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INVESTOR UPDATE – Westar Energy

Westar Energy · Mar 1, 2015 · 63 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. INVESTOR UPDATE – Westar Energy – slide 1
    March 2015 Investor Update
  2. INVESTOR UPDATE – Westar Energy – slide 2
    Pure-play, vertically integrated, regulated electric utility Kansas Largest IOU 700,000 customers 7,200 MW of diversified generation Transmission 100% FERC-regulated 18% of 6.3 billion rate base Constructive regulation Rate Base…
  3. INVESTOR UPDATE – Westar Energy – slide 3
    Approach to Creating Value Embrace uncertainty with flexibility Successful execution of strategy Financial Meet customers energy needs Operational and expectations Regulatory Grow earnings and dividend Value proposition protects…
  4. INVESTOR UPDATE – Westar Energy – slide 4
    Established Record of Delivering Value Outperforming Shareholder Return Growing the Dividend 175% 1.40 1.44 1.40 1.36 150% 1.32 WR XLU 1.30 1.24 1.28 125% 1.20 1.20 100% 1.10 75% 1.00 50% 0.90 25% 0.80 0% 0.70…
  5. INVESTOR UPDATE – Westar Energy – slide 5
    Westar Provides Growth & Income Opportunities 5 year rate base growth focused on transmission 4% overall growth Transmission growing at 10% CAGR Large air quality projects finish in 2015 5 year EPS growth target of 4% 6%* Grows…
  6. INVESTOR UPDATE – Westar Energy – slide 6
    Positioned for Dividend Growth Target 60% - 75% payout Midpoint of 15 guidance implies 61% payout DPS 1.44 Payout ratio 90% 1.40 1.40 60% - 75% 1.36 85% TARGET 1.32 1.28 Annualized dividend per share 1.30 PAYOUT RATIO…
  7. INVESTOR UPDATE – Westar Energy – slide 7
    Compelling Investment Thesis Traditional, regulated utility Constructive regulation Shareholder focused History of meeting / exceeding targets 11 years of increasing dividend TSR of 140% since 2009 significantly exceeds XLU…
  8. INVESTOR UPDATE – Westar Energy – slide 8
    Current Plans March 2015 Investor Update 9
  9. INVESTOR UPDATE – Westar Energy – slide 9
    Current Announcements & Focus Reported 2014 results: 2.40 up 5% 3% Dividend increase 2015 Guidance 2.25 to 2.45 Filed Rate Request, 152 million or 7.9% Introduced 5-Year CapEx Plan March 2015 Investor Update 10
  10. INVESTOR UPDATE – Westar Energy – slide 10
    2015 Earnings Guidance of 2.25 - 2.45 Retail MWh sales up 150 bp Normal rider price adjustments 19 million transmission margin 17 million ECRR 1% decrease in combined nontracked O&M/SGA expenses COLI proceeds 15 million Equity AFUDC…
  11. INVESTOR UPDATE – Westar Energy – slide 11
    Rate Request Summary Rate request -- 152 million increase, 7.9% Filed March 2, 2015 with expected decision late October 2015 Test year: 12 months ended Sept 2014 Includes known and measurable adjustments Proposed rate base --…
  12. INVESTOR UPDATE – Westar Energy – slide 12
    Rate Request Summary (continued) Proposed return based on pro forma cap structure Cap % Cost WACC Pretax WACC Long-term debt 46.55% 5.69% 2.65% 2.65% Common equity 53.45% 10.00% 5.35% 8.84% Total 100.00% 7.99% 11.49% Rate…
  13. INVESTOR UPDATE – Westar Energy – slide 13
    Rate Request Drivers 152 million 48 4 -19 51 68 La Cygne Wolf Creek Distribution Other Lower ROR & Other Plant (dollars in millions) March 2015 Investor Update 14
  14. INVESTOR UPDATE – Westar Energy – slide 14
    2015 Rate Case Schedule Company Files Staff / Interveners Rebuttal Settlement Evidentiary Request File Response Testimony Conference Hearings Decision March 2 July 9 July 29 August 3-7 August 17-21 October 28 Public Hearing…
  15. INVESTOR UPDATE – Westar Energy – slide 15
    Planned Regulatory Calendar 2015 Transmission Delivery Charge (TDC) Environmental Cost Recovery Rider (ECRR) Energy Efficiency Rider (EER) General Rate Case 240 day calendar (Tentative time for illustration purposes) Jan…
  16. INVESTOR UPDATE – Westar Energy – slide 16
    Rate Increases Driven by Energy Policy Annualized revenue 2013 2014 2015 changes (Estimated) Base rates 31 million - 152 million Dec Nov 1 Transmission rates (a) 25 million 44 million 19 million Jan 1 Jan 1 Jan 1 Environmental…
  17. INVESTOR UPDATE – Westar Energy – slide 17
    Cap Ex Provides Growth Platform Method of Actual Cost 2014 2015 2016 2017 2018 2019 2015 - 2019 Recovery Generation 206.7 175.2 181.1 140.9 152.6 208.3 858.1 GRC Environmental Westar 110.6 49.7 11.7 14.5 40.1 9.6 125.6 ECRR / GRC…
  18. INVESTOR UPDATE – Westar Energy – slide 18
    Cap Ex Continues to Provide Growth Platform 900 852 800 776 700 692 671 661 660 600 Millions 500 400 300 200 100 0 2014 2015 2016 2017 2018 2019 FERC / TDC Air Quality - ECRR GRC Depreciation March 2015…
  19. INVESTOR UPDATE – Westar Energy – slide 19
    Strong Investment Growth Coupled With Favorable Mix 7.5 7.2 6.9 6.6 6.3 6.3 1.8 Transmission 1.5 1.7 10% CAGR 1.4 1.1 1.2 Billions 5.1 5.0 5.1 5.3 5.4 5.6 2.5 0.2 2.3 2005 2014 2015 2016 2017 2018 2019 Base Air…
  20. INVESTOR UPDATE – Westar Energy – slide 20
    Profile March 2015 Investor Update 21
  21. INVESTOR UPDATE – Westar Energy – slide 21
    Westars All of the Above Energy Supply March 2015 Investor Update 22
  22. INVESTOR UPDATE – Westar Energy – slide 22
    Diverse Supply Benefits Customers Diverse Capacity Optimal Fuel Mix Renewable Renewable 9% 9% Gas Uranium 5% 8% Uranium 15% Coal 48% Coal Gas 71% 35% Average Coupled with Leads to Fuel Cost low cost optimal mix…
  23. INVESTOR UPDATE – Westar Energy – slide 23
    Ahead on RPS Compliance Planned additions achieves 2020 RPS and moves renewables to 14% of generation 1,064 MW of wind 149 MW owned 915 MW PPA 515 MW operating 400 MW under development 5 MW landfill gas PPA Compliance with…
  24. INVESTOR UPDATE – Westar Energy – slide 24
    Renewables Growing Piece of Diverse Generation Mix Current Generation Mix 2016 Planned Generation Mix Renewable Renewable Uranium 9% 14% 8% Uranium Coal 7% Coal 48% 45% 35% Gas Gas 34% March 2015 Investor Update 25
  25. INVESTOR UPDATE – Westar Energy – slide 25
    Diverse Customer Base Consumer manufacturing 15% Aerospace Food 15% processing 18% Residential Industrial 34% 28% 16% Other 36% Chemical & oil Other 48% General merchandise 7% Commercial 8% 38% Health care 7%…
  26. INVESTOR UPDATE – Westar Energy – slide 26
    Strong Local Economy Economy stronger than Low Unemployment 8% U.S. KS the nation 7% State unemployment favorable to nation 6% Returning growth 5% Growth across sectors 4% Topeka is one of Americas Top 10 most affordable…
  27. INVESTOR UPDATE – Westar Energy – slide 27
    Strong Balance Sheet and Liquidity Target 50/50 capital structure Modest bond maturities ( in millions) 400 300 200 Equity Debt 100 3.1B 3.2B 0 2015 2016 2017 2018 2019 Total credit facility capacity of 1 billion Dec 14…
  28. INVESTOR UPDATE – Westar Energy – slide 28
    Disciplined Cost Management 2% CAGR on nontracked expenses Revenue tracked items SPP transmission Property tax Pension and tree trimming 1,000 900 Expenses covered by revenue offsets/ 800 deferred accounting 700…
  29. INVESTOR UPDATE – Westar Energy – slide 29
    Focused Safety Performance Generation 30 30 OSHA Recordable Injuries 25 25 23 20 18 15 15 12 11 10 9 10 8 7 5 5 5 5 1 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010…
  30. INVESTOR UPDATE – Westar Energy – slide 30
    Transmission March 2015 Investor Update 31
  31. INVESTOR UPDATE – Westar Energy – slide 31
    Transmission Remains Catalyst for Growth 350 2.5 300 2.0 250 Cumulative Annual (Millions) (Billions) 1.5 200 150 1.0 100 0.5 50 0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E…
  32. INVESTOR UPDATE – Westar Energy – slide 32
    Order 1000 Proposed Timeframe Overview 2014 NT & 10-Year Needs Assessment SPP Staff Analysis NT & 10- TOs Year Final Propose Project List Projects Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 SPP SPP Board IEP…
  33. INVESTOR UPDATE – Westar Energy – slide 33
    Order 1000 - Project Identification Process SPP staff prepares Needs assessment Stakeholders propose projects to address needs SPP staff analyzes proposed projects and selects projects for final list SPP Board approves final…
  34. INVESTOR UPDATE – Westar Energy – slide 34
    Order 1000 Project Categories Competitive transmission projects Identified through the Integrated Transmission Planning (ITP) process Identified by a high priority study Identified by requests for Transmission Service Nominal…
  35. INVESTOR UPDATE – Westar Energy – slide 35
    Order 1000 Qualified RFP Participant (QRP) Issuer credit rating BBB- Expertise Transmission project development Internal safety program Transmission operations NERC compliance process and history Storm / outage response and…
  36. INVESTOR UPDATE – Westar Energy – slide 36
    Expanding Transmission Opportunities March 2015 Investor Update 37
  37. INVESTOR UPDATE – Westar Energy – slide 37
    Environmental March 2015 Investor Update 38
  38. INVESTOR UPDATE – Westar Energy – slide 38
    Winding Down Air Quality Investments 400 350 2.0 300 1.5 Cumulative Annual 250 (Millions) (Billions) 200 1.0 150 100 0.5 50 0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E…
  39. INVESTOR UPDATE – Westar Energy – slide 39
    Dramatic Improvements in Air Quality 120,000 100,000 Sulfur Dioxide 80,000 60,000 40,000 (tons) 86% 20,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 70,000 60,000 50,000 Nitrogen Oxide 40,000 30,000 (tons)…
  40. INVESTOR UPDATE – Westar Energy – slide 40
    Status of Coal Fleet Air Quality Controls 94% of MWs currently scrubbed Unit Scrubber Precipitator Fabric Filter Low Nox SCR/SNCR ACI DSI Jeffrey 1 Yes Yes No plans Yes SCR Yes (a) n/a Jeffrey 2 Yes Yes No plans Yes SNCR Yes (a) n/a…
  41. INVESTOR UPDATE – Westar Energy – slide 41
    Environmental Regulation Summary SO2 National Mercury and Coal Cross-State Air Ambient Air Air Toxics Water 316(b) Combustion Pollution Rule Quality Standards Waste Standard DC Circuit Court Final Rule Final Rule Final Rule…
  42. INVESTOR UPDATE – Westar Energy – slide 42
    Air Quality Controls Air Quality Control Targeted Emission / Benefit Low NOx Burner Systems NOx Selective Non-Catalytic Reduction NOx Selective Catalytic Reduction NOx SO2 Scrubber Acid gases Small amount of mercury Particulate matter…
  43. INVESTOR UPDATE – Westar Energy – slide 43
    Rates and Regulation March 2015 Investor Update 44
  44. INVESTOR UPDATE – Westar Energy – slide 44
    Kansas Regulators Kansas Corporation Commission Three-member board appointed by governor Serve staggered four year terms Shari Feist Albrecht (I), chair Term expires March 2016 Jay Emler (R) Term expires March 2015 Pat…
  45. INVESTOR UPDATE – Westar Energy – slide 45
    Constructive Regulation Formulas and riders result in lower ultimate prices Ultimately, Less frequent rate cases lower rates coupled with riders Price More frequent rate cases with no riders Time March 2015…
  46. INVESTOR UPDATE – Westar Energy – slide 46
    Solid Regulatory Construct Revenue Requirement Method of Recovery Comment 1 Fuel, purchased power and Quarterly adjustment based on Adjusts prices for actual costs, environmental . consumables forecasted cost, with annual true-up…
  47. INVESTOR UPDATE – Westar Energy – slide 47
    Retail Energy Cost Adjustment (RECA) Provides timely adjustments for fuel and purchased power Fuel rates based on forecast costs Set quarterly Difference between forecast and actual deferred Annual settlement of deferred…
  48. INVESTOR UPDATE – Westar Energy – slide 48
    Pension Tracker Defer as regulatory asset shortfall between funding of GAAP pension/OPEB expense and pension/OPEB currently authorized in rates Maintain minimum funding level equal to GAAP pension/OPEB expense Recover deferred…
  49. INVESTOR UPDATE – Westar Energy – slide 49
    Environmental Cost Recovery Rider Mechanics ECRR adjusts retail rates annually to reflect capital investments in emission controls Investments as of December 31 recovered in rates subsequent June Eliminates need to file a rate case to…
  50. INVESTOR UPDATE – Westar Energy – slide 50
    Transmission Cost Recovery FERC formula transmission rate Changes in cost of service reflected in annual update of FERC tariff Update posted each October using projected test year Capital expenditures O&M Tariff based on year-end…
  51. INVESTOR UPDATE – Westar Energy – slide 51
    Transmission Formula Rate Mechanics Fixed formula with changing inputs Updated annually using Form 1 data Established protocols for updates Uses projected test year Rate base (based on 13 month average) O&M, depreciation and…
  52. INVESTOR UPDATE – Westar Energy – slide 52
    Customer Programs and Digital Meters Customer Programs and Services Westar Home Services Business Energy Advisor SmartBuilt Home Builders Building Operator Certification Wattsaver Pay as You Go Smart grid efforts 120,000…
  53. INVESTOR UPDATE – Westar Energy – slide 53
    Net Metering in Kansas Limited to 1% of peak demand 275 customers Represents 3,400 MWh 2014 Statute Revisions Lower maximum size of customer generating systems Pricing Net generation usage credited at retail rate Excess…
  54. INVESTOR UPDATE – Westar Energy – slide 54
    Abbreviated (Limited Scope) Rate Case (ARC) Reduces cost, complexity and regulatory lag Obtain permission from KCC to file ARC Request made in a general rate case (GRC) Identify scope of proposed ARC Must file within 12 months…
  55. INVESTOR UPDATE – Westar Energy – slide 55
    Kansas Renewable Requirements Renewable Portfolio Standard established Installed capability standard in lieu of energy standard 10% of peak load by 2011, 15% by 2016 and 20% after 2020 If generated in Kansas, treated at 110% of…
  56. INVESTOR UPDATE – Westar Energy – slide 56
    Law Assures Predetermination and CWIP Recovery Predetermination Utilities can obtain order establishing ratemaking principles that will apply over the life of the asset Prevents second guessing after the fact Construction Work in…
  57. INVESTOR UPDATE – Westar Energy – slide 57
    Capital Structure for Ratemaking KCC Capitalization Cost of Capital Weighted Cost Pre-tax Weighted Ratio of Capital Cost of Capital Long-term debt 46.97% 6.65% 3.12% 3.12% Preferred 0.40 4.55 0.02 0.03 Common 52.63 10.00 5.26 8.71…
  58. INVESTOR UPDATE – Westar Energy – slide 58
    Background March 2015 Investor Update 59
  59. INVESTOR UPDATE – Westar Energy – slide 59
    Westar Energy Legal Structure Parent Westar Energy, Inc. (Rate regulated utility) Combined company Consolidated capital does business under structure is used for the name Westar ratemaking Energy Subsidiary Kansas Gas and…
  60. INVESTOR UPDATE – Westar Energy – slide 60
    Generating Fleet Westar's Pulverized coal MW Operator Years Installed Plant Performance Jeffrey Energy Center 1,983 Westar 1978, 1980, 1983 Lawrence Energy Center 522 Westar 1954, 1960, 1971 Tecumseh Energy Center 202 Westar 1957,…
  61. INVESTOR UPDATE – Westar Energy – slide 61
    Low-Cost Coal Fleet Embedded Cost 1,800 1,500 Very low fuel cost 1,200 /KW 900 Delivered PRB coal currently less than 600 half the cost of natural gas 300 Excellent rail arrangements 0 JEC JEC JEC LEC LAC LAC TEC LEC TEC…
  62. INVESTOR UPDATE – Westar Energy – slide 62
    Coal Fleet Net Book Capacity WR Share Heat Rate Availability Value Unit (MW) (MW) Age (Btu/kWh) Factor (Millions) /KW Jeffrey 3 722 664 32 11,241 80% 320 482 Jeffrey 2 715 658 35 11,105 75% 281 427 Jeffrey 1 718 661 37 11,171 60% 474…
  63. INVESTOR UPDATE – Westar Energy – slide 63
    Coal Supply Westar-operated plant fuel supply (80%) JEC supply under contract through 2020(10+ million tons/year) 45% has no market openers 55% reopened on price every 5 years - Most recent re-pricing effective January 2013 All…

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