J.P. Morgan Public Finance Transportation & Utility Investor … · 2019-07-25 · • Battery...

J.P. Morgan Public Finance

Transportation & Utility Investor Forum

Long Island Power Authority &

Utility Debt Securitization Authority

Public Presentation

July 25, 2019

HELLO

Disclaimer

J.P. Morgan Transportation & Utility Investor Forum 2

This presentation is provided for general information purposes only and was prepared

from publicly available sources.

A copy will be made available on the Long Island Power Authority website and the

Municipal Securities Rulemaking Board’s EMMA website.

This presentation does not purport to include every item which may be of interest, nor

does it purport to present full and fair disclosure with respect to any of the Long Island

Power Authority or Utility Debt Securitization Authority bond programs within the

meaning of applicable securities laws.

This presentation does not constitute an offer or sell, or the solicitation of an offer to

buy, any security of the Long Island Power Authority or Utility Debt Securitization

Authority and was not prepared in connection with any such securities offering.

3

NYISONew York Independent

System Operator

L O N G I S L A N D ’ S R E G I O N A L E L E C T R I C G R I D

ISO-NEIndependent System

Operator New England

PJMPennsylvania, Maryland,

New Jersey

(108 million MWh)(142 million MWh)

(787 million MWh)

Y49 / Y50 Cable

900MW net

Neptune Cable

660MW

Northport to Norwalk Cable

300MW

Cross Sound Cable

330MW

LIPA SERVICE TERRITORY

(21 million MWh)FAST FACTS

CUSTOMERS: 1,100,000 EMPLOYEES: 2,500

DISTRIBUTION SYSTEM

14,000 Miles

TRANSMISSION SYSTEM

1,400 Miles

REGIONAL CABLES

2,125MW

POWER PLANTS

32 Plants, 5,800MW

SUBSTATIONS

191

TRANSFORMERS

189,000

POLES

585,000

2019 OP. BUDGET

$3,525,334,000

(Including PSEG Long Island)

Northport and Port

Jefferson

Solar FarmsCombustion Turbines

J.P. Morgan Transportation & Utility Investor Forum

4

Public-Private Partnership

Business Model

LIPA contracts with PSEG

Long Island for

Management Services

(~55 employees)

(~2,500 employees)


J.P. Morgan Transportation & Utility Investor

Forum

E N E R G Y P L AY E R S O N L O N G I S L A N D

Not-for-ProfitState Authority

Utility Contracted to Operate LIPA’s Grid

New York Independent System Operator

& Other Generators Other State and Federal Agencies

• Owns Electric Grid• Sets Energy Policy and

Electric Rates• Contracts for T&D

Services and Generation• Oversees PSEG Long

Island Operations• Funds LI Clean Energy

Programs • Exempt from Taxes• FEMA Grant Eligibility

• Day-to-Day Operations of T&D System

• Name and Face to Customers

• Storm Response• Infrastructure and IT

Improvements • Power Supply Planning• Performance Based

Management Fee

• Oversight of LIPA and PSEG Long Island

• Independent Rate Recommendations

• Consumer Complaint Investigations

• Management and Operations Audits

• Review Emergency Response Plans

• Dispatches Power Plants and Transmission on a Least Cost Basis

• Performs Planning Studies and Sets Energy Market Rules

• Own and Operate Power Plants

FERC

5

LIPA acquires gridEstablished P3 structure

under Management

Services Agreement with

National Grid

5 Years Later…✓ Improved service

✓ Greater satisfaction

✓ Better gov’t relations

✓ Focused on value

2013

1998 2019

LIPA Reform ActReorganizes LIPA under

Operations Services

Agreement (OSA) with

PSEG Long Island

beginning January 2014

L I PA M I L E S T O N E S

1986

LIPA Act SignedLong Island Power Authority

(LIPA) created to acquire and

decommission the Shoreham

Nuclear Power Plant


7

M O S T I M P R O V E D U T I L I T Y I N T H E N AT I O N

J.D. Power Customer Satisfaction – New York State and Large East Utilities


Improving Customer Service

and Satisfaction

➢ PSEG Long Island has significantly improved customer service operating performance metrics

93

63.7

43.7

81.9

15

94.5 94.2 95.9

15

95.2 95.3 96.7

0

20

40

60

80

100

120

Average Speed of Answer(Seconds)

After-Call Residential Survey(Satisfaction Percentage)

After-Call Business Survey(Satisfaction Percentage)

Personal Contact Survey(Percentage)

Key Measures of Customer Service

2013 2018 2019 YTD


9

S M A R T M E T E R S H AV E C O M E T O L O N G I S L A N D

➢ $200+ million multi-year smart meter roll-

out to all customers by the end of 2022

➢ Modernizing the customer experience

➢ Timely and accurate information

available to customers

➢ Rate choices that meet customer’s

needs and save them money

➢ Automatic outage detection

➢ Pro-active alerts and

communication

➢ New convenient payment options

➢ Improved power quality

➢ 250,000 meters to be installed in 2019

➢ Approximately 50% of sales are metered

through AMI devices


10

R E C O R D I N V E S T M E N T I N

R E L I A B I L I T Y & R E S I L I E N C Y

Annual Infrastructure Investment in

Long Island Electric Grid


Drones used for inspection of Electrical Facilities

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwiNtp-jr_7dAhXxm-AKHTOPCS8QjRx6BAgBEAU&url=https://dronelife.com/2017/08/10/utility-specific-fixed-wing-vtol-drone-takes-flight/&psig=AOvVaw3RGnu_jnfH-7kDHU-fZJ9a&ust=1539346564379599

11Hofstra Distinguished Lecture Series11

1 s t

Q u a r t i l e

R e l i a b i l i t y


0.0 25.0 50.0 75.0 100.0 125.0 150.0 175.0 200.0 225.0 250.0 275.0 300.0 325.0 350.0 375.0 400.0 425.0

Appalachian Power Co

Central Maine Power Co

Ohio Power Co

DTE Electric Company

Duke Energy Carolinas, LLC

Pennsylvania Electric Co

Puget Sound Energy Inc

Entergy Louisiana LLC

West Penn Power Co

Consumers Energy Co

Central Hudson Gas & Elec Corp

New York State Elec & Gas Corp

Oncor Electric Delivery Company LLC

Duke Energy Progress - (NC)

National Grid (NIMO)

CenterPoint Energy

Jersey Central Power & Lt Co

Los Angeles Department of Water & Power

Massachusetts Electric Co

Public Service Co of NH (Eversource)

Ameren Illinois Company

Virginia Electric & Power Co

Georgia Power Co

Pacific Gas & Electric Co.

Alabama Power Co

Duquesne Light Co

Ohio Edison Co

Duke Energy Florida, LLC

Orange & Rockland Utils Inc

Southern California Edison Co

Union Electric Co - (MO)

Public Service Co of Colorado

Connecticut Light & Power Co (Eversource)

Arizona Public Service Co

PECO Energy Co

NSTAR Electric Company (Eversource)

Baltimore Gas & Electric Co

Northern States Power Co - Minnesota

PPL Electric Utilities Corp

LIPA / PSEG LI

San Diego Gas & Electric Co

Potomac Electric Power Co

Rochester Gas & Electric Corp

Florida Power & Light Co

Wisconsin Electric Power Co

Commonwealth Edison Co

Public Service Elec & Gas Co

Salt River Project

Consolidated Edison Co-NY Inc

2017 SAIDI PERFORMANCE (MINUTES)

1st Quartile

Median

3rd Quartile

Source Data: 2017 EIA 861 Report (Latest Available)

Panel Includes:

- NYS Utilities

- JD Power Large East Electric Companies

- National Electric Companies Serving > 1 Million Customers

SAIDI: System Average Interruption Duration Index

SAIFI: System AverageInterruption Frequency IndexCAIDI: Customer Average Interruption Duration Index

2019 Operations YTD – On Plan


MAY YTD

Operations Services Agreement Metrics L/H OSA YE Target OSA YTD Target YTD Result OSA Forecast

OSHA Recordable Incidence Rate L 1.53 1.53 1.41

OSHA Says Away Rate (Severity) L 22.61 22.61 40.39

Reduce Motor Vehicle Accidents L -5.6% -5.6% -29.1%

JD Power Customer Satisfaction Survey (Residential) H 689 or 12th 689 or 12th 695

JD Power Customer Satisfaction Survey (Business) H 732 or 8th 732 or 8th Wave 1 - Aug

After Call Survey (Residential) H 91.5% 91.5% 95.2%

After Call Survey (Business) H 91.5% 91.5% 95.3%

Personal Contact Survey H 92.0% 92.0% 96.7%

Average Speed of Answer L 19 19 15

Customer Complaint Rate L 6.5 6.5 4.1

SAIFI (System Average Interruption Frequency Index) L 0.83 0.31 0.23

CAIDI (Customer Average Interruption Duration Index) L 85 85 74

SAIDI (System Average Interruption Duration Index) L 72.5 25.7 17.1

Customers Experiencing Multiple Sustained Outages (> 4) L 36,289 37,427 29,451

MAIFI (Momentary Average Interruption Frequency Index) L 3.29 1.06 0.89

AMI Installations H 250,000 104,167 135,062

Double Wood Poles L 9,626 11,084 11,075

First Call Resolution (FCR) H 82.8% 80.5% 81.0%

Utility 2.0 - OMS Integration H 1 1 1

JD Power Communications Effectiveness H 6.6% 6.6% 4.7%

Operating Budget ($M) L 606.4 252.4 240.0

Capital Budget ($M) L 670.8 250.1 187.9

Net Write-Offs Per $100 Billed Revenue L 0.61 0.61 0.55

Accounts Receivable > 90 Days L 18.0% 18.3% 18.0%

Low to Moderate Income (LMI) Program Participation H 27,000 25,849 26,849

Customer Self-Service H 40.5% 31.9% 38.0%

Energy Efficiency Annualized Energy Savings H 276,500 113,150 137,904

Notes: YTD Results Color YTD Results Color

- Color Coding in YTD Result column represents current s tatus versus YTD Plan. At or Better than YTD Plan On Track

- YE Forecast i s a subjective estimate of whether each metric i s expected to meet the YE Target. At Risk

- For Uti l i ty 2.0 - OMS Integration; 1 = Pass and 0 = Fa i l Worse than YTD Plan Wi l l Not Meet

Econ

omic

Gree

nSa

fe, R

eliab

lePe

ople

14

R E C O R D F U N D I N G F O R C L E A N E N E R G Y


➢ PSEG-LI won the 2019 Energy Star Partner of the Year Award for its efforts to help lower customer energy usage and reduce their carbon footprint

15

M E E T I N G N E W

Y O R K ’ S C L E A N

E N E R G Y G O A L S

LARGE-SCALE BATTERIES

• Two utility-scale batteries are now operational on Long Island

• Battery technology stores and distributes clean energy when

renewables are not producing power

OFFSHORE WIND

• New York’s first offshore wind farm, operational in 2022,

will power 70,000 homes

• Delivers clean energy to an area on Long Island that

needs more power

SOLAR

• Home to New York’s three largest solar farms

• Over 47,000 customers with residential rooftop solar


16

E N C O U R A G I N G E L E C T R I C V E H I C L E A D O P T I O N

• Residential charger rebates

• Smart charging discount

• Fast charging stations

• Reduces Long Island’s Carbon

Footprint


F L AT C U S T O M E R B I L L S F O R O V E R A D E C A D E


18

CLIMATE LEADERSHIP AND

COMMUNITY PROTECTION

ACT OF 2019 (CLCPA)


HELLO

19

70% X 203070 percent of electricity

generated in New York

to come from renewable

energy by 2030

9,000 MW X 2035New York aims to develop

9,000 MW of offshore

wind by 2035

6,000 MW X 2025Deploy 6,000 MW of

distributed solar by 2025

3,000 MW X 2030Energy storage target of 3,000

megawatts by 2030 to store

clean & renewable energy

NEW YORK’ S ELECTRI C POW ER GOALS

100% X 2040 | New York’s power grid will be 100% carbon neutral by 2040


20

N E W Y O R K S TAT E E M I S S I O N G O A L S

➢ 60% reduction statewide

greenhouse gas emissions

by 2030

➢ Carbon neutral statewide

greenhouse gas emissions

by 2050

➢ Achieving targets will likely

require significant beneficial

electrification of

transportation and heating

NY Carbon Emissions by Sector


21

Approx. 20 GW

Regional Market

O F F S H O R E W I N D I S T H E L A R G E S T

S O U R C E O F D O W N S TAT E C L E A N E N E R G Y


22

L I PA / N Y S E R D A S T U D Y O F L O N G I S L A N D

G R I D F O R O F F S H O R E W I N D

Farragut

Substation

Holbrook

Substation

138kV 800MW

Canal Substation

Shoreham Substation

138kV 800MW

Ruland Road Substation

138kV 800MWBrookhaven

Substation

138kV 400MW

• N-1 and N-1-1 Study impacts down to the 69kV system• Deliverability Analysis• Short Circuit Analysis• Summer Peak and Light Load Conditions• Approximate costs of transmission upgrades and fast-start

resources to remedy impacts


HELLO

23

E U R O P E ’ S B O O M I N G O F F S H O R E M A R K E T

Source: Statista Dossier, Wind Europe, 2019


HELLO

24

• The cost of offshore wind continues to decline in Europe due to scale,

competition, and technology. That trend is now evident in the U.S. as

offshore wind scales

O F F S H O R E W I N D C O S T W I L L C O N T I N U E

T O D E C L I N E

24J.P. Morgan Transportation & Utility Investor Forum

25

Property Tax Update


26

L I PA P O W E R P L A N T S A M O N G H I G H E S T

TA X E D P R O P E R T Y I N A M E R I C A

Rank 2017 Taxes Building Name City, State Year Built

1 $82,093,239 Northport Power Station Northport, NY 1967

2 $75,568,292 General Motors Building New York, NY 1968

3 $66,504,858 Stuyvesant Town New York, NY 1945

5 $52,089,329 MetLife Building New York, NY 1963

11 $42,617,000 E.F. Barrett Island Park, NY 1956

15 $39,895,406 Empire State Building New York, NY 1931

21 $36,576,768 Exelon - Byron Nuclear Generating Station Byron, IL 1985

22 $35,642,819 Disneyland® Resort Anaheim, CA 1955

27 $32,661,000 Port Jefferson Power Plant Port Jefferson, NY 1958

28 $31,742,883 Sears/Willis Tower Chicago, IL 1973

31 $30,761,902 Mall Of America Bloomington, MN 1990

44 $23,000,000 Glenwood Landing Power Plant Glenwood Landing, NY 1967

58 $20,411,225 Borgata Hotel and Casino Atlantic City, NJ 2003

68 $19,230,044 The Waldorf Astoria New York, NY 1930

76 $17,912,974 Xcel Energy Monticello Nuclear Generating Plant Monticello, MN 1971

94 $16,365,273 Bellagio Hotel and Casino Las Vegas, NV 1998

Source: CommericalCafe


Status of LIPA’s tax certiorari challenges:

Nassau County: E.F. Barrett and Glenwood

▪ Settlement discussions are continuing with Nassau

County

Town of Brookhaven & Village of Port Jefferson: Port

Jefferson Power Station

▪ Process in place to reduce annual tax payments

50% by 2027

Town of Huntington: Northport Power Station

▪ Trial anticipated to be completed in 2019

Property Tax Update

2019 Property Tax Report available

at www.lipower.org


28

Financial Overview


29

B O A R D P O L I C Y E S TA B L I S H E S

C L E A R F I N A N C I A L G O A L S

The LIPA Board Policy on Debt and Access to Capital Markets provides guidance for

LIPA’s path to a stronger financial position, with the goal of reducing long-term cost for

customers.

Key financial planning metrics:

➢ Implementing financial plans that lead to bond ratings of at least A2/A/A from

Moody’s, S&P, and Fitch over five years

➢ Achieving Fixed Obligation Coverage Ratio (measure of cash flow available to

pay current debt obligations) of 1.20x in 2016, 1.30x in 2017, 1.40x in 2018, and

1.45x in 2019 and beyond

➢ Generating sufficient cash flow to fund no more than 64% of capital expenditures

with debt

➢ Maintain Cash on hand of $100 million in Operating Fund and $150 million in

Rate Stabilization Fund

➢ Cash available credit of at least 120 days of operating expenses


LIPA Cost Recovery Mechanisms Greatly

Reduce Financial VolatilityRate Components

Base Delivery Charges

Cost Recovery➢ Fuel and purchased power true up - Monthly

➢ Energy efficiency program true up - Annually

➢ Revenue and assessment tax true up - Annually

➢ Sales true up (Revenue decoupling) - Annually

➢ Debt, PILOTs, labor, regulation, taxes update - Annually

➢ Debt/Coverage, storms costs - Annually

UDSA Charge➢ Separate charge to repay UDSA bonds

➢ Revenues not subject to the LIPA Bond Resolution


LIPA Cost Recovery Mechanisms Have

Delivered On or Better Than Planned Budgets

➢ LIPA has exceeded the financial targets in the Three-Year Rate Plan for 2016 to 2018

(in thousands) Budget Actual Results

2016 (42,031)$ (26,433)$ Better than Plan

2017 (12,140)$ 17,122$ Better than Plan

2018 376 22,662 Better than Plan

Change in Net Position


F I X E D O B L I G AT I O N C O V E R A G E

Board financial policies require LIPA to budget for certain levels of Fixed Obligation

Coverage annually

LIPA has exceeded the coverage requirement in 2016, 2017, and 2018 and has budgeted

to achieve the required level in 2019

LIPA Only Coverage

1.20

1.30

1.40 1.45

1.26

1.33

1.49 1.45

1.00

1.10

1.20

1.30

1.40

1.50

2016 Actual 2017 Actual 2018 Actual 2019 Projected

Board Approved Actual & Projected

LIPA and UDSA Coverage

1.15

1.20

1.25 1.25 1.19 1.22

1.29 1.25

1.00

1.10

1.20

1.30

2016 Actual 2017 Actual 2018 Actual 2019 Projected

Board Approved Actual & Projected


0

25

50

75

100

125

150

175

200

225

250

275

300

Jan

-17

Feb

-17

Mar

-17

Ap

r-1

7

May

-17

Jun

-17

Jul-

17

Au

g-1

7

Sep

-17

Oct

-17

No

v-1

7

Dec

-17

Jan

-18

Feb

-18

Mar

-18

Ap

r-1

8

May

-18

Jun

-18

Jul-

18

Au

g-1

8

Sep

-18

Oct

-18

No

v-1

8

Dec

-18

Jan

-19

Feb

-19

Mar

-19

Ap

r-1

9

May

-19

Jun

-19

LIPA Cash and Available Credit

Days Cash and available credit Average 120 Days

➢ LIPA has exceeded its Board required 120 days cash on hand

LIPA Cash and Available Credit

Average: 198 Days

33

Minimum: 120 Days


Available Resources


OPEB, $308

Rate Stabilization, $160

Unrestricted Cash and Cash

Equivalents, $220

LIPA Revenue Bonds, $218

$0

$100

$200

$300

$400

$500

$600

$700

$800

DSRF Mitigants 2019 LIPA Debt Service Obligations

(Mill

ions)

The above mitigants far exceed the

equivalent of maximum annual debt service

reserve requirement of $329 million

➢ Board authorized OPEB account: $308 million

➢ Board permits account to be available for debt service, if necessary

➢ Rate Stabilization Fund: $160 million (Covenant with credit providers

currently requires $150 million)

➢ Unrestricted cash of $220 million

➢ Approximately $582 million of remaining available credit capacity

35

R E D U C I N G H I G H D E B T L E V E L S

70.00%

75.00%

80.00%

85.00%

90.00%

95.00%

100.00%

105.00%

110.00%

2016 2017 2018 2019 2020 2021 2022

LIPA Debt-to-Asset Ratio

➢ High leverage - acquisition of LILCO in 1998 financed 100% with debt

➢ LIPA’s plan is for debt-to-capital ratio to decline to the level of “A-rated”

public power utilities over 10 years (mid-60%)

➢ LIPA’s debt over the past 3 years has remained relatively stable

(increase < $250 million) while LIPA increased capital investments to improve reliability and resiliency of the grid by over $1.5 billion


36

R AT I N G A G E N C Y V I E W

1

Rating

Outlook

A-

Negative

Baa1

Negative

A-

Negative

Rating

Outlook

A-

Stable

A3

Positive

A-

Positive

2013

2018

“The rating considers LIPA’s … improved financial, operating, and

customer satisfaction measures … LIPA's continued investment in

operational and systems improvements and the strong economic

profile of LIPA's service territory.” - Moody’s


37

Financial Update


R EFI N A N C I N G FOR SAVI N GS

➢ Issuance of up to $540 million in New Money bonds to finance electric system

infrastructure required to provide safe and reliable electric service to Long Island

2018 Actual 2019 Budget

Transmission and Distribution $356,526 $530,403

Information Technology $40,439 $35,236

FEMA-Storm Hardening $151,384 $153,609

Customer Operations & Other $42,209 $95,494

NMP2 $17,956 $19,461

Total 1 $608,514 $834,203

Percent of Capital Funded from Debt 62% 62%

1 Excludes portion of management fee funded through capital and LIPA capital expenditures

38

Financial Update


R EFI N A N C I N G FOR SAVI N GS

Refunding Dependent on Market Conditions

➢ LIPA monitors its debt for cost savings opportunities and is currently seeking

authorization to refund select series of bonds

➢ While tax-exempt advance refunding transactions are no longer permitted, LIPA is

considering structuring options that would maximize present value savings on any

refinancing

J.P. Morgan Public Finance Transportation & Utility Investor … · 2019-07-25 · • Battery...

Documents

Transcript of J.P. Morgan Public Finance Transportation & Utility Investor … · 2019-07-25 · • Battery...