Louisville Water Company. Utility and Public Works Advisory Group Bond Covenants/Finance/Rates February 8, 2012

Transcription

1 Louisville Water Company Utility and Public Works Advisory Group Bond Covenants/Finance/Rates February 8, 2012

2 Bond Issue New money and advance refunding of $200 million in December Modernized language and modified the dividend calculation with 2009 Master Bond Resolution. Borrowed through 2012 for capital projects and refinanced $80 million in existing debt. Utilized Build American Bond (BABs) program and achieved an interest rate of 3.22% taxable (BABs) and 2.98% taxexempt.

3 Bond Covenants Describes dividend calculation. No special dividend allowed. Allow for risk mitigation reserve with Board and Metro Mayor approval (Operating Reserve) Budget timing and notification processes defined to align with current practices. Conduct Engineering inspection every two years. 3

4 Dividend Process Calendar year with budget presented to BOWW in November of preceding year for approval. Water Rates and Charges (Tariff) approved in December for rate increase effective January 1. Budgeted dividend paid quarterly on last day of quarter following BOWW approval. December dividend paid to Metro based on forecasted year end results. Following annual external audit, dividend adjusted for actual full year results and paid as directed by Metro Chief Financial Officer the next year. 4

5 Accounting Principles LWC is wholly owned by Louisville Metro Government and therefore follows Governmental Accounting Standards. LWC follows accounting principles generally accepted in the United States of America (GAAP). LWC is an Enterprise fund and reports as a Business Type Activity (BTA). BTAs are those activities that are financed in whole or in part by fees charged to external parties for goods and services. Accounts are maintained in accordance with the uniform system of accounts prescribed by the National Association of Regulatory Utility Commissioners. 5

6 Balance Sheet 2011 Draft (unaudited) Total Assets $1,124,000,000 Utility Plant $956,000,000 Cash and Investments $106,000,000 Total Liabilities $324,000,000 Total Debt $277,000,000 Total Net Assets $801,000,000 6

7 Income Statement 2011 Draft (unaudited) Total Revenues $148,000,000 Total Expenses $105,000,000 Non-Operating Income $1,400,000 Non-Operating Expense $9,300,000 Net Income $35,000,000 Dividend $18,000,000 Contributions $6,000,000 Increase in Net Assets $23,000,000 7

8 LWC Operates on a Business Model Louisville Water Company (LWC) benchmarks other utilities in each of the following areas: Debt Service Coverage Earnings O & M costs per customer Capital Improvement Program Water Rates 8

9 2012 Water Rates In 2010, LWC completed a comprehensive cost of service rate study with CDM Smith. Three components of water rates. o Fixed Service Charge o Commodity Charge (per thousand gallons) o Elevated Charge (per thousand gallons) LWC has three main water rate objectives. o Cost of Service o Customer Acceptance o Revenue Stability and Adequacy 9

10 2011 Water Rates $60.00 $50.00 LWC ranked 8th lowest of the 28 utilities surveyed, with a rate of $22.61 compared to an average rate of $31.05, for 6,000 gallons. $40.00 $30.00 Louisville $20.00 $10.00 $0.00 Source: Louisville Water Company 10

11 Economic/Industry Challenges Meeting increased water quality regulations Maintaining aging infrastructure Maintaining affordable rates Managing through difficult economic times, while at the same time being faced with declining water usage due to low flow conservation fixtures. 11

12 Total Average Monthly Consumption per Customer 12

13 Appendix 13

14 Stockholder Equity 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Actual 2011 Estimate Total Equity Capital Beginning of Year $ 345,990,260 $ 362,621,354 $ 384,916,463 $ 406,628,267 $ 427,180,704 $ 450,639,830 Plus Net Income $ 30,689,957 $ 40,626,521 $ 39,242,014 $ 37,416,091 $ 41,508,497 $ 34,819,381 Less Dividends Payable $ 14,058,863 $ 18,331,412 $ 17,530,210 $ 16,863,654 $ 18,049,371 $ 18,009,280 Total Equity Capital End of Year $ 362,621,354 $ 384,916,463 $ 406,628,267 $ 427,180,704 $ 450,639,830 $ 467,449,931 Less Cumulative Deposits to IRR $ 36,103,333 $ 38,553,333 $ 40,053,333 $ 40,053,333 $ 42,053,333 $ 42,053,333 Stockholder Equity Eligible for Return Computation $ 326,518,021 $ 346,363,130 $ 366,574,934 $ 387,127,371 $ 408,586,497 $ 425,396,598 Cumulative Contributions $ 278,850,142 $ 298,567,045 $ 310,529,513 $ 317,877,070 $ 327,420,082 $ 333,245,983 Reconcilement to Net Assets $ 641,471,496 $ 683,483,508 $ 717,157,780 $ 745,057,774 $ 778,059,912 $ 800,695,914 14

15 Return on Equity, Assets, Plant and Profitability 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Actual 2011 Budget Return on Equity (ROE) 9.08% 10.84% 10.30% 9.67% 9.67% 8.96% Return on Assets 3.41% 4.14% 4.03% 3.47% 3.56% 3.35% Return on Net Utility Plant 3.97% 4.79% 4.56% 4.30% 4.30% 3.87% Net Profit Margin 25.98% 28.43% 27.60% 27.55% 26.65% 24.90% Operating Margin 57.48% 58.57% 58.05% 58.62% 60.05% 60.15% 15

16 Dividend and Liquidity 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Actual 2011 Budget Dividend Dividend Payout 47.43% 48.82% 46.45% 45.07% 45.68% 48.49% Total Owner Transfers % Revenue 21.00% 22.37% 21.16% 21.44% 21.09% 21.04% Dividend Yield 4.31% 5.29% 4.78% 4.36% 4.42% 4.34% Liquidity Days of Funded Operations Days of Cash Operations

17 Capitalization and Debt Service 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Actual 2011 Budget Capitalization Debt to Net Utility Plant 26.19% 24.02% 21.72% 33.95% 31.15% 27.93% Debt to Capitalization 37.44% 35.23% 32.92% 43.26% 41.21% 39.23% Debt Service Debt Service Coverage 2.78x 3.02x 2.69x 2.43x 2.30x 2.48x Max Year Debt Service Coverage 2.11x 2.71x 2.63x 1,60x 1.88x 1.93x Debt Service Safety Margin 46.91% 48.21% 46.24% 45.79% 45.35% 46.57% EBITDA/Interest Expense (x) 8.49x 8.66x 8.70x 8.95x 7.36x 7.93x 17

18 Operating Productivity 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Actual 2011 Actual O&M Costs Per Customer $ $ $ $ $ $ Customers excl. fire hydrants 273, , , , , ,135 O&M Costs per Gallons Sold $1, $1, $1, $1, $1, $1, Gallons Sold (000's) 36,978,600 41,071,700 38,709,600 35,796,500 37,997,000 35,655,900 Gallons Sold per Total Customer Residential Gallons Sold per Month

19 Capital Improvement Program 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Actual 2011 Actual Capital Budget $86,529,158 $87,902,259 $108,436,390 $101,327,332 $99,091,784 $83,088,946 Revised Capital Budget $70,340,553 $63,515,111 $70,872,681 $69,522,273 $79,619,571 $65,368,029 % Spent of Original Budget 78.04% 71.26% 62.03% 68.63% 79.04% 78.27% % Spent of Revised Budget 95.99% 98.62% 94.90% % 98.37% 99.49% 19

20 Water Rates and Metered Water 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Actual 2011 Actual 2012 Budget/Goal Annual Average Rate Increase 5.00% 6.50% 6.50% 5.50% 4.50% 3.75% 3.75% Average Monthly Water Bill $17.25 $18.40 $19.78 $20.87 $21.80 $22.62 $23.47 (6000 gallons per month) Metered Water 84.48% 85.02% 82.77% 81.71% 83.17% 82.16% 85.00% 20

21 Questions Amber Halloran Vice President Treasurer Louisville Water Company 550 South Third Street Louisville, KY