EnergyBiz - January/February 2008 - (Page 33) EnErgyBiz How are you dealing with the unique financial challenges facing utilities? Fanning We’re going to spend about $13.2 billion over the next three years in capital expenditures. Georgia Power itself is spending $1 billion dollars on environmental investments in 2007. rigBy We have about a $4 billion construction program over the next five years. We have a very significant transmission project that just got approved. It’s about $1.2 billion. We also have within that plan about $600 million of what we refer to as our blueprint for the future, which is advanced metering, infrastructure and a lot of energy efficiency. prOTsch We’re going to take our balance sheet roughly from $4 billion to $9 billion between now and 2015. Two coal plants, a lot of wind farms. We are doing a number of things to make that manageable and create shareholder value in the process. pirO We’ve got a pretty extensive capital expenditure program mostly focused on wind generation and a fair amount of environment mitigation for both our coal plant and our hydroelectric plants. As we move forward, we’re going to have to tap the equity markets and we’re looking at that in about the 2009 time frame. rOgErs Nevada is one of the fastest-growing states in the country. We need to add 250 megawatts each and every year just to meet our peak demand requirement. In dollar terms for us from the 2007 to 2011 time period that’s $7.2 billion. There are years in there where our external financing needs exceed our internally generated cash flow. So we will be active in the debt and equity capital markets. rigBy We are going to be looking at a period in 2008, 2009 and 2010 when we will need to be in a financing mode. We’ve already announced that we’re going to issue equity. EnErgyBiz Are regulators more willing to let you recover costs up front when you are financing big projects? rOgErs In Nevada, we have an integrated resource planning process, which by law deems an investment prudent once our commission approves it. What is your approach to cash-flow management? We look at operating cash flow. Then, we place our highest priority on dividends. And then we look at what we are required to spend by law on the environment, to connect new customers or maintain plants. The final level of capital will be discretionary capital used to get ahead of the curve to meet future growth. If dealing with growth requires a company to have capital spending that exceeds current cash, that’s a good, healthy, growing utility. EnErgyBiz Fanning How would you rate the quality of state regulators? We were under rate caps for nine years. We’ve been out of rate cases for quite some time. Our states are deregulated. When those rate caps came off, we had enormous price increases and there was a tremendous amount of fallout. The legislature passed a law to fire the Maryland Public Service Commission. That led to a downgrade for two of our companies in 2006. prOTsch Our regulators are compelled to be responsible to the long-term interests of consumers and the shareowners of the utilities. The processes have improved immensely in a way that the regulators are a part of the game on the get-go. We’re better positioned than I can remember in my 29-year career. Fanning We’re with the regulators on a continuous basis dealing with the issues of the day every day. That is a great harbinger of success. pirO We’ve all learned you can’t stay away from the regulators and show up when you want to have a rate case. The regulators understand there’s a lot of infrastructure that needs to be built and they are not going to want to be at the back end of the bus and say our state isn’t in a position that can attract customers. EnErgyBiz rigBy How many of you fear a recession? We have found historically that our service territory has been a little bit more recession-resistant in that the federal government is not going away. rOgErs In Nevada, we’re not concerned about recession in EnErgyBiz rigBy Tom Fanning William Rogers Tom Fanning CHIEF FINANCIAL OFFICER SOuTHERN COmPANy MARKET CAP: $27.4 BILLION (AS OF 12/06) Jim Piro CHIEF FINANCIAL OFFICER PORTLANd GENERAL ELECTRIC MARKET CAP: $1.7 BILLION (AS OF 12/07) Eliot Protsch CHIEF FINANCIAL OFFICER ALLIANT ENERGy MARKET CAP: $ 4.4 BILLION (AS OF 12/06) Joseph Rigby CHIEF OPERATING OFFICER, FORMER CFO PEPCO HOLdINGS MARKET CAP: $ 5 BILLION (AS OF 12/06) William Rogers CHIEF FINANCIAL OFFICER SIERRA PACIFIC RESOuRCES MARKET CAP: $ 3.6 BILLION (AS OF 12/06) www.energycentral.com E n E rgyB i z 33 http://www.energycentral.com
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