agm finance update derrick sturge, vice-president, finance & cfo june 4, 2014
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Overview• Financial Reporting• 2013 Financial Highlights• Financing Growth and Re-investment• 2014 Financial Outlook
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IFRS and Financial Reporting• All numbers in this presentation are in accordance with Canadian GAAP• Nalcor will be completing transition to International Financial Reporting
Standards (IFRS) in 2014– Nalcor has previously deferred adoption of IFRS due to uncertainty with
regulatory accounting– A new standard has been released which will allow Nalcor to continue
accounting for its regulatory assets and liabilities under IFRS• Beginning with the third quarter of 2014, Nalcor will be issuing its financial
statements to the public on a quarterly basis
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2013 Financial Highlights• Net income of $96 million continues to trend upwards
– Solid overall financial results– Hydro requires new rates to support higher costs and significant re-investment
in capital assets• A General Rate Application was filed in July 2013; regulatory process is ongoing
• Continue to invest in all areas of the business– Capital expenditures of $1.0 billion were the highest level ever
• Lower Churchill financing of $5.0 billion completed with financial close in December 2013– Interest rates locked in for the life of the debt financing
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Financial Overview2006 2012 2013
Revenue ($ millions) 548 726 785
Net Income ($ millions) 70 93 96
Cash from Operations ($ millions)** 121 218 241
Capital Assets ($ millions) 1,791 2,811 3,771
Total Assets ($ millions)* 2,216 3,447 9,537
Capital Expenditures ($ millions) 61 449 1,009
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* 2013 total assets includes $5.0 billion of proceeds from the LCP debt issue** Before working capital adjustments
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Business Unit Results($ millions)
2012 2013
Net income Net income
Regulated Hydro 17.1 0.5Churchill Falls 28.3 23.2Energy Marketing 21.2 33.2Oil and Gas 32.7 37.5Bull Arm Fabrication 4.2 15.5Corporate and Other (10.8) (14.3)Net Income 92.7 95.6
Capital Expenditures($ millions)
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2006 2007 2008 2009 2010 2011 2012 2013 2014(F)
Base Business Growth (LCP and O&G)
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2013 2014Hydro 81 244CF 49 51Oil and Gas 195 240LCP Phase 1 695 1,213
Total Assets($ millions)
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2006 2007 2008 2009 2010 2011 2012 2013 2014(F)
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2013 2014Hydro 1,954 2,074CF 472 476Oil and Gas 580 781LCP Phase 1 6,320 6,685
Investment of proceeds from LCP debt issue
Financing Growth & Re-Invesment• Since 2006 all cash generated from operations has been invested back in
the business– Strong earnings in all business units is key to investment plans
• Continue to receive equity support from our shareholder• Debt Financing
– Lower Churchill financing completed– Multi-year debt financing program for Hydro under development
• Oil and Gas and Churchill Falls investments all financed by equity• Five year outlook on capital structure is in the range of 60% debt /40%
equity
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LCP Financing• Throughout 2013 activities were ongoing to satisfy conditions required to facilitate
issuance of $5.0 billion of debt guaranteed by Canada– $2.6 billion to Muskrat Falls/Labrador Transmission and $2.4 billion to Labrador-Island
Link – Commercial Agreements between LCP project entities and Hydro to support financing
and secure long-term power supply completed– Equity Agreements between Nalcor and LCP project entities completed– LCP debt assigned a AAA credit rating
• The Canada guarantee provided a weighted average interest rate of 3.8% which is locked in for 35 years for MF/LTA and 40 years for LIL– Provides savings of over $1 billion over the life of the project on a discounted basis
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Hydro Financing• Hydro has not issued long-term debt since 2006• Over the next five years Hydro’s capital program will be approximately $1.2 billion
– Ongoing and growing re-investment in existing assets– New 100 MW gas turbine at Holyrood– New transmission line in Labrador West– New transmission line from Bay D’Espoir to Western Avalon
• In addition several existing bond issues will mature during this period• These expenditures will be financed through the issue of long-term debt and internally
generated equity
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Structured For Growth
2006 2007 2008 2009 2010 2011 2012 2013 2014 (F) 2020 (F)0%
10%20%30%40%50%60%70%80%90%
100%
30% 35%44%
53% 57% 62% 61%
28% 32%40%
70% 65%56%
47% 43% 38% 39%
72% 68%60%
Equity Debt
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2014 Financial Outlook• Forecasting higher net income in 2014, primarily driven by:
– Increased oil production– Stronger electricity prices in the US markets– Approval of rate increase for Hydro
• Forecast capital expenditures $1.8 billion– Ramp up in construction activities for Muskrat Falls ($1,213 million)– Continued re-investment in Hydro and Churchill Falls ($295 million)– Continue to invest in offshore oil projects ($240 million)
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Summary• New investments starting to produce cash flow
– Growth in income and cash from operations to continue over next several years, leading up to Hebron and Muskrat Falls in-service
• Capital expenditures at highest levels ever in each business unit• Financing for Lower Churchill completed• Financing program for Hydro investments under development• Continue to re-invest 100% of our cash generated by operations back in
the business• Strategy developed in 2006 to finance growth and re-investment and
make sound long-term investments is playing out as planned
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