers are anticipated to generate approximately $280-$315 of
distribution net operating income per customer
distribution net operating income per customer
(1) Residential and commercial
5
3Q ’11 Earnings
GenConn Energy
50/50 Joint Venture between UI and NRG
Middletown
Devon
Both GenConn Middletown & Devon are
now operating in the ISO-New England
(ISO-NE) markets
now operating in the ISO-New England
(ISO-NE) markets
Ø UIL reported pre-tax income of $3.5M and
$8.2M in the 3Q and first nine months of
’11, respectively
$8.2M in the 3Q and first nine months of
’11, respectively
6
3Q ’11 Earnings
Ø Final decision by CT PURA approving CNG & SCG
settlement of rate case appeals was issued on 8/3/11
(DN 08-12-06RE02 & DN 08-12-07RE02)
settlement of rate case appeals was issued on 8/3/11
(DN 08-12-06RE02 & DN 08-12-07RE02)
› Resolves all pending issues related to the rate case
appeals
appeals
› Removes the 10 basis point ROE penalty for
monitoring
monitoring
› Authorized ROEs going forward: CNG - 9.41%,
SCG - 9.36%
SCG - 9.36%
› Terminates the SCG potential overearnings
investigation
investigation
› Companies are allowed to recover carrying
charges on the interim rate decrease amounts over-
credited to customers during the stay of the rate
case decisions (since 2009)
charges on the interim rate decrease amounts over-
credited to customers during the stay of the rate
case decisions (since 2009)
› Approximately $3.7M to be recovered and
collected over the next two non-winter periods,
collected over the next two non-winter periods,
$2.2M booked to earnings in 3Q ’11
Regulatory Update
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SCG Potential Overearnings
Generic ROE Proceeding
UI Electric Decoupling
SCG/CNG Rate Case Appeals
PURA schedule has not been updated
Ø Final decision issued on 8/31/11 (DN 08-07-04RE03)
› Approved decoupling credit of $1.4M for ‘10 rate year
› Allows decoupling mechanism to continue until next
general rate case proceeding
general rate case proceeding
GenConn ’12 Revenue Requirement
Ø Annual revenue requirement filed with CT PURA on
7/29/11 (DN 11-07-12)
7/29/11 (DN 11-07-12)
› Requesting approximately $78M for the period
commencing 1/1/12 - 12/31/12
commencing 1/1/12 - 12/31/12
› Draft decision expected 12/7/11
› Final decision expected 12/21/11
7
3Q ’11 Earnings
Regulatory Update - continued
Transmission ROE
Utility Company Storm Response Docket
Ø Several New England governmental entities have filed a
complaint with FERC regarding the base return on equity
for transmission investments
complaint with FERC regarding the base return on equity
for transmission investments
› Claim that the current approved base ROE on
transmission investments of 11.14% is not just and
reasonable and are seeking a reduction of the base
transmission investments of 11.14% is not just and
reasonable and are seeking a reduction of the base
ROE to 9.20%
Ø Investigation of the service response and communications of
utilities in CT following Tropical Storm Irene (DN 11-09-09)
utilities in CT following Tropical Storm Irene (DN 11-09-09)
Electric Distribution Rate Case
Ø Evaluating timing of distribution rate case to reflect
significant investments in distribution infrastructure
significant investments in distribution infrastructure
8
3Q ’11 Earnings
Governmental Update
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Implementation of Public Act 11-80
Ø Department of Energy & Environmental Protection (DEEP) was created
Ø Former DPUC has become the Public Utilities Regulatory Authority (PURA)
› Change from 5 DPUC commissioners to three PURA directors
§ Kevin DelGobbo (former DPUC chair), John Betkoski and Anna Ficeto
Ø Allows each electric distribution company to develop and own up to 10 MW renewable
source generation
source generation
Post-Storm Irene Investigations
Ø Participated in two legislative hearings
Ø Governor Malloy established a State Team Organized for the Review of Management of
Irene (S.T.O.R.M. Irene) assessment team
Irene (S.T.O.R.M. Irene) assessment team
Low Income Home Energy Assistance Program (LIHEAP)
Ø Anticipate significant reductions in funds available for home energy assistance
programs
programs
Next Legislative Session February-May ‘12
9
3Q ’11 Earnings
Economic Update
Economic recovery has been extremely slow over the past 2 years
Ø September - moving primarily sideways with a slight downside bias
CT labor markets are now slightly lagging the national average
Seasonally adjusted unemployment rate as of September 2011
Ø CT - 8.9%
Ø MA - 7.3%
Ø National - 9.1%
Unemployment rates in largest cities in our territory (as of August 2011)
Ø Bridgeport - 8.3%
Ø New Haven - 9.4%
Ø Hartford - 9.0%
Source: U.S. Bureau of Labor Statistics
10
3Q ’11 Earnings
3Q & YTD 2011 Financial Results by Business
Net Income ($M)
Net Income ($M)
3Q ’11 vs. 3Q ’10
YTD ‘11 vs. YTD
’10
’10
11
3Q ’11 Earnings
3Q & YTD 2011 Financial Results - Details
Electric distribution, CTA, GenConn & Other
Ø 1% increase in net income YTD, 3Q was lower primarily due to mark to market & effective tax rate
adjustments, offset by GenConn earnings
adjustments, offset by GenConn earnings
› The mark to market & effective tax rate adjustments reduced net income by $2.3M & $3.4M for the
3Q & nine months of ’11, respectively
› GenConn contributed to UIL pre-tax income of $3.5M & $8.2M for the 3Q & first nine months of
’11, respectively
’11, respectively
Ø Average D & CTA ROE as of 9/30/11: 9.63%
Electric transmission
Ø 19% increase in net income for the quarter & YTD
› Increase attributable to an increase in the allowance for funds used during construction due to
increased CWIP
increased CWIP
Gas Distribution
Ø YTD income of $29.7M , 3Q loss of $6.2M due to seasonality of earnings
Ø YTD - colder than normal winter season in New England in ’11
Ø Recovered approximately $2.2M pre-tax of carrying charges in the 3Q ’11 on interim rate
decrease amounts over-credited to customers during stay of rate case decisions
decrease amounts over-credited to customers during stay of rate case decisions
› Recovery of carrying charges will continue until the outstanding surcharge balance is exhausted
Ø Preliminary average ROE as of 9/30/11: SCG 8.30-8.40%, CNG 8.90-9.00%
Corporate
Ø YTD after-tax costs of $9.4M, a decrease of $0.1M compared to ’10
Ø After-tax costs of $2.3M in the 3Q, a decrease of $2M compared to 3Q ’10
Ø The decrease for the quarter & YTD was primarily attributable to the absence in ’11 of after-tax
acquisition related costs that occurred in the 3Q ’10, partially offset by the interest expense related to
the October ‘10 issuance of $450M of public debt
acquisition related costs that occurred in the 3Q ’10, partially offset by the interest expense related to
the October ‘10 issuance of $450M of public debt
Ø Interest expense on the $450M of public debt was $3.2M & $9.5M for the 3Q and first nine
months of ’11, respectively
months of ’11, respectively
12
3Q ’11 Earnings
Increased ‘11 Earnings Expectations
Current Assumptions
Ø Electric distribution, CTA & Other and Gas distribution ranges were narrowed reflecting year-to-date performance
Ø GenConn expected to earn $0.12-$0.14 per share
Ø UIL Corporate was reduced to reflect tax savings resulting from the deductibility of certain gas company acquisition costs
‘12 earnings expectations will be discussed on the
4Q ‘11 earnings call
4Q ‘11 earnings call
Q&A