COURSE UTILITY COST OF CAPITAL January 29, 2018 EUCI Conference Center Denver, CO TAG US #EUCIEvents FOLLOW US @EUCIEvents EUCI is authorized by IACET to offer 0.8 CEUs for the course
OVERVIEW This one-day course will lead participants through various financial elements involved in cost of capital determination such as risk and return, credit ratings, financial ratios and models, and capital structure. The knowledge of basic financial concepts, relationships, and models would enable participants to better understand how authorized rate of return is set. Training materials will be provided. LEARNING OUTCOMES Examine Ratemaking Issues Discuss Cost of Debt Define Debt Ratings and Financial Ratios Discuss Cost of Common Stocks Discuss Models for Estimating Cost of Equity Discuss Capital Structure COURSE INSTRUCTOR Maryam Ghadessi Senior Analyst at California Public Utilities Commission Maryam Ghadessi has been working at the California Public Utilities Commission (CPUC) since 2000. At the CPUC, she has prepared written testimony and recommendations and testified in a number of Cost of Capital proceedings. In addition to working at the CPUC, Maryam Ghadessi has been teaching courses in Finance at San Francisco State University as an adjunct professor. Prior to joining the CPUC, Maryam Ghadessi, for a period of two years, held an assistant professorship position in the Department of Accounting and Finance at Monash University in Australia. At Monash, Maryam Ghadessi was responsible for teaching courses in corporate finance, asset pricing, and financial market structure at undergraduate and graduate levels. Maryam Ghadessi received a Master in Economics from University of New Hampshire and a Ph.D. in Financial Development & Econometrics from University of Utah. PAGE 2
AGENDA 7:30 8:00 am Registration and Continental Breakfast 8:00 8:15 am Course Overview and Introduction Course Objectives Course Organization Course Overview 8:15 9:00 am Ratemaking Process Overview Rate of Return Regulation Governing Legal Standard o Bluefield and Hope Decisions Revenue Requirement Ratemaking Issues o Rate Base - Definitions - Components o Return on Rate Base - Weighted Average Cost of Capital (WACC) - Cost of Debt - Cost of Equity - Capital Structure 9:00 10:00 am Bonds, Debt Ratings and Financial Ratios Bonds Cost of Bonds Bond Rating Quantitative Factors o Pre-tax Interest Coverage o Total Debt to Total Capital o Funds from Operations Interest Coverage o Funds from Operations Debt Qualitative Factors o Bond Contract Terms Other Qualitative Factors 10:00 10:20 am Morning Break 10:20 11:45 am Risk and Return Principle What is Investment Risk o Probability Distribution of Return o Expected Return Stand Alone Risk o Standard Deviation o Coefficient of Variation Risk on Portfolio Basis o Standard Deviation o Coefficient of Variation Diversification Effects Breaking down Stand-alone Risk o Market risk o Diversifiable Risk PAGE 3
AGENDA 11:45 am 12:45 pm Group Luncheon 12:45 2:00 pm Cost of Common Equity What is Return on Equity (ROE) Theoretical Principle Underpinning ROE Models for Estimating ROE o Discounted Cash Flow (DCF) Model - Assumptions - Example - DCF in Practice o Risk Premium (RP) Model - Assumptions - Example - Methods of Estimation; Historical vs. Authorized RP 2:00 2:30 pm Networking Break 2:30 3:30 pm Capital Asset Pricing Model (CAPM) Primary Assumptions o Rational Investors o Compensation for Risk Security Market Line (SML) o What is Beta? - Calculating Beta o What is the Market Risk Premium? Primary Conclusion Factors that change the SML Verifying the CAPM Empirically More thoughts on the CAPM 3:30 4:00 pm Capital Structure Capital Structure o The Effect of Debt on the Cost of Capital 4:00 4:30 pm Authorized ROE Comparable Companies Financial Risk Business Risk Regulator Risk Examples 4:30 pm Course Adjourns PAGE 4
REQUIREMENTS FOR SUCCESSFUL COMPLETION OF PROGRAM Participants must sign in/out each day and be in attendance for the entirety of the course to be eligible for continuing education credit. INSTRUCTIONAL METHODS Case studies and PowerPoint presentations will be used in this program. IACET CREDITS EUCI has been accredited as an Authorized Provider by the International Association for Continuing Education and Training (IACET). In obtaining this accreditation, EUCI has demonstrated that it complies with the ANSI/ IACET Standard which is recognized internationally as a standard of good practice. As a result of their Authorized Provider status, EUCI is authorized to offer IACET CEUs for its programs that qualify under the ANSI/IACET Standard. EUCI is authorized by IACET to offer 0.8 CEUs for the course. EVENT LOCATION EUCI Conference Center 4601 DTC Blvd., B-100 NEARBY HOTELS Hyatt Regency Denver Tech Center 7800 E. Tufts Ave Phone: 303-779-1234 0.3 miles away Hilton Garden Inn Denver Tech Center 7675 E. Union Ave Phone: 303-770-4200 0.6 miles away Denver Marriott Tech Center 4900 S. Syracuse St Phone: 303-779-1100 0.7 miles away Hyatt Place Denver Tech Center 8300 E. Crescent Parkway Greenwood Village, CO 80111 Phone: 303-804-0700 0.9 miles away PAGE 5
WWW.EUCI.COM p: 303-770-8800 f: 303-741-0849 Please make checks payable to: PMA" EVENT LOCATION EUCI Conference Center 4601 DTC Blvd., B-100 SEE NEARBY HOTELS ON PAGE 5 PLEASE REGISTER UTILITY COST OF CAPITAL January 29, 2018: US $995, Early bird on or before January 12, 2018: US $895 ENERG ZE WEEKLY How did you hear about this event? (direct e-mail, colleague, speaker(s), etc.) Print Name Job Title Company What name do you prefer on your name badge? Address City State/Province Zip/Postal Code Country Phone Email List any dietary or accessibility needs here CREDIT CARD INFORMATION Name on Card Billing Address Account Number Billing City Billing State Exp. Date Security Code (last 3 digits on the back of Visa and MC or 4 digits on front of AmEx) Billing Zip Code/Postal Code OR Enclosed is a check for $ to cover registrations. Substitutions & Cancellations Your registration may be transferred to a member of your organization up to 24 hours in advance of the event. Cancellations must be received on or before December 29, 2017 in order to be refunded and will be subject to a US $195.00 processing fee per registrant. No refunds will be made after this date. Cancellations received after this date will create a credit of the tuition (less processing fee) good toward any other EUCI event. This credit will be good for six months from the cancellation date. In the event of non-attendance, all registration fees will be forfeited. In case of course cancellation, EUCI s liability is limited to refund of the event registration fee only. For more information regarding administrative policies, such as complaints and refunds, please contact our our offices offices at 303-770-8800. at (201) 871-0474. EUCI reserves the right to alter this program without prior notice. PAGE 6