Item 10: 2nd Qtr Financial Briefing — original pdf

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Item 10 Austin Energy Quarterly Financial Report 2nd Quarter FY 2021 (January - March) Mark Dombroski Chief Financial Officer May 13, 2021 © 2018 Austin Energy Disclaimer Certain information set forth in this presentation contains forecasted financial information. Forecasts necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance. Although the forecasted financial information contained in this presentation is based upon what Austin Energy management believes are reasonable assumptions, there can be no assurance that forecasted financial information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such forecasts. In addition, this presentation contains unaudited information and should be read in conjunction with the audited Comprehensive Annual Financial Reports for the City of Austin, which was published on March 18, 2021: https://assets.austintexas.gov/financeonline/downloads/comprehensive_annual_financial_report/comprehensi ve_annual_financial_report_2020.pdf 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. Contingency and Capital Reserve balances below minimums but total cash above minimum of $457m. $ 501 Million Revenues Operating revenues at March are 22% under budget due to decreased Power Supply Revenue due to the February winter storm. Balance sheet is liquid and adequately capitalized. Cash increased $42m primarily due to ERCOT settlement revenue related to the February winter storm. Generally meeting financial metrics supporting AA credit rating (reaffirmed October 2020). Received credit upgrade from Fitch Ratings in May 2019. $372 Million Expenses Operating expenses are 28% under budget due to lower Power Supply costs due to the February winter storm. The COVID pandemic has compounded the trends of an increasing number of customers with lower consumption per customer resulting in a deficiency of revenues. 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 Contingency and Capital Reserve balance below minimums but total cash above minimum of $457m 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 AA Standard & Poor’s Global Ratings 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 271 Days Actual 2.0 Actual -4% Actual 54% 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 Full Compliance Since 2019 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, 2021 $300 $250 $ f o s n o i l l i M $200 $150 $100 $50 $0 $187.0 $57.0 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, 2021 $160.4 $39.2 $ 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, 2021 Variance to Budget Variance to Prior Year Favorable (Unfavorable) Favorable (Unfavorable) Millions of $ Actual Budget Amount % Prior Year Actual Amount Operating Revenues Operating Expenses Operating Income (Loss) Interest Revenue Debt Service Income (Loss) Before Transfers Administrative Support General Fund Economic Development CTM Fund Voluntary Utility Assistance Fund Other City Transfers Internal Transfers / CIP Excess (Deficiency) of Revenues $501 372 $129 2 (65) $66 (16) (57) (4) (8) 0 (2) (30) ($51) $639 514 $125 5 (64) $66 (16) (57) (4) (8) 0 (3) (30) ($52) ($138) 142 $4 (3) (1) $0 0 0 0 0 0 1 0 $1 (22%) 28% 3% (66%) (2%) 0% 0% 0% 0% 0% 0% 0% 0% 0% $629 514 $115 7 (60) $62 (15) (55) (4) (6) 0 (1) (44) ($63) ($128) 142 14 (5) (5) $4 (1) (2) 0 (2) 0 (1) 13 $12 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 % (20%) 28% 12% (79%) (8%) 5% (6%) (3%) 0% (20%) (0%) (80%) 30% 20% 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 $45 $25 $5 -$15 -$35 -$55 -$75 -$95 -$115 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, 2021 Type of Financing Type of Project 22% 35% 43% Cash Debt Contributions in Aid of Construction Distribution District Cooling Transmission Joint Projects General Substations Power Production $0 $50 $100 $150 Millions of $ FY 2021 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 2021 $2,007 Difference between Load Zone And Power Supply Costs $1.7B or 88% $244 ($12) ($55) ($344) ($1,352) Load Zone Owned Assets Contracted Assets GreenChoice ® and Value of Solar Bilateral and Hedging Net Power Supply 19 $2,500 $2,000 $1,500 $1,000 s n o i l l i M $ $500 $0 ($500) ($1,000) ($1,500) ($2,000) 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 2020 Mar 2021 $419 309 2,973 1,846 $461 376 3,013 2,108 Capital Reserve $70m Power Supply Stabilization $110m Working Capital and Reserves $749m Working Capital $461m Contingency Reserve $108m Total Assets $5,547 $5,958 Liabilities and Fund Equity Current Liabilities $249 $269 Long-term Liabilities 2,968 3,238 Deferred Inflow of Resources Retained Earnings Total Liabilities & Fund Equity 457 624 1,873 1,827 $5,547 $5,958 $162 $128 $73 $200 $150 $100 $50 $0 $37 $13 2QTR 2020 3QTR 2020 4QtR 2020 1QtR 2021 2QTR 2021 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 3/31/2020 3/31/2021 Change 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 Total Liabilities and Fund Equity $419 121 7 $461 $42 170 49 0 (7) 1,327 1 34 107 109 70 14 11 10 36 2 108 1 110 1 70 - 19 5 365 370 5 1,590 264 2,973 3,013 40 411 157 15 139 139 19 (24) 2,104 163 37 (36) 1,675 200 1,873 1,827 (46) 411 5,547 142 0 43 1,941 73 1,475 5,958 5,958 5,547 Income Statement $ in Millions 12 Months Ending 3/31/2020 3/31/2021 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 Debt Capital Ratio $968 478 434 711 260 $41 $59 (111) ($11) 2.7 52% $947 296 244 765 284 ($50) $117 (113) ($46) 2.0 54% Average Number of Customers Total Sales in Gigawatt Hours 503,941 515,249 6,138 5,940 2.2% (3.2%) 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 FYTD 2020 FYTD 2021 FYTD 2020 FYTD 2021 Austin Energy Quarterly Financial Report Market and Industry Analysis 23 Trends in Customers and Retail Sales Growth in customer count does not translate to growth in sales Retail Sales Trend Line Millions of Kwh 13,600 13,400 13,200 13,000 12,800 12,600 12,400 Customers 540,000 520,000 500,000 480,000 460,000 440,000 420,000 FY 2016 Actual FY 2017 Actual FY 2018 Actual FT 2019 Actual FY 2020 Actual FY 2021 Forecast FY 2022 Forecast Number of Customers Retail Sales in Kwh* Linear (Retail Sales in Kwh*) * Retail sales in Kwh not adjusted for weather 24 Declining Consumption per Customer Residential Sales Per Household Commercial Sales Per Customer l s e a S H W M l a u n n A 12.50 12.00 11.50 11.00 10.50 10.00 l s e a S H W M l a u n n A 160 155 150 145 140 135 130 125 120 115 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Historical (MWh) Weather Normalized (MWh) Historical (MWh) Weather Normalized (MWh) 25 FY 2020 Average Residential kWh per Bill Residences have become increasingly more energy efficient All Residences Overall, 862 3 0 7 2 2 7 3 8 6 1 7 6 4 6 6 6 9 5 8 7 4 9 0 4 9 0 9 3 7 8 L L I B R E P H W K 2 1 0 2 e r P L L I B R E P H W K 2 1 0 2 e r P Single Family Overall, 1123 1 4 1 , 1 5 4 1 , 1 8 6 1 , 1 8 8 1 , 1 9 6 0 , 1 5 1 0 , 1 1 4 9 Multi-Family 1 5 8 2 5 7 9 5 6 Overall, 613 8 3 5 2 1 5 8 5 5 1 3 5 2 9 4 4 1 5 4 5 4 4 6 3 6 3 3 L L I B R E P H W K 4 5 6 2 1 0 2 e r P 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 YEAR RESIDENCE BEGAN SERVICE YEAR RESIDENCE BEGAN SERVICE YEAR RESIDENCE BEGAN SERVICE 26 Tiered Rates: Customer Bill Stability and Revenue Impacts Growth in new residential customers is aggregated in lower tiers Inclined Block Rates FY2022 Residential Tier Distribution 76% of sales 60% of revenue 12% of sales 21% of revenue Austin Energy adopted a 5-tiered residential block structure in 2013 and set the rates for tiers 1 and 2 below cost of service while tiers 4 and 5 are significantly above cost. Consumption in tiers 4 and 5 have decreased 14% since 2012. Declining average consumption aggregates energy sales into the lower tiers jeopardizing Austin Energy’s ability to recover costs and customers’ bill stability especially during weather events. 60% 40% 20% 0% 29% 31% 50% 26% 19% 12% 14% 8% Tier 1 Tier 2 Tier 3 Tier 4 kWh % Energy Charge Revenue % 7% 4% Tier 5 27 COVID Impact: Residential Weekly Consumption Patterns Residential (GWh) Actual Model Prior Year 3 per. Mov. Avg. (Actual) March 13, 2020 Stay Home-Work Safe 160 140 120 100 80 60 40 20 0 J a n ' 2 0 F e b ' 2 0 M a r ' 2 0 A p r ' 2 0 M a y ' 2 0 J u n ' 2 0 J u l ' 2 0 A u g ' 2 0 S e p ' 2 0 O c t ' 2 0 N o v ' 2 0 D e c ' 2 0 J a n ' 2 1 28 COVID Impact: Commercial Weekly Consumption Patterns Excludes Primary Customers Secondary Voltage Commercial (GWh) Actual Model Prior Year 3 per. Mov. Avg. (Actual) March 13, 2020 Stay Home-Work Safe 160 140 120 100 80 60 40 20 0 J a n ' 2 0 F e b ' 2 0 M a r ' 2 0 A p r ' 2 0 M a y ' 2 0 J u n ' 2 0 J u l ' 2 0 A u g ' 2 0 S e p ' 2 0 O c t ' 2 0 N o v ' 2 0 D e c ' 2 0 J a n ' 2 1 29 COVID Impact on Base Revenues Forecasted 2022 base revenue is $14M less than Pre-COVID estimates Millions of $ Over $40M reduction in estimated base revenue from FY2020 thru 2021 $628.6 $633.6 $617.5 $638.7 $614.7 $643.9 $629.5 $650.0 $645.0 $640.0 $635.0 $630.0 $625.0 $620.0 $615.0 $610.0 $605.0 $600.0 FY2019 Actual FY2020 Actual FY2021 Estimate FY2022 Forecast Base Revenues Base Revenues (No COVID Impact) 30 Trends in Revenues and Requirements COVID has compounded the effects of flat consumption Millions of $ $1,150.0 $1,100.0 $1,050.0 $1,000.0 $950.0 $900.0 FY2019 Actual FY2020 Actual FY2021 Estimate FY2022 Forecast Non-Power Revenues Non-Power Requirements 31 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.