Item 8: 2QTR20 Financial Report — original pdf

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Austin Energy Quarterly Financial Report 2nd Quarter FY 2020 (January – March 2020) Mark Dombroski Chief Financial Officer May 11, 2020 © 2018 Austin Energy Disclaimer This information is unaudited and should be read in conjunction with the audited Comprehensive Annual Financial Reports for the City of Austin, when published on: http://austintexas.gov/service/current-comprehensive-annual-financial-report 2 QUARTERLY Financial Report Agenda Executive Summary Financial Policy Compliance Financial Performance Measures Actual to Budget Analysis Financial Statements Market and Industry Analyses 3 Austin Energy Quarterly Financial Report Executive Summary 4 Executive Summary Substantially compliant with all financial policies. Capital Reserve balance below minimums but total cash above minimum of $414m. $ 629 Million Revenues Operating revenues trended close to budget through March. Balance sheet is liquid and adequately capitalized. Cash balances are stable through the second quarter. Meeting financial metrics supporting AA credit rating. Received credit upgrade from Fitch Ratings in May 2019. $515 Million Expenses Operating expenses exceed forecast by 2.7% primarily due to higher costs in power production and electric service delivery. City Council approved a $35 million bill reduction effort in April. This includes a reduction in regulatory charges, increase in CAP discounts, increase in Plus 1 funding and reductions in tiers 4 & 5. This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 5 Austin Energy Quarterly Financial Report Financial Policy Compliance 6 Financial Policy Compliance Financial policies are memorialized and adopted by ordinance each year during the budgeting process Compliance Debt Reserves Operating Non-Compliance Debt Policies Reserves Policies Operating Policies Full Compliance Partial Compliance Full Compliance Capital Reserve balance below minimums but total cash above minimum of $414m This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 7 Austin Energy Quarterly Financial Report Financial Performance Measures 8 Financial Performance Measures Standard & Poor’s Global Ratings AA Achieved November 2018 Excessive Liquidity Coverage Efficiency Leverage Deficient Days Cash on Hand Debt Service Coverage Ratio Operating Margins Debt to Capitalization Minimum > 150 Days Minimum > 2.0 Minimum > 10% Minimum < 50% Actual 225 Days Actual 2.7 Actual 5% Actual 51% Excludes General Fund Transfer This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 9 Austin Energy’s Affordability Goal has Two Metrics Financial Performance Measures Compliance Affordability Competitiveness Non-Compliance Affordability Metric Competitiveness Metric Full Compliance Since 2013 Non-Compliance Since 2016 Maintain system average rates at or below 2% annual compound growth rate that began October 2012. Maintain an average annual system rate in the lower 50% of all Texas utilities serving residential, commercial and industrial customers as measured by published data from the Energy Information Administration (EIA) Form 861. This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 10 Austin Energy Quarterly Financial Report Actual to Budget Analysis 11 Actual to Budget Analysis Budget Based Operating Revenues Fiscal Year Through March 31, 2020 $300 $250 $ f o s n o i l l i M $200 $150 $100 $50 $0 Billed Base Power Supply Regulatory Transmission Miscellaneous Community Benefit Actual Budget This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 12 Actual to Budget Analysis Budget Based Operating Expenses Fiscal Year Through March 31, 2020 $ f o s n o i l l i M $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Actual Budget This information is unaudited and should be read in conjunction with the audited Comprehensive Financial This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 13 Actual to Budget Analysis Budget Based Fund Summary Fiscal Year Through March 31, 2020 Variance to Budget Favorable (Unfavorable) Variance to Prior Year Favorable (Unfavorable) Millions of $ Actual Budget Amount % Amount % Prior Year Actual Income (Loss) Before Transfers $(12) (17%) Operating Revenues Operating Expenses Operating Income (Loss) Interest Revenue Debt Service Administrative Support General Fund Economic Development CTM Fund Other City Transfers Internal Transfers / CIP $629 515 $114 7 (60) $61 (15) (56) (5) (6) (0) (44) $(65) $628 502 $126 7 (60) $73 (15) (56) (5) (6) (0) (44) $(53) $1 (13) $(12) 0% (3%) (10%) 0 0 0 0 0 0 0 0 5% 0% 0% 0% 0% 0% 0% 0% $631 523 $108 8 (42) $74 (14) (55) (4) (5) (1) (73) (78) (18) ($13) (2) 8 $6 0 0 0 0 0 0 29 13 0% 1% 5% (9%) (44%) (18%) (2%) (1%) (6%) (12%) 23% 41% 20% Excess (Deficiency) of Revenues $(12) (24%) This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 14 Actual to Budget Analysis Actual to Budget Retail Energy Sales ) h w G ( s r u o H t t a w a g i G 1,600 1,400 1,200 1,000 800 600 400 200 0 Actual Budget This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 15 Actual to Budget Analysis Actual to Budget Non-Power Supply Revenues $ f o s n o i l l i M $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Actual Budget This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 16 Actual to Budget Analysis Actual to Budget Power Supply $ f o s n o i l l i M $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Actual Cost Budget PSA Revenue This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 17 Capital Improvement Plan Summary Actual to Budget Analysis Fiscal Year Through March 31, 2020 Type of Financing Type of Project $21.0 $43.6 $46.6 Cash Debt Contributions in Aid of Construction Distribution District Cooling Transmission Joint Projects General Substations Power Production $0 $20 $80 $100 $60 $40 Millions of $ FY 2020 Spend Plan Year-to-Date This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 18 Power Supply Adjustment Cost Components Twelve Months Ending March 2020 $639 Difference between Load Zone And Power Supply Costs - $233M or 36% $406 $38 $7 ($17) ($261) Owned Assets Load Zone Contracted GreenChoice ® Bilateral Assets and Value of Solar and Hedging Net Power Supply 19 s n o i l l i M $ $700 $600 $500 $400 $300 $200 $100 $0 ($100) ($200) ($300) ($400) t s o C e u n e v e R Austin Energy Quarterly Financial Report Financial Statements 20 Balance Sheet Snapshot $ in Millions Assets Cash Current Assets Capital Assets Long-Term Assets Mar 2019 Mar 2020 $420 266 2,597 1,420 $419 310 3,005 1,845 Capital Reserve $70m Power Supply Stabilization $109m Working Capital and Reserves $705m Working Capital $419m Contingency Reserve $107m Total Assets $4,703 $5,579 Liabilities and Fund Equity Current Liabilities $198 $250 Long-term Liabilities 2,224 2,967 Deferred Inflow of Resources Retained Earnings Total Liabilities & Fund Equity 397 457 1,884 1,905 $4,703 $5,579 $266 $248 $300 $250 $200 $150 $100 $50 $0 $73 $50 $27 2QTR 2019 3QTR 2019 4QTR 2019 1QTR 2020 2QTR 2020 Commercial Paper Program Limits: Tax Exempt $200m Taxable $75m $275m This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 21 GAAP Financial Summary Comparative Statement of Net Position $ in Millions 03/31/2019 03/31/2020 Change Income Statement $ in Millions 12 Months Ending 03/31/2019 03/31/2020 Cash Accounts Receivable (net) Power Supply Under-Recovery Non-PSA Under-Recoveries Debt Service Contingency Reserve Power Supply Stabilization Reserve Capital Reserve Nuclear Decommissioning Reserve Other Restricted Assets Other Assets Capital Assets Total Assets Other Current Liabilities Power Supply Over-Recovery Non-PSA Over-Recoveries Revenue Bonds Commercial Paper Other Long-Term Liabilities Retained Earnings Operating Revenues Power Supply Revenues Power Supply Expenses Non-Power Supply Expenses Depreciation Expense Operating Income/(Loss) Other Revenue (Expense) General Fund Transfer Net Income/(Loss) Debt Service Coverage $876 Debt Equity Ratio $951 463 468 684 167 $95 $45 (110) $30 3.5 44% $968 478 434 711 228 $73 $59 (111) $21 2.7 51% Average Number of Customers Total Sales in Gigawatt Hours 491,294 503,941 5,944 6,138 $420 105 0 2 24 103 106 68 226 115 937 2,597 $4,703 $132 17 24 1,238 248 1,159 1,884 $419 121 7 1 34 107 109 70 233 146 1,326 3,006 $5,579 $143 0 43 73 1,941 1,474 1,905 ($1) 16 7 (1) 10 4 3 2 7 31 389 409 11 (17) 19 703 (175) 314 21 Total Liabilities and Fund Equity $4,703 $5,579 $876 FYTD 2019 FYTD 2020 FYTD 2019 FYTD 2020 This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 22 Austin Energy Quarterly Financial Report COVID-19 Response: $35 million Bill Relief 23 $35 Million in Electric Bill Relief Increase CAP Discount from 10% to 15% Expand Plus 1 assistance program funding and eligibility Reduce all residential billing for Tiers 4 and 5 to Tier 3 in city rate for usage over 1000kwh Reduce Regulatory Charge for all customers © 2018 Austin Energy Identified Relief Strategies • Estimate $35 million in electric bill relief through September 30, 2020 • Rates expected to remain in effect until adoption and implementation of FY 2021 budget • Changes address both financial needs and increased usage • Additional assistance to CAP customers and to others experiencing financial hardship or loss of income • Reduces impact to residential customers using more energy due to Stay Home-Work Safe 25 Strategies Consider Implementation Speed • Structural changes to billing system take minimum 90 days • Adjusting value inputs of existing tiers and discounts are not structural changes and can be implemented quickly • Implementation details for Plus 1 enrollment will continue to be developed – may need other means beyond current partners • Continuing with no disconnects, no late fees, and enhanced payment arrangements 26 $35 million in Electric Bill Relief for FY 2020 • Transfer $5M to the Plus 1 financial aid program from the discount program balance • Increase the CAP Discount from 10% to 15% • Reduce the Regulatory Charge for residential and commercial customers now rather than during the $25M FY21 budget process • Set all residential rates for Tiers 4 and 5 to the current Tier 3 rates for use over 1000 kwh to the inside city Tier 3 rate to reduce premium pricing for those using more energy under Stay Home – Work Safe $5M $1M $4M 27 Ongoing Activities • Monitor COVID-19 impacts on customers needs • Monitor customer consumption by class to understand impacts to customers and Austin Energy • Monitor Bond covenant – we are required to set rates to cover operating costs and 1.5 times debt service • Work with our partner agencies to address immediate and ongoing challenges to enrolling more participants in CAP or Plus 1 • Provide a flexible qualification path for customers who have a Covid- 19 related need 28 Confidential & Proprietary ©2018 Austin Energy. All rights reserved. Austin Energy and the Austin Energy logo and combinations thereof are trademarks of Austin Energy, the electric department of the City of Austin, Texas. Other names are for informational purposes only and may be trademarks of their respective owners.