Gainesville Regional Utilities Presentation to Standard & Poor’s November 10, 2014
Overview • Policy Updates • 2015 Budget Driver and Business Plan • 2015 Budget Results • Financial Metrics • GREC Status • Regulatory Issues and System Updates 2
City Commission Committed to GRU Financial Strength • City Commission has adopted rates that continue to increase GRU’s financial strength • Financial metrics improved significantly in FY 2014 and will remain strong through 2021 • GREC is fully integrated in GRU operations and financials • GRU Management proactive in strategic long-term planning • GRU staff continues to increase operational efficiency • Gainesville’s economy continues to grow 3
Policy Updates City Commission Initiatives • Governance – Discussions ongoing • Investigative Review – Main focus is the GREC RFP and resulting PPA – Navigant Consulting selected – On site November 1, 2014 • Mountain Top Removal Coal Resolution – GRU will not buy coal mined from mountain top removal; however if price is greater than 5%, GRU will bring to City Commission 4
New Growth Opportunities Innovation Square • Public/Private Partnership with UF • Infinity Hall − Dorms, offices, collaboration lounges, design and prototype space • Announcements pending − Four-story office building next to Innovation Hub − 135-unit luxury apartment complex along University Ave. − Proposed grocery store and hotel • Increases tax base and creates jobs 5
Senior Leadership Position Update • General Manager – National search under way by Mycoff, Fry & Prouse, LLC – Advertising began first week of November – Possible GM in place by March/ April • CFO – To be conducted by new GM 6
FY15 Business Plan Positioning GRU for the Future • Maintain Financial Strength – Manage revenues and expenses – Balance against financial metrics • Deliver Excellent Service – Improve trust and transparency – Evaluate future energy needs – Meet customers’ changing demands (products/ services) • Develop Engaged and Proficient Employees – Improve employee morale – Succession planning – Reduce recordable injuries 7
FY15 Budget Driver • Competitive electric rates – Set a goal to reduce anticipated FY15 1,000 kWh electric bill increase of $9.85 to $5 or less – Approved budget and rates achieved an increase of $1.35 8
Budget Highlights Controlling and Managing Costs Revisions to proposed FY15 Budget developed during FY14 Budget preparation: • Reduced O&M Expenses $10.6 million • Reduced Fuel Expenses $11.4 million – Natural gas usage increased while prices decreased – Less GREC availability reduced fixed costs • Increased Capital Spending $31.6 million – Added phase 2 of South Energy Center, adding new revenues to the system, approximately $20 million – Continued investment in infrastructure • Reduction in General Fund Transfer $ 1.2 million – Negotiated revised methodology 9
Budget Highlights Reducing Costs through Focused Change in Personnel Policy Personnel Savings • Eliminated 2% Employee Pay Increase $800,000 • Unfunded 59 Positions $3.7 million – 52 regular/7 overfills – Reassessment from 2014 with strategic selection of which positions unfunded • Reduction in pension costs $2.1 million – Modified pension plan structure • Extended time of service for eligibility for normal retirement • Extended time of service for COLA • Reduced interest earnings during DROP 10
Budget Highlights Increasing Revenue through Strategic Assessment • Long-term Facilities/ Real Estate Planning – Sale of Electric System Control $1.46 M Building – Sale of Surplus Union County $73,000 Property 11
Budget Highlights Financial Strength • General Fund Transfer – Fixed amount from 2015 – 2019, resulting in savings to GRU and stability and predictability to both GRU and General Government – Resulted in an FY15 reduction from proposed budget of $1.2 million • Connect Free (CF) Program on hold – $475,000 of CF balance moved to Water RSF • Multi-family Water Rate Added – Better reflects cost to serve • Economic Development Rate Implemented 12
Financial Strength Increasing Revenue by Optimizing System Capacity Wholesale Sales • Alachua – Ten Year Contract with reopener after five years – Discussions have begun though reopening period will not be reached until November 2015 • Winter Park – Contract begins January 1, 2015 – FY 15 projected revenue of $495,000 – 10 MW firm capacity and energy 13
Financial Strength Increasing Revenues from Community Growth • South Energy Center Expansion – Serves UF Health Cancer Hospital • 600-800 new, permanent jobs • $420 million project to UF Health – Providing power, standby power, steam, chilled water, medical gas infrastructure – GRU will add equipment to serve the increased electrical and thermal demand (amending contract to add hot water) – $28.5 million cost • University of Florida opportunity – Steam contract with Duke Energy is expiring 14
Financial Strength Potential Improvements from Approved FY15 Budget • Duke Energy Crystal River 3 Nuclear Plant Settlement − Approximately $10 million revenue to GRU − Payment pending ownership transfer approval by Nuclear Regulatory Commission (NRC) − Approval anticipated by end of CY 2015 • Overfunded Disability Pension Plan − Estimated one time cash return to the system of $2.9 - $3.2 million 15
General Fund Transfer 2015-2019 Reducing GRU’s Transfer to the City of Gainesville 2013 FY14 Projection 2015 2016 2017 2018 2019 Base GFT $ 36,542,425 $ 37,090,561 $ 37,646,920 $ 38,211,623 $ 38,784,798 Less: GREC Property Tax 1 $ (1,400,000) $ (1,400,000) $ (1,400,000) $ (1,400,000) $ (1,400,000) Net GFT $ 35,142,425 $ 35,690,561 $ 36,246,920 $ 36,811,623 $ 37,384,798 One time Reduction in 2015 $ (250,000) GFT $ 36,656,458 $ 37,180,675 $ 35,392,425 $ 35,690,561 $ 36,246,920 $ 36,811,623 $ 37,384,798 GRU Projected Revenues $ 355,963,786 $ 393,968,801 $ 413,534,074 $ 429,277,552 $ 446,025,654 $ 454,584,078 $ 462,158,475 Net GFT as % of Revenues 10.3% 9.4% 8.6% 8.3% 8.1% 8.2% 8.1% 1 Reduction in GFT equal to actual City of Gainesville property tax revenue from GREC plant each year; $1.4M is example figure only 16
Residential Electric Customer 1,000 kWh Bill Change December 2013 Presentation Percentage Base Rate Percentage Fuel Revenue Increase Adjustment Increase Total Bill Increase 2014 -5.60% 39.00% 10.60% Approved 2015 -1.65% 17.00% 7.00% Projected 2016 2.75% 3.60% 2.50% 2017 2.75% 1.20% 1.80% 2018 2.75% 0.00% 1.30% 2019 2.75% 0.00% 1.10% 2020 2.75% 0.00% 1.10% Approved FY15 Budget Percentage Base Rate Percentage Fuel Revenue Increase Adjustment Increase Total Bill Increase 2015 -8.50% 13.04% 0.97% Approved 2016 3.50% 3.85% 3.70% Projected 2017 3.00% 2.47% 2.70% 2018 0.00% 1.20% 0.70% 2019 0.00% 1.19% 0.70% 2020 0.00% 0.00% 0.00% Note: Base Rate Revenue Increases represent an increase on the total 17 base rate revenue requirement, and does not translate directly into an overall bill increase due to the different tiers and fuel component.
Total Residential Bill Projected Change December 2013 Presentation 2014 2015 2016 2017 2018 2019 2020 Electric $13.48 $9.85 $3.75 $2.75 $2.00 $1.75 $1.75 Gas $0.20 $0.36 $0.87 $1.23 $0.67 $0.65 $0.98 Water $2.45 $0.55 $0.85 $1.10 $1.05 $1.40 $1.50 Wastewater $0.80 $2.25 $2.20 $2.25 $1.90 $1.80 $2.20 Total $16.93 $13.01 $7.67 $7.33 $5.62 $5.60 $6.43 Approved FY15 Budget 2014 2015 2016 2017 2018 2019 2020 Electric $13.48 $1.35 $5.30 $3.90 $2.00 $2.00 $2.00 Gas $0.20 $2.36 $0.99 $2.38 $0.74 $0.49 $0.99 Water $2.45 $0.50 $0.80 $0.00 $0.00 $0.00 $0.00 Wastewater $0.80 $1.95 $2.35 $2.35 $0.00 $0.00 $0.00 Total $16.93 $6.16 $9.44 $8.63 $2.74 $2.49 $2.99 18 Based on 1,000 kWh electricity, 25 therms natural gas, 7,000 gallons water and 7,000 gallons wastewater.
FINANCIAL METRICS 19
Debt vs. Equity: Funding Capital Continuing to Fund Capital Expenditures with Internally Generated Funds 20
Debt Service Coverage Continuing to Improve Coverage Ratios 21
Fixed Charge Coverage Improving Historical Ratios HISTORICAL PROJECTED 22
System Reserves (Unrestricted) Providing Flexibility to Address Uncertainty 23 Additionally, System has Commercial Paper Capacity of $48 million available
Financial Risk Management Developing Cash Liquidity Targets 24
Financial Risk Management Strong Liquidity Position Exceeding Cash Liquidity Targets 25
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