Capital Expenditures
U.S. Shareholder-Owned Electric Utilities
Rapid Capex Growth Since 2004
Capital Spending: Trailing 12 Months
US Shareholder-Owned Electric Utilities
$ Billions
90 80 70 60 51.9 50 40 30 20 10 0
2003 2004 2004 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
74.1 62.4 64.3 66.2
76.3
79.5
82.7 84.2
55.1
58.5 59.9
43.6 45.3 43.0 41.8 40.7 40.2 41.1 42.0
48.4
Latest Capex Budgets Show Continued High Spending in 2009-10
$ Billions
Capital Expenditures
U.S. Shareholder-Owned Electric Utilities
90 85 80 75 70 65 60 55 50 45 40 35 30 2003 2004 2005 2006 2007 2008 2009p 2010p
84.2 74.1
84.1
85.5
59.9
48.4 43.0 41.1
p = projected
* 2009p and 2010p represent preliminary updates and are subject to revision. Source: SNL Financial, company reports and EEI Finance Dept.
Capex Impacts on Utility Cash Flow
Pre-Dividend Free Cash Flow (Cash from Ops - Capex)
20.0 14.0 10.0 7.4 1.9 $ Billions 0.0 (1.8) (5.3) (10.0) (7.5) 9.6 17.0
(20.0) (20.9) (30.0)
Source: SNL Financial and EEI Finance Dept.
Higher Debt Costs from Financial Crisis
Utilities' Cost of Debt: 10-Year Treasury Yields and Bond Spreads (New Offerings)
9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 -
Average 10-Year Treasury Yield (%)
Average Spread Over Treasury (%)
Average Coupon (%)
Industry Capital Expenditures
Industry committed to reliability-making needed investments in generation, transmission, smart grid/ distribution & the environment Financial crisis initially brought sharp revisions for 2009
U.S. Shareholder-Owned Electric Utilities
Multi-year trend of soaring construction/materials costs reversed in Q3 2008
Increased spending expected to
continue into the future
Total capex for 2010-2030 ~ $1.5 trillion*
Excludes impact from climate legislation
* The Brattle Group, preliminary findings from The Edison Foundation presentation titled Transforming America’s Power Industry. Represents the entire Power sector.
Commodities Reversal
in Second Half of 2008
350
300
250
200
CAB Coal Natural Gas Steel
150
Aluminum Concrete Copper
100
50
0
Sources: Bureau of Labor Statistics, NYMEX, Platts, SNL Financial, World Bank. Prices/indices averaged over calendar quarters and indexed to “100” at 3Q07.
Transmission
Reliable electric service and regional markets depend on strong transmission systems
2000-2007 - Shareholder$12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0
Shareholder Segment Transmission Investment
(in millions) - Real 2007$
owned segment invested more than $48.8B (Real 2007$) segment invested $7.8B in transmission (+2.9% over 2006)
Planned Actual
2007 - Shareholder-owned
2008-2010 - Shareholder-
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
owned segment planning to invest $30.9B (preliminary)
Distribution
Distribution systems deliver power to neighborhoods, businesses and consumers
$20,000 $18,000 $16,000 $14,000 $12,000 Near-term projections $10,000 $8,000 ~$20B / year $6,000 $4,000 Investments replace aging infrastructure and modernizing $2,000 $0
Shareholder Segment Distribution Investment (in millions, Real 2007$)
2000-2007 – Real dollar annual spending increased 10% from $15.9B to $17.6B
system management and control
1975
1980
1985
1990
1995
2000
Distribution Investment (Nominal) Distribution Investment (Real)
2005
Generation
EIA forecasting 223 GW of new capacity to meet growing demand by 2030 –
~ $505 billion (nominal)*
Shareholder-owned segment
(MW) 35,000 30,000 25,000 20,000 15,000
U.S. Shareholder-Owned Electric Utilities
Actual
Planned
10,000
5,000 0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
added 8,852 MW in 2008
Shareholder-owned segment
announced 13,551 MW of new capacity additions in 2008
Coal
Natural Gas
Nuclear
Wind
Other
* 2008 – The Brattle Group, preliminary findings from The Edison Foundation presentation titled Transforming America’s Power Industry