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AGM Finance Update Derrick Sturge , Vice-President, Finance & CFO June 4, 2014 PowerPoint Presentation
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AGM Finance Update Derrick Sturge , Vice-President, Finance & CFO June 4, 2014. Overview. Financial Reporting 2013 Financial Highlights Financing Growth and Re-investment 2014 Financial Outlook. IFRS and Financial Reporting.

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Presentation Transcript
overview
Overview
  • Financial Reporting
  • 2013 Financial Highlights
  • Financing Growth and Re-investment
  • 2014 Financial Outlook
ifrs and financial reporting
IFRS and Financial Reporting
  • All numbers in this presentation are in accordance with Canadian GAAP
  • Nalcor will be completing transition to International Financial Reporting Standards (IFRS) in 2014
    • Nalcor has previously deferred adoption of IFRS due to uncertainty with regulatory accounting
    • A new standard has been released which will allow Nalcor to continue accounting for its regulatory assets and liabilities under IFRS
  • Beginning with the third quarter of 2014, Nalcor will be issuing its financial statements to the public on a quarterly basis
2013 financial highlights
2013 Financial Highlights
  • Net income of $96 million continues to trend upwards
    • Solid overall financial results
    • Hydro requires new rates to support higher costs and significant re-investment in capital assets
      • A General Rate Application was filed in July 2013; regulatory process is ongoing
  • Continue to invest in all areas of the business
    • Capital expenditures of $1.0 billion were the highest level ever
  • Lower Churchill financing of $5.0 billion completed with financial close in December 2013
    • Interest rates locked in for the life of the debt financing
financial overview
Financial Overview

* 2013 total assets includes $5.0 billion of proceeds from the LCP debt issue

** Before working capital adjustments

capital expenditures millions
Capital Expenditures($ millions)

20132014

Hydro 81 244

CF 49 51

Oil and Gas 195 240

LCP Phase 1 695 1,213

total assets millions
Total Assets($ millions)

20132014

Hydro 1,954 2,074

CF 472 476

Oil and Gas 580 781

LCP Phase 1 6,320 6,685

Investment of proceeds from LCP debt issue

financing growth re invesment
Financing Growth & Re-Invesment
  • Since 2006 all cash generated from operations has been invested back in the business
    • Strong earnings in all business units is key to investment plans
  • Continue to receive equity support from our shareholder
  • Debt Financing
    • Lower Churchill financing completed
    • Multi-year debt financing program for Hydro under development
  • Oil and Gas and Churchill Falls investments all financed by equity
  • Five year outlook on capital structure is in the range of 60% debt /40% equity
lcp financing
LCP Financing
  • Throughout 2013 activities were ongoing to satisfy conditions required to facilitate issuance of $5.0 billion of debt guaranteed by Canada
    • $2.6 billion to Muskrat Falls/Labrador Transmission and $2.4 billion to Labrador-Island Link
    • Commercial Agreements between LCP project entities and Hydro to support financing and secure long-term power supply completed
    • Equity Agreements between Nalcor and LCP project entities completed
    • LCP debt assigned a AAA credit rating
  • The Canada guarantee provided a weighted average interest rate of 3.8% which is locked in for 35 years for MF/LTA and 40 years for LIL
    • Provides savings of over $1 billion over the life of the project on a discounted basis
hydro financing
Hydro Financing
  • Hydro has not issued long-term debt since 2006
  • Over the next five years Hydro’s capital program will be approximately $1.2 billion
    • Ongoing and growing re-investment in existing assets
    • New 100 MW gas turbine at Holyrood
    • New transmission line in Labrador West
    • New transmission line from Bay D’Espoir to Western Avalon
  • In addition several existing bond issues will mature during this period
  • These expenditures will be financed through the issue of long-term debt and internally generated equity
2014 financial outlook
2014 Financial Outlook
  • Forecasting higher net income in 2014, primarily driven by:
    • Increased oil production
    • Stronger electricity prices in the US markets
    • Approval of rate increase for Hydro
  • Forecast capital expenditures $1.8 billion
    • Ramp up in construction activities for Muskrat Falls ($1,213 million)
    • Continued re-investment in Hydro and Churchill Falls ($295 million)
    • Continue to invest in offshore oil projects ($240 million)
summary
Summary
  • New investments starting to produce cash flow
    • Growth in income and cash from operations to continue over next several years, leading up to Hebron and Muskrat Falls in-service
  • Capital expenditures at highest levels ever in each business unit
  • Financing for Lower Churchill completed
  • Financing program for Hydro investments under development
  • Continue to re-invest 100% of our cash generated by operations back in the business
  • Strategy developed in 2006 to finance growth and re-investment and make sound long-term investments is playing out as planned