Item 9: 3QTR21 Financial Report — original pdf

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Item 9 Austin Energy Quarterly Financial Report 3rd Quarter FY 2021 (April - June) Stephanie Koudelka Director of AE Finance - Accounting Aug 19, 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 Generally compliant with all financial policies. Contingency and Capital Reserve balances below minimums but total cash above minimum of $457m. $ 843 Million Revenues Operating revenues at June are 14% under budget due to decreased Power Supply Revenue due to the February winter storm. Balance sheet is liquid and adequately capitalized. Working Capital increased $11M primarily due to changes in PSA recovery, offset by decreased Base Revenue. Generally meeting financial metrics supporting AA credit rating. $645 Million Expenses Operating expenses are 17% under budget due to lower Power Supply costs due to the February winter storm. Austin Energy’s credit rating was affirmed by S&P in July. S&P removed Negative Watch but replaced with Negative Outlook. 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 Partial Compliance Partial Compliance Full Compliance Debt Service Coverage 1.9x at June 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 239 Days Actual 1.9 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 June 30, 2021 $ f o s n o i l l i M $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 $287.4 $171.0 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 12 Actual to Budget Analysis Budget Based Operating Expenses Fiscal Year Through June 30, 2021 $246.6 $140.6 $ f o s n o i l l i M $300 $250 $200 $150 $100 $50 $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 June 30, 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 $843 645 $198 2 (105) $95 (23) (86) (6) (11) (3) (2) (79) $977 775 $202 7 (109) $100 (23) (86) (6) (12) (3) (2) (40) ($72) ($134) 130 ($4) (5) 4 ($5) 0 0 0 0 0 0 (39) ($43) (14%) 17% (2%) (71%) 4% (4%) 0% 0% 0% 0% 0% 0% (97%) (59%) $958 758 $200 9 (99) $110 (22) (83) (7) (13) 0 (2) (62) ($79) ($115) 113 (2) (7) (6) ($15) (1) (2) 0 (1) (3) 0 (17) ($36) Excess (Deficiency) of Revenues ($115) 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%) 15% (1%) (78%) (6%) (15%) (6%) (3%) 8% 9% 0% (2%) (27%) (45%) 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 June 30, 2021 Type of Financing Type of Project 30% 12% 58% 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 June 2021 $2,071 Difference between Load Zone And Power Supply Costs $1.8B or 88% $255 ($12) ($60) ($358) ($1,386) 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 Jun 2020 Jun 2021 $370 336 2,961 1,894 $381 408 3,054 2,107 Capital Reserve $70m Power Supply Stabilization $110m Working Capital and Reserves $669m Working Capital $381m Contingency Reserve $108m Total Assets $5,561 $5,950 Liabilities and Fund Equity Current Liabilities $252 $294 Long-term Liabilities 3,011 3,243 Deferred Inflow of Resources Retained Earnings Total Liabilities & Fund Equity 453 615 1,845 1,798 $5,561 $5,950 $162 $150 $128 $200 $100 $50 $0 $63 $37 $13 3QTR 2020 4QtR 2020 1QtR 2021 2QTR 2021 3QTR 2021 Commercial Paper Program Limits: Tax Exempt $200m Taxable $100m $300m 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 6/30/2020 6/30/2021 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 $370 154 5 $381 $11 191 37 0 (5) 1,354 0 27 107 110 70 235 21 21 28 1 108 1 110 - 70 - 240 5 168 143 (25) 1,604 250 2,961 3,054 93 389 198 35 121 121 18 (14) 2,070 158 63 (65) 1,682 201 1,845 1,798 (47) 389 5,561 163 0 32 1,912 128 1,481 5,950 5,950 5,561 Income Statement $ in Millions 12 Months Ending 6/30/2020 6/30/2021 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 $967 462 413 733 281 $2 $79 (111) ($30) 2.3 53% $949 308 254 769 287 ($53) $119 (113) ($47) 1.9 54% Average Number of Customers Total Sales in Gigawatt Hours 505,362 518,306 9,206 8,991 2.6% (2.3%) 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 Standard & Poor’s Credit Rating Update Winter Storm Uri Financial Summary • Net revenue position Resilient generation fleet • Wholesale market over recovery Rating actions post-Uri update • • 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 24 Standard & Poor’s Rating Action Summary Rating Action Factors March 2021 • Placed on Credit Watch (most ERCOT utilities) • Maintained AA credit rating • Market uncertainty • Regulatory environment July 2021 Rating Action • Removed Credit Watch • Reaffirmed AA credit rating • Moved from Stable Outlook to Negative Outlook Factors Limited exposure to ERCOT market price volatility this summer • • Current - dispatchable generation tempers sizable intermittent renewable portfolio • Future operating risk – greater reliance on renewable resources 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 25 Austin Energy Credit Strengths Austin Energy Credit Summary • Healthy liquidity and stable coverage metrics Competitive, adjustable rates Robust Austin economy • • • • Continued coordination with Market Ops and Power Production AA credit rating = low borrowing rates for customers 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 26 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.