Board of Directors Meeting. December 7, 2017

Transcription

1 Board of Directors Meeting December 7, 2017

2 2018 Annual Budget December 7, 2017

3 Agenda Recap new sections in budget document Budget changes since October Financial impact Final results Highlights 2017 Budget to 2018 Budget

4 Collaboration Working together toward shared goals. Customer Information System Environmental Services Efficiency Works Demand Response Electric Vehicles Distributed Energy Distribution System Maintenance Renewable Supply Options SCADA Services Customized Resource Plan Engineering Services Zero Net Carbon Model Substation Security Community Relations & Communications Salary Survey Rates Framework NERC Compliance Headquarters Campus Project Disaster Recovery Fiber Optics Organized Energy Market Regional Water Exchange & Storage Joint Technical Advisory Committee Beyond traditional generation and transmission services. Other new sections: Strategic Initiatives Key Goals and Activities

5 Budget Changes Since October Operating Expenses $378K Contracted Services & Materials $333K Drain and clean the storm water holding basin to restore capacity. Replace four pulverizer/coal mill doors. Salaries $45K Opportunity arose to hire a high performing accounting intern in a new staff accountant position. Removed contracted services for hiring temporary assistance in the accounting department. Other minor adjustments were also made to salaries. Capital Additions $74K Cyber security controls project added. Partially offset by reduction to gas yard controls project and removal of skid steer replacement Annual Budget

6 Financial Impact $ in Thousands October Proposed Budget* O&M Net Increase Capital Increase Favorable (Unfavorable) Changes Final Budget Revenues Sales to Municipalities $ 197,016 $ - $ 197,016 Sales for Resale 23,476-23,476 Interest and Other Income 3,049-3,049 Total Revenues $ 223,541 $ - $ 223,541 Operating Expenses Purchased Power $ 34,525 $ - $ 34,525 Fuel 49,654 - $ 49,654 Production 44,861 $ (333) (333) $ 45,194 Transmission 17,199 - $ 17,199 Administrative and General 25,367 (45) (45) $ 25,412 Total Operating Expenses $ 171,606 $ (378) $ (378) $ 171,984 Debt Expenses $ 20,785 $ - $ 20,785 Capital Additions Production $ 42,066 $ (74) $ (74) $ 42,140 Transmission 3,274-3,274 General 15,300-15,300 Total Capital Additions $ 60,640 $ (74) $ (74) $ 60,714 Total Expenditures $ 253,031 $ (378) $ (74) $ (452) $ 253,483 Contingency Appropriation $ 23,000 $ 23,000 Total Expenditures and Contingency $ 276,031 $ (378) $ (74) $ (452) $ 276,483 Net Income $ 22,991 $ (378) $ (378) $ 22,613 *Small rounding adjustments were made to reconcile to final budget results Annual Budget

7 2018 Annual Budget Final 2018 Budget Results Budget Results ($ millions) 2018 Budget Total Revenues $ Total Expenditures $ Board Contingency $ 23.0 Strategic Financial Plan Indicators Target 2018 Minimums Budget Net Income ($ millions) $ 6.0 $ 22.6 Debt Service Coverage 1.50x 2.48x Debt to Capitalization Ratio < 50% 35% Unrestricted Days Cash on Hand Rate Increase 2%

8 Highlights 2017 Budget to 2018 Budget Ongoing operations & maintenance controlled Capital investments $28M w/o outage Debt financing $95M Rawhide outage $45.6M maintenance & capital Surplus sales $0.2M increase DSM expansion $2.2M increase $7.9M total 2018 Budget $276.5M 2% Tariff 1 rate increase $3.7M increase Positioned to meet Platte River s strategic direction Annual Budget

9 Questions

10 Board of Directors Meeting December 7, 2017

11 PLATTE RIVER POWER AUTHORITY NEW HEADQUARTERS CAMPUS Board of Directors Meeting 11 DECEMBER 7, 2017

12 AGENDA Headquarters Campus Project Activity Update Current Project Processes Cost Model Summary Site Development Renderings Next Steps 12

13 CURRENTPROJECT PROCESSES Completed Design Development pricing to confirm construction budget. Comprehensive design review discussions with Sr Leadership on direction is ongoing. Detailed site engineering in process. Headquarters building size, structure, systems, and finishes continue to be refined. Substation and Fleet Maintenance buildings scope, cost, and schedule being reviewed. Fort Collins development review schedule being drafted in conjunction with City staff. Platte River soft cost, FF&E, specialty equipment & systems budgets being validated. 13

14 COST MODEL SUMMARY 14

15 SITE DEVELOPMENT 15

16 RENDERINGS 16

17 RENDERINGS 17

18 RENDERINGS MAIN ENTRY 18

19 RENDERINGS MAIN ENTRY 19

20 RENDERINGS 20

21 RENDERINGS 21

22 COST REDUCTION STRATEGIES HQ: Electrical supply generator redundancy. HQ: Modify HVAC system. HQ: Simplify building exterior enclosure (skin). HQ: Simplify building structure (also changes interior aesthetics). HQ: Remove 2,100 square feet of discretionary circulation space. HQ: Remove 5,000 square feet of discretionary space (office/cubicle sizes, training room sizes/spaces, entry foyer, fitness area, etc.). HQ: Adjust interior finishes. HQ: Replace interior sliding glass doors and walls (mainly in conference rooms) with standard doors and side lights. Site development: Simplify and compact site design. Accomplished lower price. COST REDUCTIONS UP TO $5.5 MILLION 22

23 NEXT STEPS Dec. BOD Meeting Budget Approval Feb. BOD Meeting Construction Documents & Site Phasing March. BOD Meeting Site Mobilization 23

24 QUESTIONS? 24

25 Board of Directors Meeting December 7, 2017

26 Strategic Financial Plan Revisions December 7, 2017

27 Discussion Topics Strategic Financial Plan (SFP) background SFP revision purpose and proposals Next steps

28 SFP Background

29 Current Strategic Financial Plan Board adopted through separate resolution (4/2012) Included in the annual Strategic Plan Financial metric targets Cash flow, liquidity, leverage, earnings Targets established with the intent of maintaining a AA credit Reviewed with the Board annually during rates discussions Financial metrics are established and evaluated on an annual basis Multi-year performance is considered during the evaluation of rate action and decision making.

30 What the Strategic Financial Plan is SFP Goals Long-term financial sustainability Manage financial risk SFP Priorities Support Mission, Vision, and Values Asset and Risk Management Rate requirements and practices Financial metrics Policy compliance Best practices Legal requirements Rate smoothing Cash flows, Liquidity, Leverage, Earnings

31 SFP Revision Purpose and Proposals

32 SFP Revision Purpose Ensure alignment with long-term organizational values and resource planning objectives Increase transparency Increase the emphasis placed on financial metrics ensuring the plan is measurable and verifiable Update metrics in consideration of rating agency guidelines Remove references to other Board approved policies Eliminates unnecessary dependencies among separate Board actions

33 Moody s Investors Service Source: Moody s Investors Service, Rating Methodology US Municipal Joint Action Agencies

34 PROPOSED UPDATE CURRENT SFP RESOLUTION Generate minimum 1.50 fixed obligation charge coverage ratio Generate minimum debt service coverage of 1.50 times Generate minimum net income equal to 3 percent of projected annual operating expenses Generate minimum net income of $6 million Target debt ratio less than 50 percent Target debt-to-capitalization less than 50 percent Target minimum 200 days of unrestricted cash-on-hand Target minimum 200 days of unrestricted cash-on-hand

35 = NNNNNN OOOOOOOOOOOOOOOOOO RRRRRRRRRRRRRRRR + IIIIIIIIIIIIIIII OOOOOOOOO IIIIIIIIIIII DDDDDDDD LLLLLLLL OOOOOOOOOOOOOOOOOOOOOO NNNNNN RRRRRRRRRRRRRR BBBBBBBB SSSSSSSSSSSSSS + DDDDDDDD LLLLLLLL OOOOOOOOOOOOOOOOOOOOOO Replaces 1.5x Debt Service Coverage (DSCR) target Measure of cash flow Fixed Obligation Charge Coverage Ratio (FOCCR) includes off balance sheet financings which more accurately represents cash flow requirements to meet debt obligations than DSCR FOCCR and target are consistent with rating agency guidelines Legal minimum 1.10 DSCR will be achieved by achieving FOCCR target

36 = TTTTTTTTTT OOOOOOOOOOOOOOOOOO RRRRRRRRRRRRRRRR TTTTTTTTTT OOOOOOOOOOOOOOOOOO EEEEEEEEEEEEEEEE + NNNNNN OOOOOOOOOOOOOOOOOO RRRRRRRRRRRRRRRR (EEEEEEEEEEEEEEEE) Replaces minimum net income of $6 million Measure of earnings Using a percent of operating expenses, instead of a fixed dollar target, allows for target to change over time with inflation and operational changes Three percent provides a longterm balance with leverage targets MILLIONS $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $- Net Income: SFP Targets Rating agencies do not provide specific guidelines for earnings Proposed SFP Current SFP

37 = LLLLLLLL TTTTTTTT DDDDDDDD, NNNNNN TTTTTTTTTT EEEEEEEEEEEEEEEE UUUUUUUUUUUUUU PPPPPPPPPP + NNNNNN WWWWWWWWWWWWWW CCCCCCCCCCCCCC Replaces Debt to Capitalization Ratio less than 50 percent Measure of leverage Debt ratio and target are consistent with rating agency guidelines

38 = CCCCCCC BBBBBBBB RRRRRRRRRRRRRRRR RRRRRRRRRRRRRRRR OOOOOOOOOOOOOOOOOO EEEEEEEEEEEEEEEE xx 365 DDDDDDDD Target remains unchanged Measure of liquidity 200 days unrestricted cash is consistent with rating agency guidelines Included in the days cash target is the rate stabilization fund

39 The Rate Stabilization Fund is included in the 200 days unrestricted cash on hand Rate Stabilization Fund Purpose Reduce or eliminate the rate impact due to an unforeseen event that affects Platte River s ability to meet the minimum legal DSCR requirement. Not to smooth the rate impacts of typical business operations Proposed removing $20 million target from the SFP Analysis and recommended funding outside the SFP Contributions approved through budget process Withdrawals communicated to the Board No business advantage to lowering fund balance and is view favorably by the rating agencies

40 SFP Revision Rate Impact SFP revisions applied to August 2017 rate projections $/MWh Compared to Current SFP minimum rate projections: Identical until % higher in % higher in /2017: Recommendation 2.0% ( ) 2.8% ( ) 8/2017: SFP Minimum Proposed SFP Minimum: Net Income 3% of Operating Expenses

41 Next Steps Present SFP proposed revisions December Board Meeting December and January Board feedback Request formal adoption of SFP through resolution February Board Meeting

42 Questions

43 Board of Directors Meeting December 7, 2017

44 Wind Purchase Update December 7, 2017

45 Platte River Wind RFP Timeline Issued RFP for wind proposals Board Executive Session Sent out initial draft PPA to preferred developer(s) Completed congestion analysis & developed transmission approval timeline Inform Board of preferred option Negotiate Final PPA Execute final PPA(s) 6/6/17 10/26/17 11/15/17 12/1/17 12/7/17 12/20/17 1/15/18

46 Preferred Proposal Roundhouse Renewable Energy (Enyo) Roundhouse Located on Duck Creek Ranch in southern Wyoming / northern Colorado Purchase 150 MW from about Dec 1, 2020 through May 31, 2042 No third party transmission service or congestion risk Requires miles of transmission line construction to the Rawhide Substation Review transmission easement options Slightly lower price available if we extend transmission line into Wyoming and construct all turbines in Wyoming

47 Enyo Wind Project

48 Preferred Proposal Roundhouse Renewable Energy (Enyo) Roundhouse Located on Duck Creek Ranch in southern Wyoming / northern Colorado Annual output 600,000 MWh per year Annual capacity factor 45.7% Platte River will serve 48% of member load with carbon free resources in 2021, compared to 30% carbon free today

49 Key Terms of PPA Development Milestones April 2018 July 2019 July 2019 January 2020 June 2020 Enyo will provide communication plan for permitting transmission project Enyo will execute necessary easements and leases Enyo will execute generator interconnection agreement Enyo will obtain all permits to construct and operate wind turbines and transmission line Issue a full notice to construct the project

50 Key Terms of PPA (cont d) Platte River will have the option to purchase the transmission line after 5 years Platte River will have the right to curtail wind output Platte River will have the Right of First Offer to purchase the wind project if Enyo decides to sell Enyo will not have the right to deliver additional output into the Rawhide Substation without Platte River s approval

51 Risk Management With new wind resources, Platte River will be more active in managing additional volumes, requiring additional risk management: RTO should accommodate more market sales Use bilateral markets to manage excess wind, sometimes at prices lower than market Pursue monthly or even yearly long-term sales agreement(s) to effectively reduce Platte River s Craig or Rawhide minimum output levels Exercise wind curtailments economically Increase operational flexibility

52 Project Risks Higher wind penetration in the region may result in even lower market prices Must sell surplus wind energy in the market when Craig and Rawhide are at minimum output Greater load following of wind resources could increase Operational and Maintenance costs at Rawhide and Craig New transmission line to Rawhide could result in third party use of excess Platte River transmission system capacity Developer fails to timely secure necessary approvals to proceed with the project

53 Financial Impact: 150 MW Wind PPA Millions Net Savings (Costs): RTO vs Non-RTO $14 $12 $10 $8 $6 $4 $2 $- $(2) $(4) RTO, Base Market Projections RTO, Low Market Projections Non-RTO, Low Market Projections Projected long-term financial benefit from increased sale, reduced operating expenses Financial benefit greater in an RTO (avoided integration costs) Projected Rate Savings *2021: (0.9%) to 1.7% 2025: 0.5% to 3.7% 2030: 2.4% to 5.1% *2021 reflective of current market. Actual savings dependent on market

54 Financial Impact: 225 MW Wind PPA Millions Net Savings (Costs): RTO vs Non-RTO $20 $15 $10 $5 $- $(5) $(10) RTO, Base Market Projections RTO, Low Market Projections Non-RTO, Low Market Projections Projected long-term financial benefit from increased sale, reduced operating expenses Financial benefit greater in an RTO (avoided integration costs) Projected Rate Savings *2021: (3.6%) to 1.9% 2025: (1.6%) to 4.9% 2030: 1.2% to 6.9% *2021 reflective of current market. Actual savings dependent on market

55 Recommendations Proceed to finalize negotiations with Roundhouse Renewable Energy LLC ( Enyo ) and execute PPA for 150 MW of nameplate wind consistent with terms defined herein An additional 75 MW of wind, for a total of 225 MW, is still being evaluated to assist our members in meeting their customer s energy goals

56 Questions?

57 Board of Directors Meeting December 7, 2017

58 October Operational Results Category October Variance YTD Variance Municipal Demand (2.0%) (0.9%) Municipal Energy (1.6%) (1.5%) Baseload Generation (10.7%) (2.8%) Wind Generation 13.1% (3.2%) Solar Generation (4.3%) (8.6%) Surplus Sales Volume (3.7%) 9.5% Surplus Sales Price (11.0%) (4.9%) Dispatch Cost 1.9% (0.9%) Variance Key: Favorable: >2% Near budget: +/- 2% Unfavorable: <-2%

59 Board of Directors Meeting December 7, 2017

60 Financial Summary Category October Variance from Budget ($ in millions) Year to Date Variance from Budget ($ in millions) Net Income ($0.1) $5.3 Debt Coverage (.03x).23x Revenues ($0.1) ($1.3) Operating Expenses $ - $6.0 Capital Additions ($0.5) $15.8 > 2% Favorable 2% to -2% At or Near Budget < -2% Unfavorable

61 Board of Directors Meeting December 7, 2017