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OPALCO 2015 Year End Financial Report – page
TIER is back to a conservative 2.51Equity % of Total Cap at healthy 53%
Revenue is on budgetExpenses reduced
2015 Year End Results: Summary
2
OPALCO 2015 Year End Financial Report – page
OPALCO 2015 Year End Results: Statement of Operations
3
$0M
$5M
$10M
$15M
$20M
$25M
Budget Actual
Revenuevariance: -$-115,223
Total Operating Expensevariance: -$923,482
Cost of Powervariance: -$665,738
Headline
• Beginning of year: Budget revenue was down big
• Mid-year: Invoked revenue recovery add-on
• End of year: Budget revenue down, but budget expenses down more.
Net Margin: $759,959
OPALCO 2015 Year End Financial Report – page 4
$0M
$2M
$4M
$6M
$8M
$10M
$12M
$14M
$16M
$18M
$20M
$22M
$24M
$26M
2013 2014 2015 2016Actual Actual Actual Budget
BPA Power Cost
Current Capital Projects
All Other Accounts
G&A
Future capital project and Capital credit planning
Operations
Member Services
Communication Maint.
Energy Savings Dept.
Permitting/Environment
Energy Assistance
OPALCO Revenue AllocationNewCo StartupRIC Startup
OPALCO 2015 Year End Financial Report – page
2016 Budget: Capital Projects
5
$0M
$2M
$4M
$6M
$8M
2012
2013
2014
2015
2016
2017
2018
2019
2020
DistributionTransmissionGrid Control Backbone
Headline
• Transmission: peak is Lopez San Juan submarine cable
• Distribution: Normal under-grounding to improve reliability
• Grid Control Backbone: Expansion to improve
• reliability
• field communications
• preparing for intermittent local renewable energy resources
submarine cable
installation completes
$0M
$4M
$8M
$12M
$16M
2012
2013
2014
2015
2016
2017
2018
2019
2020
ActualProjected
Total Capital ProjectsMajor Capital Projects
OPALCO 2015 Year End Financial Report – page
2016 Budget: Financial Metrics
6
$0M
$1M
$2M
2012
2013
2014
2015
2016
2017
2018
2019
2020
$0M
$1M
$2M
$3M
2012
2013
2014
2015
2016
2017
2018
2019
2020
$0M
$10M
$20M
$30M
$40M
$50M
$60M
2012
2013
2014
2015
2016
2017
2018
2019
2020
$0M
$3M
$6M
DebtInterest
Depreciation & Amortization
$40M
$45M
$50MEquity
Margin
0
1
2
3TIER
Rock Island pays back $7.5M
Submarine Cable on the books RUS: highest 2 out of 3 years,
averaged must be over 1.25
Actual
Actual
2015 Forecast
2015 Forecast
OPALCO 2015 Year End Financial Report – page
Debt Equity Ratio
7
0%
100%
200%
300%
400%
500%
600%
700%
800%
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
Actual Forecast
OPALCO 2015 Year End Financial Report – page
Annual Account Additions
8
0
1,000
2,000
3,000
4,000
5,000
1980 1985 1990 1995 2000 2005 2010 2015
New service additions peaked in the 1990s, during
the real estate boom.
SJC
Tot
al E
nerg
y D
eman
d (k
Wh)
0M
50M
100M
150M
200M
250M19
3519
4019
4519
5019
5519
6019
6519
7019
7519
8019
8519
9019
9520
0020
0520
1020
1520
2020
2520
3020
35
2013 215 million kWh
1937 OPALCO founded
Energy
Source: OPALCO
Headline
• Exponential growth in 20th Century
• Transitioning to low growth in 21st Century
OPALCO Energy Demand
Annual Account Additions
Population drives growth of energy demand
OPALCO 2015 Year End Financial Report – page
Annual Account Additions
10
0
1,000
2,000
3,000
4,000
5,000
1980
1985
1990
1995
2000
2005
2010
2015
Ramp up energy efficiency programs
SJC
Tot
al E
nerg
y D
eman
d (k
Wh)
0M
50M
100M
150M
200M
250M19
3519
4019
4519
5019
5519
6019
6519
7019
7519
8019
8519
9019
9520
0020
0520
1020
1520
2020
2520
3020
35
Source: OPALCO, Cisco VNI
Energy
SJC population
growth, fuel
switching
slow population
growth,AC, fuel switching
warming world, EE&C
programs, heat
pumps, local
renewable energy
Headline
• In the 20th Century, SJC electric energy demand was driven by:• population growth and • fuel switching from wood, propane and fuel oil heating
• In the 21st Century, SJC energy demand is projected to be flat - driven up by: • slow population growth, and• emerging load from AC and fuel switchingand driven down by: • Energy Efficiency & Conservation programs (EE&C), • reduced heat load due to a warming world, and increased use of super efficient heat pumps.
OPALCO Energy Demand
OPALCO 2015 Year End Financial Report – page
Revenue and Expense: Trend Analysis
12
3/16/2016
$-
$0.01
$0.02
$0.03
$0.04
$0.05
$0.06
$0.07
$0.08
$0.09
$0.10
$0.11
$0.12
$0.13
$0.14
2010 2011 2012 2013 2014 2015
$/KW
h
OPALCO Revenue and Cost of ElectricityOpalco Revenue
BPA Expense
Distribution Operations
Distribution Maintenance
Total General & Administrative
Depreciation & Amortization less FOBB
Long Term Interest less FOBB
FOBB Depreciation + Long Term Interest
Linear (Opalco Revenue)
Linear (BPA Expense)
FOBB = Fiber Optic Back Bone
4.5% per yr
4.5% per yr
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2009 2010 2011 2012 2013 2014 2015
% N
et M
argi
n
Net Margin
$-
$0.010
$0.020
$0.030
$0.040
$0.050
$0.060
$0.070
$0.080
$0.090
2010 2011 2012 2013 2014 2015
$/KW
h
Total Non-Energy Expenses
6.1% per yr
3/16/2016
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
2010 2011 2012 2013 2014 2015
KWh
Sold
per
Year
KWh Sold to Members
Residential Commercial
Ave decline in electricity consumption = 3%/yr since 2011
OPALCO 2015 Year End Financial Report – page
When growth is flat, but power and fixed costs continue to rise, …
13
OPALCO 2015 Year End Financial Report – page
Manage grid wiselyInvest in things that reduce costs
Find new sources of revenue
14
Three Options
OPALCO 2015 Year End Financial Report – page
Rock Island 2015 Year End Results: Statement of Operations
16
OPALCO 2015 Year End Financial Report – page 17
Roc
k Is
land
Sub
scrib
ers
0
500
1,000
1,500
2,000
2,500
3,000D
ec Jan
Feb
Mar Ap
rM
ay Jun
Jul
Aug
Sep
Oct
Nov
Dec Jan
Feb
Mar Ap
rM
ay Jun
Jul
Aug
Sep
Oct
Nov
Dec Jan
Rock Island Subscriber Growth: Actual, Goal, Trend
Source: Rock Island
2015 2016 2017
Fiber
LTE Wireless
LTE GoalTrends
DSL/Canopy
Fiber Goal
Headline • Fiber installation growing exponentially,
but expected to max out at about 42 new connects per month
• LTE wireless has been in testing phase, we are now starting to ramp up connects, quickly growing to about 125 connects per month
Notes • January 2016 rainy season slowed fiber
deployments, pace will quicken with drier weather
• LTE wireless growth trend will be less exponential once we have a few more months of actual growth data