20110527Williams Di.pdf

RECEIVED
20ff MAY 27 AM fOt 54
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE )
APPLICATION OF ROCKY )
MOUNTAIN POWER FOR )
APPROVAL OF CHAGES TO ITS )
ELECTRIC SERVICE SCHEDULES )
AND A PRICE INCREASE OF $32.7 )
MILLION, OR APPROXIMATELY )15.0 PERCENT )
CASE NO. PAC-E-l1-12
Direct Testimony of Bruce N. Wiliams
ROCKY MOUNTAIN POWER
CASE NO. P AC-E-l1-12
May 2011
1 Q.
2
3 A.
Please state your name, business address and present position with Rocky
Mountain Power (the "Company"), a division of PacifCorp.
My name is Bruce N. Willams. My business address is 825 NE Multnomah, Suite
4 1900, Portland, Oregon 97232. My present position is Vice President and
5 Treasurer.
6 Qualifications
7 Q.
8 A.
9
10
11
12
13
14
15 Q.
16 A.
17
18
19
20
21 Q.
22 A.
23
Please describe your education and business experience.
I received a Bachelor of Science degree in Business Administration with a
concentration in Finance from Oregon State University in 1980. I also received
the Charered Financial Analyst designation upon passing the examination durng
1986. I have been employed by the Company for 25 years. My business
experience has included financing of the Company's electric operations and non-
utilty activities, responsibility for the investment management of the Company's
qualified and non-qualified retirement plan assets, and investor relations.
Please describe your present duties.
I am responsible for the Company's treasur, credit risk management, pension
and other investment management activities. I am also responsible for the
preparation of PacifiCorp's embedded cost of debt and preferred equity and any
associated testimony related to capital strctue for regulatory fiings in all of
PacifiCorp's state and federal jurisdictions.
Please provide a summary of your testimony?
My testimony discusses the Company's capital strctue and costs of capitaL. It
supports the proposed common equity level of 52.3 percent and provides evidence
Wiliams, Di - 1
Rocky Mountain Power
1
2
3
4
5
6
7 Q.
8 A.
9
10
of why that level is appropriate and demonstrates the benefits to customers,
including maintaining the Company's curent credit ratings which wil faciltate
continued access to the capital markets for the Company and over the long-term a
more competitive cost of debt and overall cost of capitaL. This capital strctue is
necessary to enable the Company to continue to invest in infrastrctue in order to
provide safe and reliable service to our customers at reasonable costs.
What is the overall cost of capital that you are proposing in this proceeding?
Rocky. Mountain Power is proposing an overall cost of capital of 8.25 percent.
This cost includes the retu on equity recommendation of 10.5 percent from Dr.
Samuel C. Hadaway and the following capital strctue and costs:
Overall Cost of Capital
Component
Long Term Debt
Preferred Stock
Common Stock Equity
Total
Percent of
Total
47.4%
0.3%
52.3%
100.0%
%
Cost
5.78%
5.43%
10.50%
8.25%
Weighted
Average
2.74%
0.02%
5.49%
11 Financing Overview
12 Q.
13 A.
14
15
16
17
18 Q.
19 A.
Please explain Rocky Mountain Power's need for and sources of new capitaL.
Rocky Mountain Power is in the process of adding significant new plant
investments over multiple years. These investments include required pollution
control equipment, generation upgrades, and transmission facilities. These
investments help system reliabilty, improve power delivery and help to assure
safe operations for the benefit of its customers.
How does the Company finance its electric utilty operations?
Generally, the Company finances its regulated utilty operations utilizing
Willams, Di - 2
Rocky Mountain Power
1
2
3
4
5
6
7
8
9
10
11
12 Q.
13
14 A.
15
16
17
18
19
20
21
22
23
approximately a 50/50 percent mix of debt and common equity capitaL.
Immediately prior to and durng periods of signficant capital expenditues, the
Company may allow the common equity component of the capital strctue to
increase. This provides more flexibility regardig the type and timing of debt
financing, better access to the capital markets, a more competitive cost of debt,
and over the long-run, more stable credit ratings; all of which assist in fiancing
such expenditues. In addition, all else being equal, the Company wil need to
have a greater common equity component to offset varous adjustments that rating
agencies make to the debt component of the Company's published fmancial
statements. I wil discuss these adjustments in greater detail later in this
testimony.
Has the Company recently begun paying dividends to MidAmerican Energy
Holdings Company ("MEHC")?
Yes. With the passage of recent legislation enacting bonus depreciation, the
Company's expected net cash flow durg the next two years wil increase
significantly. This will reduce but not eliminate the need for new borrowings and,
absent the payment of dividends, retention of earings could cause the percentage
of common equity to grow beyond the level necessar to support the curent
credit ratings. Consequently, dividend payments are now necessary, in
combination with debt issuances, to keep the percentage of equity in the
Company's capital strctue in line with the level sufficient to support the
Company's credit ratings. As a result, the Company has initiated the payment of
dividends to MEHC to continue to manage the common equity component of the
Wiliams, Di - 3
Rocky Mountain Power
1
2 Q.
3 A.
4
5
6
7
.8
9
10
11
12
13
14
15 Q.
16
17 A.
18
19
20
21
22
23
capital strctue and keep the Company's overall cost of capital at a prudent leveL. .
Please explain why dividends were not paid to MEHC in the past.
Since the acquisition in 2006 by MEHC, the Company has managed the capital
strctue through the timing and amount of long-term debt issuances and capital
contrbutions while forgoing any common dividend distrbutions. MEHC
recognizes that the Company is in a period requirng significant capital
investment which, until recently, has far exceeded the Company's abilty to
finance with internally generated fuds. As such, MEHC allowed the Company to
retain earnings totaling over $2 bilion and even increased its investment in the
Company by more than $1 bilion in order to enable the Company to finance
capital investment and help maintain the credit ratings during this period of
capital spending. As I wil discuss later, the maintenance of credit ratings has
allowed the Company to access the capital markets when other utilities were
denied access, provided a lower cost of debt and a lower overall cost of capitaL.
Shouldn't the additional cash flow generated by the tax law changes mitigate
the need for a rate increase?
Only to a limited extent. Bonus depreciation provides a temporary cash flow
benefit to the Company in the form of accelerated tax benefits, but this cash
benefit does not translate one-for-one into a reduction in revenue requirements.
Income tax expense, a component of revenue requirements, generally is
unchanged as a result of bonus depreciation, as the curent income tax benefits
received from bonus depreciation generally are fully offset by additional deferred
income tax expenses. Customers receive benefits from bonus depreciation in the
Willams, Di - 4
Rocky Mountain Power
1 form of increased deferred income tax liabilities, which reduces rate base and by
2 lower equity levels carred in the Company's capital strctue than would
3 otherwise be the case without the benefits of bonus depreciation. This capital
4 strctue with a lower equity level stil produces financial results that meet the
5 rating agency's expectations due to the improved cash flow metrcs resulting from
6 bonus depreciation.
7 Credit Ratings
8 Q.Why should this Commission be concerned about credit ratings and the
9
10 A.
11
12
13
14
15
16
17
18
19
20
21
22
23
views expressed by rating agencies?
This Commission should be concerned about credit ratings and the views of rating
agencies for several reasons. First, the credit rating of a utility has a direct impact
on the price that a utility pays to attact the capital necessar to support its curent
and futue operating needs. Many institutional investors have fiduciar
responsibilities to their clients, and are tyically not permitted to purchase non
investment grade (i.e. rated below BBB-) securties or in some cases even
securties rated below a single A.
Second, credit ratings are an estimate of the probability of default by the
issuer on each rated securty. Lower ratings equate to higher risks and higher costs
of debt. However, even investment grade rated borrowers have experienced recent
problems accessing the capital markets or even been shut out entirely. The
financial crisis of 2008 and 2009 provided clear and compellng evidence of the
benefits of the Company's credit rating as it was able to issue new long-term debt
durng the midst of the financial tuoiL. Other lower rated utilties were simply
Wiliams, Di - 5
Rocky Mountain Power
1
2
3 Q.
4
5 A.
6
7
8
9
10
11
12
13
14
15
16
17 Q.
18
19 A.
20
21
22
23
shut out of the market and could not obtain new capital regardless of how much
they were wiling to pay.
Can you give the Commission examples where poor credit ratings hurt a
utility's flexibilty in the credit markets?
Yes. Arzona Public Service Company (rated at that time Baa2/BBB-) fied a
letter with the Arzona Corporation Commission durng October 2008 stating that
the commercial paper market was completely closed to them and, they likely
could not successfully issue long-term debt. See Exhibit No.5, APS Access to
Corporate Debt Markets.
Furher, those issuers who could access the markets paid rates well above
the levels that the Company was able to achieve. For example, Nevada Power
(rated Baa3/BBB) issued new debt two days following PacifiCorp's January 2009
issuance and was required by investors to pay a coupon of 7.375% for a five year
matuty. Subsequently, Puget Sound Energy (rated Baa2/A-) issued new seven
year debt at a credit spread over Treasures of 480.3 basis points resulting in a
6.75 percent coupon.
How do these coupon rates compare to PacifiCorp during that period and
more recently?
The Company completed in Januar 2009 an offerig of $350 millon of first
mortgage bonds with a 10 year matuity at a coupon rate of 5.50 percent and $650
millon of 30 year first mortgage bonds with a coupon of 6.00 percent. The
Company was able to achieve both a longer matuty and lower cost than either of
those other utilities.
Wiliams, Di - 6
Rocky Mountain Power
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16 Q.
17 A.
18
19
20
21
22
23
More recently, the Company completed an issuance of $400 million of
first mortgage bonds at a coupon rate of 3.85 percent which compares very
favorably to debt issuances by similarly or higher rated utilty issuers including
Pacific Gas & Electric Company, The Detroit Edison Company and Southern
California Edison Company. This favorable debt rate is included in the cost of
debt calculation in this docket.
Furer, the Company has a near constant need for short-term liquidity as
well as periodic long-term debt issuances. We daily pay significant amounts to
suppliers whom we count on providing necessary goods and services such as fuel
and spare pars and inventory. Being unable to access fuds can risk the
successful completion of necessary capital infrastrctue projects and would
increase the chance of outages and service failures over the long-term.
The Company's creditworthiness, as reflected in its credit ratings, wil
strongly influence its ability to attact capital in the competitive markets and the
resulting cost of that capitaL.
Can regulatory actions or orders affect a Company's credit rating?
Yes, in a very significant way. Regulated utilities such as the Company are fairly
unique since they unilaterally cannot set their own prices for their services. The
fmancial integrty of a regulated utility is largely a result of how the utilty is
treated on cost recovery issues and the prices set by regulators. Rates are
established by regulators to permit the utilty to recover prudently incured
operating expenses and a reasonable opportity to ear a fair retu on the
capital invested. Therefore, rate decisions by utility commissions have a direct
Wiliams, Di - 7
Rocky Mountain Power
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15 Q.
16
17 A.
18
19
20
21
22
23
24
25
and significant impact on the financial condition of utilities.
Rating agencies and investors have a keen understanding of the
importnce of regulatory outcomes. For example, Standard & Poor's wrtes:
"(t)he assessment of reguatory risk is perhaps the most importt factor in
Standard & Poor's Ratings Services' analysis of U.S. regulated, investor-owned
utilty's business risk."i Similarly, Moody's has stated:
(f)or a regulated utilty, the predictability and supportiveness of the
regulatory framework in which it operates is a key credit
consideration and the one that differentiates the industr from most
other corporate sectors. The most direct and . obvious way that
regulation affects utilty credit quality is through the establishment
of prices or rates for the electrcity, gas and related services
provided (revenue requirements) and by determining a retu on a
utility's investment, or shareholder return.2
How does maintenance of the Company's current credit ratings benefit
customers?
The Company is in the midst of a period of heavy capital spending and investing
in infrastructue in order to provide for the needs of customers. If the Company
does not have consistent access to the capital markets at reasonable costs these
borrowings and the resulting costs of building new facilities become more
expensive than it otherwise would be. The inability to access fmancial markets
can threaten the completion of these necessar projects which, in tu, wil impact
system reliability and customer safety. All of these resulting higher costs are
ultimately borne by the customers. Maintaining the curent single-A credit rating
makes it more likely the Company wil have access to the capital markets at
1 Standard & Poor's Ratings Direct - Assessing U.S. Utility Regulatory Environments; March 11,2010.
2 Moody's Investors Service Regulated Electrc and Gas Utilities; August 2009.
Wiliams, Di - 8
Rocky Mountain Power
1
2
3
4 Q.
5 A.
6
7
8
9
10
11
12
13
14 Q.
15
16 A.
17
18
19
20
21
reasonable costs even during periods of financial turmoiL. Such a rating wil allow
the Company continued access to the capital markets that wil enable it to fulfill
its capital investments for the benefit of customers.
Are there other identifiable advantages to a favorable rating?
Yes. Higher-rated companies have greater access to the long-term markets for
power purchases and sales. Such access provides these companies with more
alternatives when attempting to meet the curent and futue load requirements of
their customers. Additionally, a company with strong ratings will often avoid
having to meet costly collateral requirements that are tyically imposed on lower-
rated companies when securg power in these markets.
In my opinion, maintaining the curent single-A rating provides the best
balance between costs and continued access to the capital markets which is
necessary to fud capital projects for the benefit of customers.
Is the proposed capital structure consistent with the Company's current
credit rating?
Yes. This capital strctue is intended to enable the Company to deliver its
required capital expenditures and achieve fmancial metrics which wil meet rating
agency expectations. S&P has stated very clearly their expectations for
PacifiCorp: "we expect FFO to total debt and FFO interest coverage wil be in the
high teens and the 4.0x - 4.5x range, respectively. We view these cash flow levels
as minimum levels to retain the rating.,,3
3 Standard & Poor's Ratings Direct April 28, 2011.
Wiliams, Di - 9
Rocky Mountain Power
1 Q.
2
3 A.
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Does the Company's credit rating benefit because of MEHC and its parent
Berkshire Hathaway?
Yes. Although ring fenced, historically, the Company's credit ratios have been
weak for the ratings level and we have been able to sustain our ratings, in par
through the acquisition by MEHC and its parent, Berkshire Hathaway. S&P was
very clear on this point in their recent assessment of PacifiCorp in stating
".. ..cash flows metrcs remain just adequate to support the ratings." S&P fuer
stated:
.....the Company's funds for operations (FFO) to total debt has
been consistently in the high teens, slightly below our expected
credit metrcs for the rating, since it was acquired by (MEHC).
Leverage has also been somewhat high for the ratig at 53 percent
at year-end 2009. However, we expect that credit metrcs wil
improve in the coming years, producing FFO total debt in the area
of20 percent, FFO interest coverage ....in the range of 4.0x - 4.5x,
and leverage of about 50 percent.4
Clearly, Rocky Mountain Power and its customers have benefited from the
higher ratings the Company would otherwise not likely have been awarded on a
stand-alone basis. Another important element supporting the Company's curent
ratings is the rating agencies' expectations that Rocky Mountain Power wil
receive supportive regulatory treatment including reasonable outcomes in rate
proceedings, including applications to recover the full cost of large scale capital
projects. Absent ownership by MEHC and constrctive regulatory treatment that
permits a fair opportity for the Company to recover its reasonable and prudent
expenses, including a retu on its investment comparable to other similarly
4 Stadard & Poor's Rating Direct October 7, 2010.
Wiliams, Di - 10
Rocky Mountain Power
1
2
3 Q.
4
5 A.
6
7
8 Q.
9 .A.
10
11
12
13
14
15
16
17
18
19
20
21
22
situated utilities, PacifiCorp's senior secured and corporate credit ratings would
have likely suffered at least a one rating level downgrade.
Has there been any changes in the Company's credit ratings that needs
clarification?
Yes. In March 2009, S&P upgraded PacifiCorp's senior secured debt to 'A' while
it downgraded PacifiCorp's short-term debt ratings to 'A-2'. Similarly, Moody's
revised PacifiCorp's senior secured debt to 'A2' from 'A3' in August 2009.
Please explain these rating changes.
The action on PacifiCorp's senior secured debt merely reflects a change in S&P's
methodology rather than a change in PacifiCorp's credit quality or fmancial
metrcs. S&P changed its approach to estimating the amount of collateral that
would be available to senior secured debt holders in the event of a default by
PacifiCorp on its first mortgage bonds.
S&P has been cautious about PacifiCorp credit metrics and, as noted
previously, views the Company's credit metrics on a stand-alone basis as just
adequate to support the ratings. Indeed, in downgrading the Company's short-
term debt ratings, S&P cited a need to take a firmer view on lining PacifiCorp
short-term ratings to stand-alone credit quality. S&P sustained their curent 'A-'
corporate credit ratig based on their expectation "that management wil achieve
cash flow metrics more consistent with an 'A' rating over the next several years."s
The upgrade of the Company's senior secured debt by Moody's was part
of an industr-wide action in which the majority of senior secured debt ratings of
5 Standard & Poor's Rating Direct April 30, 2010.
Wiliams, Di - 11
Rocky Mountain Power
1
2
3
4 Q.
5
6
7 A.
8
9
10
11
12
13
14
15
16
17 Q.
18
19 A.
20
21
22
investment-grade regulated utilities were upgraded by one leveL. The action was a
result of Moody's analysis of the history of regulated utilty defaults and was not
specific or unique to the Company.
Do S&P's recent credit reports on PacifiCorp underline S&P's expectation
that PacifiCorp improve its financial metrics in order to maintain its current
credit rating?
Yes. S&P made several references to the need for PacifiCorp to improve its stand-
alone fmancial metrcs, noting that PacifiCorp's fmancial risk profie reflects a
large capital program and the need to shore up cash flow metrics. S&P also stated
that, "(gJiven the recent tuoil in both the liquidity and capital markets, we have
taken a firmer view on the need to lin the PacifiCorp short-term ratings to its
stand-alone quality, which supports an 'A-2' short-term ratig." S&P also
reiterated its credit view that, "supportive rate case outcomes remain key to
maintaining and improving upon the company's fmancial pedormance." Exhibit
Nos. 6, 7, 8 are the April 28, 2011, October 7, 2010, and April 30, 2010, S&P
Ratings Direct publications.
Do other rating agencies share S&P's view concerning the need for
supportive rate case outcomes?
Yes. Fitch stated, "(tJhe curent ratings and stable outlook assume (PacifiCorpJ
continues to benefit from parent company support and reasonable outcomes in
pending and futue rate proceedings to recover anticipated, significant capital
investment.,,6 More recently, Fitch wrote:
6 Fitch Ratings - October 1, 2010.
Wiliams, Di - 12
Rocky Mountain Power
1 "Given the size of its planned capital investment, timely recovery
2 of capital and related operating and maintenance costs is crucial for
3 PPW's creditworthiness. Therefore, curently unanticipated
4 adverse developments in PPW's six regulatory jursdictions,
5 leading to greater regulatory lag or lower recoveries, and resulting
6 weaker coverage ratios compared with Fitch's projections could
7 lead to futue deterioration in PPW's creditworthiness and lower
8 credit ratings."? Likewise Moody's lists "Reasonably supportive
9 regulatory environment" as one of the ratings drvers. Moody's
10 also states, "The stable outlook incorporates Moody's expectation
11 that PacifiCorp wil continue to receive reasonable regulatory
12 treatment for the recovery of its higher capital expenditues. ..."
13 Further as to what could change the rating-down; Moody's wrtes
14 " .. ...if there were to be adverse regulatory rulings on curent and
15 futue rate cases such that we would anticipate a sustained
16 deterioration in fmancial metrcs...,,8
17 Capital Structure
18 Q.How did the Company determine the capital structure proposed in this case?
19 A.The test period in this proceeding is the 12 months ending December 31, 2010,
20 with known and measurable changes though December 2011. To appropriately
21 match the Company's costs with customer prices durng the period, the capital
22 strctue is based on the actual capital strctue at March 31, 2011, and forecasted
23 capital activity, including known and measurable changes, through December 31,
24 2011. The Company has averaged the five quarer end capital strctues measured
25 beginning at December 31,2010, and concluding with December 31, 2011. The
26 capital activity includes known matuties of certain debt issues that were
27 outstanding at December 31, 2010, subsequent issuances of long-term debt and
28 the payment of dividends. The known and measurable changes represent actual
29 and forecasted capital activity since March 31, 2011.
7 Fitch Ratings - January 6, 2011.
8 Moody's Investor Service May 9, 2011.
Wiliams, Di - 13
Rocky Mountain Power
1 Q.Why is Rocky Mountain Power using an average of five quarter ends to
2 determine the proposed capital structure rather than simply an average of
3 the beginning and ending points as in previous cases?
4 A.As the Company has grown, its capital expenditue program has increased
5 significantly from historical levels which, in tu, have required new financings to
6 also be much larger. These larger financings are usually more efficient due to
7 lower transactional costs, and better received by investors who value the greater
8 liquidity that larger financings tyically offer. However, the trade-off is greater
9 volatility in the Company's capital strctue ratios, paricularly at quarter-end
10 following sizable fmancings. As such, the Company is proposing in this case to
11 use a capital strctue that employs an average of the five quarter ending balances
12 spanning the test period to help smooth out this volatilty. This is also the same
13 methodology the Company used in its most recent rate case, Case No. PAC-E-I0-
14 07, and approved by the Commission.
15 Q.How does this capital structure compare to what in the Commission ordered
16 the Company's most recent rate case?
17 A.The capital structues are compared in the table below.
Rocky Mountain Power Comparison of Capital Structures
Case No. 2011 General Rate
PAC-E-10-07 Case
Lonf!- Term Debt 47.6%47.4%
Preferred Stock 0.3%0.3%
Common Equity 52.1%52.3%
Totals 100.0%100.0%
18 The proposed capital strctue in this docket has a slightly higher common equity
19 component than the Company's capital strctue in the prior case which the
Willams, Di - 14
Rocky Mountain Power
1
2 Q.
3
4 A.
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
Commission accepted without adjustment.
What tye of debt and preferred equity securities does the Company employ
in meeting its financing requirements?
The Company relies on a mix of first mortgage bonds, other secured debt, tax-
exempt debt, and preferred stock to help meet its long-term financing
requirements. These securties employ various matuties in order to provide
flexibility and mitigate refinancing risks. The Company has completed the
majority of its long-term financing utilizing secured first mortgage bonds issued
under the Mortgage Indentue dated January 9, 1989. Exhibit NO.9 Cost of Long-
Term Debt shows that, over the 12 months ended December 31, 2011, the
Company is projected to have an average of approximately $5.7 bilion of first
mortgage bonds outstanding, with an average cost of 6.24 percent. Presently, all
outstanding first mortgage bonds bear interest at fixed rates. Proceeds from the
issuance of the first mortgage bonds (and other financing instrments) are used to
finance the combined utility operation.
Another important source of financing has been the ta-exempt financing
associated with certin qualifyg equipment at power generation plants. Under
arangements with local counties and other tax-exempt entities, these entities
issue securties, the Company borrows the proceeds of these issuances from the
respective entities and pledges its credit quality to repay the debt in order to take
advantage of the tax-exempt status of the fmancings. These bonds are primarily in
a varable rate mode and are re-marketed, some as often as weekly. In addition to
tax-exempt status, these securties take advantage of current very low short-term
Wiliams, Di - 15
Rocky Mountain Power
1
2
3
4
5
6
7
8
9 Q.
10
11 A.
12
13
14
15
16
17
18
19
20
21
22 Q.
23 A.
interest rates. On the other hand, the variable rate strctue of this tye of
financing exposes the Company to re-marketing and interest rate risks as well as
dislocations in the short-term credit markets. Hence, the Company is careful as to
the total amount of this variable rate fmancing that it maintains in its capital
strctue.
During the 12 months ended December 31, 2011, PacifiCorp' s tax-exempt
portfolio is projected to be $738 milion in principal amount with an average cost
of2.23 percent (which includes the cost of issuance and credit enhancement).
How does the Company determine the amount of common equity, debt and
preferred stock to be included in its capital structure?
As a regulated public utilty, the Company has a duty and an obligation to provide
safe, adequate and reliable service to customers in its Idaho service terrtory while
prudently balancing cost and risk. In order for Rocky Mountain Power to fulfill its
service obligation, the Company is makng significant capital expenditues for
new plant investment, including transmission and environmental control
investments on existing fossil-fired generation units. Each of these capital
investments also has associated operating and maintenance costs. Through its
planning process, the Company determined the amount of necessary new
financing needed to support these activities and to provide financial results and
credit ratings that balance the cost of capital with continued access to the financial
markets.
Please describe the changes to the amount of outstanding long-term debt.
Durg the 12 months ending December 31, 2011, the balance of the outstanding
Willams, Di - 16
Rocky Mountain Power
1 long-term debt wil change through matuties and principal amortization totaling
2 $586.7 milion.
3 In addition, the Company recently completed the issuance of new long-
4 term debt in the amount of $400 millon with a coupon rate of 3.85 percent This
5 issuance is included in the proposed capital strctue and the cost is included in
6 the cost of debt calculation.
7 Purchase Power Agreements
8 Q.
9
10 A.
11
12
13
14
15
16
17
18 Q.
19 A.
20
21
22
23
Is the Company subject to rating agency debt imputation associated with
Purchase Power Agreements?
Yes. Rating agencies and financial analysts consider Purchase Power Agreements
("PPAs") to be debt-like and wil impute debt and related interest when
calculating financial ratios. For example, S&P wil adjust the Company's
published financial results and impute debt balances and interest expense resulting
from PP As when assessing creditworthiness. They do so in order to obtain a more
accurate assessment of a company's fmancial commitments and fixed payments.
Exhibit No. 10 S&P RatingsDirect May 7, 2007, is a publication by S&P detailing
its view of the debt aspects of PP As.
How does this impact the Company?
Durng a recent ratings review, S&P evaluated the Company's PPAs and other
related long-term commitments. Approximately $396 milion of additional debt
and $26 milion of related interest expense were added to the Company's debt and
coverage tests solely as a result of PP As. There were also other adjustments made
by S&P that resulted in a total of approximately $1 bilion of debt and $78 milion
Wiliams, Di - 17
Rocky Mountain Power
1 of interest being imputed into PacifiCorp's credit ratios.9
2 Q.How would the inclusion of this PP A related debt and these other
3 adjustments affect the Company's capital structure as S&P reviews your
4 credit metrics?
5 A.Negatively. By including the imputed debt resulting from PPAs and these other
6 adjustments, the Company's capital strctue has a lower equity component as a
7 corollar to the higher debt component, lower coverage ratios and reduced
8 fmancial flexibility than what might otherwise appear to be the case from a
9 review of the book value capital strctue. For example, if one were to add the
10 total $1 bilion amount of debt adjustments that Standad & Poor's makes to the
11 Company's capital strctue in this case, the resulting common equity percentage
12 would decline from 52.3 percent to 48.7 percent. The 48.7 percent equity ratio
13 falls below S&P's published expectations for PacifiCorp.
Book ValueslRatios Rating Agency Adjusted Book ValueslRatios
Adjustments
Long-Term $6,466/47.4%$1,000 $ 7,466 /51.0%
Debt
Preferred $41/0.3 %0 $41/0.3 %
Stock
Common $7,129/52.3%0 $ 7129 /48.7%
Equity
Totals $13,636/ 100.0%$1,000 $ 14,636/100.0%
14 Financing Cost Calculations
15 Q.How did you calculate the Company's embedded costs of long-term debt and
16 preferred stock?
17 A.I calculated the embedded costs of debt and preferred stock using the
9 Standard & Poor's Rating Direct October 7, 2010.
Wiliams, Di - 18
Rocky Mountain Power
1
2
3 Q.
4 A.
5
6
7
8
9
10
11
12
13
14
15 Q.
16 A.
17
18
19
20
21
22
23
methodology relied upon in the Company's previous rate cases in Idaho and other
jurisdictions.
Please explain the cost of long-term debt calculation.
I calculated the cost of debt by issue, based on each debt series' interest rate and
net proceeds at the issuance date, to produce a bond yield to maturity for each
series of debt. It should be noted that in the event a bond was issued to refinance a
higher cost bond, the pre-tax premium and unamortized costs, if any, associated
with the refinancing were subtracted from the net proceeds of the bonds that were
issued. Each bond yield was then multiplied by the principal amount outstading
of each debt issue, resulting in an annualized cost of each debt issue. Aggregating
the anual cost of each debt issue produces the total annualized cost of debt.
Dividing the total annualized cost of debt by the total principal amount of debt
outstanding produces the weighted average cost for all debt issues. This is the
Company's embedded cost of long-term debt.
How did you calculate the embedded cost of preferred stock?
The embedded cost of preferred stock was calculated by first determining the cost
of money for each issue. I begin by dividing the annual dividend per share by the
per share net proceeds for each series of preferred stock. The resulting cost rate
associated with each series was then multiplied by the total par or stated value
outstanding for each issue to yield the annualized cost for each issue. The sum of
annualized costs for each issue produces the total annual cost for the entire
preferred stock portfolio. I then divided the total anual cost by the total amount
of preferred stock outstanding to produce the weighted average cost for all issues.
Wiliams, Di - 19
Rocky Mountain Power
1
2 Q.
3
4
5 A.
6
7
8
9
10
11
12
13
14
15
16
17
The result is the Company's embedded cost of preferred stock.
A portion of the securities in the Company's debt portfolio bears variable
rates. What is the basis for the projected interest rates used by the
Company?
The Company's variable rate long-term debt in this case is in the form of tax-
exempt debt. Exhibit No. 11 PCRB Variable Rates shows that, on average, these
securties had been trading at approximately 94 percent of the 30-day London
Inter Bank Offer Rate (LIB OR) for the period January 2000 through March 2011.
Therefore, the Company has applied a factor of 94 percent to the forward 30-day
LIBOR rates at each futue quarter-end spaning the test period and then added
the respective credit enhancement and remarketing fees for each floating rate tax-
exempt bond. Credit enhancement and remarketing fees are included in the
interest component because these are costs which contrbute directly to the
interest rate on the securties and are charged to interest expense. This method is
consistent with the Company's past practices when determining the cost of debt in
previous Idaho general rate cases as well as the other states that regulate
PacifiCorp.
18 Embedded Cost of Long-Term Debt
19 Q.
20 A.
21
What is the Company's embedded cost of long-term debt?
The cost of long-term debt is 5.78 percent for the period ending December 31,
2011, as shown in Exhibit No.9, Cost of Long-Term Debt.
Wiliams, Di - 20
Rocky Mountain Power
1 Embedded Cost of Preferred Stock
2 Q.
3 A.
What is the Company's embedded cost of preferred stock?
Exhibit No. 12, Cost of Preferred Stock, shows the embedded cost of preferred
4 stock for the period ending December 31,2011, to be 5.43 percent.
5 Q.
6 A.
Does this conclude your direct testimony?
Yes.
Wiliams, Di - 21
Rocky Mountain Power
....."" "'..
')n\\ ~\~~ 21 AM \0: 54 Case No. PAC-E-l1-12L.U Exhibit NO.5
Bruce N. Wiliams
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ROCKY MOUNTAIN POWER
Exhibit Accompanying Direct Testimony of Bruce N. Wiliams
APS Access to Commercial Paper Market
May 2011
OR\G\N~\;'.. ..
.. RECe.lVEO
1ØOØ Oei \1 P ): ia
Thomas L. ~1it'RP COMM'SS\OR
Senior AttorAr..OOC.KE. T CONTROL
[phone] .. .. . .
Direct Line
. ~~t:"~:9~;" 111111111111.'"Ä. Case No. PAC E 1112 000008981 2
....~itness: Bruce N. Willams
PT1'"J AC L E 'VE ST '\MÇ""ITAl CÐllI'D...YI.O!l
LAW DEPARTMENT
October 17, 2008 Ariinna C ";¡r¡ission
L:JCd;(ETED
Commissioner Krstin K. Mayes
Arzona Corpration Commssion
1200 West Washington
Phoenix, Arzona 85007
l l. 11-~" ZL¡~~'~;
f ",:c. ":;;tT~7\.L-.,_....-~"J
Re: Docket No. E-01345A-08-0172 (Interi Rate Motion)
Dear Commissioner Mayes:
On October 8, 2008, you filed a: letter in which you requested Arzona Public Service
Company ("APS" or "Company") to respond to five specific issues. covèring a range of subjects.
Because several of these issues are germane to the Company's pending Motion for Interim Rates,
the Company ha chosen to submit its response in the above docket. For the convenience of the
pares to ths proceeding, I have attched a copy of your October 8th letter as Appendix A.
APS Access to Commercial Paper Market and Other Credit-Related Issues
APS first began experiencing trouble accessing the commercial paper maket in August
of 2007 when the sub-prime credt issues began to impact the capita markets. Access ha
continued to be sporadic thoughout 2008, with the amount of commercial paper APS can issue
often being limited even when access to the market was possible. Beginng September 17,
2008, the commercial paper market has been completely closed to APS.
As discussed durg the hearng, APS had total lines of credit of $900 millon. The first
line of$400 millon expires at the end of 2010, with a second for $500 milion expirig at the
end of 2011. The purse of these lines of credit is to provide the Company with liquidity and
workig capita when commercial paper canot be utilized - not fud capita expenditues. i
Indeed, Decision No. 69947 (October 30, 2007) specifically limted the use of the $500 millon
line of credit tofuellpurchased power requirements and thus canot be used to fud the
Company's capital requirements. As of September 30, 2008, approximately $270 millon had to
be drawn down due to the problems in the commercial paper market described above. Also, $34
millon of the Company's credit line was with banpt Lehman Brothers and thus no longer
i Borrowing on bak lines of credit is normally 25 to 50 basis points more expensive than commercial paper.
APS . APS Energy Services. SunCor. EI Dorao.
Law Departent, 400 North Fifth Street, Mail Station 8695, Phoenix, AZ 85004-3992
Phone: [phone] . Facsimile [phone]
E-mail: Thomas.Mum~pinnaclewest.com
Krstin K. Mayes, Commissioner
October 17, 2008
Page 2
Rocky Mountain Power
Exhibit NO.5 Page 2 of 11
Case No. PAC-E-11-12
Witness: Bruce N. Willams
exists. Another $36 milion was with Wachovia, which is in the process of being acquied by
Wells Fargo. Whether the new owner ofWachovia will assume the $36 millon commtment is
uncertn, to say the least. Accordingly, APS's previous $900 millon lines of credit are now no
more than $866 millon, and may be as low as $830 milion. Finaly, as aresult of recent wrte-
downs of ban assets, there is $2 trlion less credit capacity in the U.S. bang system than
t1ere was before ths global finacial crisis began. As a result, APS will liely encounter
diffculty in maitag its remaing lines of credit in the futue, and there is no doubt tht
these lines of credit would, in any case, be insuffcient to meet APS's capita expenditue needs
over the next few years.
Liquidity is absolutely vita to the finacial integrty of an electrc utility. APSitself was
contated by each of the thee ratig agencies afer the Lehm Brothers banptcy and asked
about the Company's exposure to Lehman Morgan Staley, Merrll Lynch and Goldman Sachs,
. as well as its abilty to count on its lines of credt given the chaos in the short-term credit
markets. A recent example of the critical importce of liquidity is Constellation Energy, the
parent of Baltimore Gas & Electrc Company, which began 2008 with a stock price of over $100
per shar. After facing a liquidity crisis drven by theatened credit rating downgres and the
resultat cash collateral cals that nearly drove Constellation to the bri of banptcy, it.was
force to sell itself to MidAerican Energy (the same entity that bought out PacifiCorp) for
$26.50 per shae.
And the damage has not been limited to the short-term debt market. Despite masive
efforts by our Federal governent and governents in Europe and Asia to pump liquidity into
the national and interntional credit markets, access to the corporate debt market is extremely
strained, with only the most highly-rated corporations being successfu in raising long~term debt
capita. At present, APS likely could not successfully issue long-term debt. Whether ths
fmancial market envionment will improve by the spring of next year, when APS liely will need
to issue debt, is unown.
GeoSmartSolar Financing Program
On Thurday, September 25, 2008 GE Money anounced that it will no longer offer
unecured instalment consumer fmancing for its energy effciency and renewable energy
programs afer October 23, 2008 because of the curent tuoil in the credit markets. The action
specifically afected the Electrc & Gas Industres Association's ("EGIA") GEOSmart Financing
Program offered by APS because GE Money provided the finacial support for the program.
Although APS had no prior warg of GE Money's actions, APS remais committed to its
parership with EGIA. EGIA, as a non-profit entity implementig similar financing programs
for utilties around the countr, is situted to identify other suitable fiancial institutions to back
the GeoSmart program. In recent conversations, EGIA inormed APS that a number of fmancial
institutions have been identified that may be able to provide fudig for GEOSmart. APS
remans hopefu but canot offer any assurance that EGIA will secure other financial backig in
the futue.
Krstin K. Mayes, Commissioner
October 17, 2008
Page 3
Rocky Mountain Power
Exhibit No.5 Page 3 of 11
Case No. PAC-E-11-12
Witness: Bruce N. Willams
Transactions with Investment Banks or Similar Financial Institutions
Attched as Appendix B is a list of the ban with which APS ha existng lines of credit.
As noted before, Lehman Brothers and Wachovia ar in tht group. APS ha also submitted a
$1.1 milion claim against Lehman Brothers in banptcy over a hedgig tranaction. APS has
conducted numerous tranactions with Morgan Staey and Goldman Sachs, who together are
major players in the U.S energy makets. Although it would seriously reduce the overall liquidity
of these energy markets should Morgan Staey and/or Goldman Sachs bow out of the energy
market, APS itself had controls in place well before all these problems began tht limited its
exposur to any single trading parer, including those discussed above. However, with chaotic
and unprecedented market events such as we are presently experiencing, no amount of internal
controls ca provide complete protection agait potential losses.2 Finally, AIG isa carer for
APS property and cauaty insurance. APS believes tht these insurance policies will contiue to
be honored.
Auction Rate Securities
APS does not have any fuds invested in auction rate securties ("ARS"). APS is an
issuer of ARS, with $343 millon outstading and with matuties in 2029 and 2034. The average
rate of interest paid on these securties has been 3.2%, thus providing very attactive financing
for APS and its cusomers.
Palo Verde
Palo Verde Unit 3 experienced two relatively brief unplaned outages recently. The first
was from September 16 to September 20 when a failed transmitter in the control circuitr for one
of the two power supplies to the reator control rods requied the unt to be shut down. Tht was
safely accomplished, and after the electronic card that included the failed component was
replaced, the unt was retued to ful power without incident. The second was from September
27 to 30 when high sulfate levels were detected in the secondar steam systm (the system that
connects the steam generators with the steam tubine). Afer operators had shut döwn the unt,
the seconda system chemistr was . retued to normal, the unt again. retued to service
without incident and has been operating at full power since then. APS estimates tht the amount
of additional fuel and purchased power costs deferred for recovery though the PSA to be
approximately $3 milion.3
Neither outage involved what could be chacterized as an unusua event for a nuclear
power plant and is the sort of occurence anticipated in the budgeted effective forced outage rate
("EFOR") for Palo Verde. Palo Verde, like all generators, including all APS generators, ha an
2 Although such transactions are not directly with APS, the APS decommissioning trts and the Pinnacle West
retirement fuds have relatively small investments in some of the troubled entities identified in your lett, as likely
do most if not all large investment funds in this countr.
3 As the Commission is aware, APS absorbs 10% of higher fuel costs, and a portion of outage costs are embedded in
the base fuel cost. In addition. a small amount is allocated to wholesale customers. Thus, the total cost ofthe
outages was $4.4 milion.
Krstin K. Mayes, Commssioner
October 17, 2008
Page 4
Rocky Mountain Power
Exhibit No.5 Page 4 of 11
Case No. PAC-E-11-12
Witness: Bruce N. Willams
anticipated EFOR based primarily on past operations. Ths is merely an acknowledgement tht
all machines, no matter how well designed, constrcted, operated, and maitaned, will
sometimes faiL. Electrc generators are no exception to tht rue.
To date ths year, the overal Palo Verde capacity factor has been 98% (excludig
refueling outages). This past sumer, Palo Verde set an all-time record for generation.
Thoughout both outage events, Palo Verde sta demonstrated theirsafety-first focus by
using effective problem identification and resolution behaviors, took proper action durng
troubleshooting (including developing contigency plan) and work planng. They executed all
needed repairs with a focus on human performance. The NRC was kept fuly inormed
thoughout these outages and monitored Palo Verde's decision-makng process and the actions
taen. APS does not believe these outages have had any negative impact on APS's substatial
progress in resolvig the NRC's Confrmatory Action Letter. .
Sincerely,
~¿~
Attorney for Arzona Public
Service Company
Attchments
cc: Mike Gleason, Chairman
Wiliam A. Mundell
Jeff Hatch-Miler
Gar Pierce
Brian McNeil
Ernest Johnson
Lyn A. Faner
Janet Wagner
Rebecca Wilder
Janice Alward
Pares of Record
Docket Control
Rock Mountain Power
Exhibit NO.5 Page 5 of 11
Case No. PAC-E-11-12
Witness: Bruce N. Willams
Copies of the foregoing emailed or mailed
This 17th day of October 2008 to:
Ernest G. Johnson
Diretor, Utilities Division
Arzona Corporation Commission
1200 West Washington Street
Phoenix, AZ 85007
ejohnon~cc.state.az. us
Maureen Scott
Le~al Division
Arzona Corporation Commission
1200 West Washigton Street
Phoenix, AZ 85007
mscottaYazc.gov
Janet Wagner
Le~al Division
Arizona Corp'oration Commission
i 200 West Washington Street
Phoenix, AZ 85007
jwagner~cc.gov
Terr Ford
Utilities Division
Arizona Corporation Commission
1200 West Washingon Street
Phoenix, AZ 85007
tfordtiazcc. gov
Barbara Keene
Utilities Division
Arzona . Corporation Commission
1200 West Washington Street
Phoenix, AZ 85007
bKeeneticc.state.az.us
Daniel Pozefsky
Chief Counsel
RUCO
1110 West Washington, Suite 220
Phoenix, AZ 85007 .
dpozefsky(iazco.com
Wiliam A. Rigsby
RUCO
1110 West Washington, Suite 220
Phoenix, AZ 85007
brigsby('azco.gov
Tin Gamble
RUCO
111 0 West Washigton, Suite 220
Phoenix, AZ 85007
egamble('azco.gov
C. Webb Crockett
Fennemore Craig
3003 Nort Central, Suite 2600
Phoenix AZ 85012-2913
wcrocket(ßclaw.com
Kevin Higgins
Energy Strtegies, LLC
215 South State Street, Suite 200
Salt Lake City, UT 84111
khggis('energystrat.com
Michael L. Kurz
Boehm, Kur & Lowr
36 East Seventh Street, Suite 2110
Cincinati, OH 45202
mk('BKLlawfrm.com
Kur J. Boehm
Boehm, Kur & Lowr
36 East Seventh Street, Suite 21 i 0
Cincinnati,OH 45202
kboehmWKLlawfrm.com
The Kroger Company
Denns George
Att: Corporate Energy Manager (G09)
10 14 Vine Street
Cincinati, OH 45202.
dgeorge(ßoger.com
Stephen J. Baron
J. Kennedy & Associates
570 Colonial Park Drive
Suite 305
Roswell, GA 30075
sbaron(gjkenn.com
Theodore Roberts
Sempra Energy Law Deparent
101 Ash Street, H Q 13D
San Diego, CA 92101-3017
TRoberts('sempra.com
Lawrnce V. Robertson, Jr.
2247 E. Frontage Road
Tubac, AZ 85646
tubac1awyer(ßaol.com
Rocky Mountain.Power
Exhibit No. 5 Page 6 of 11
Case No. PAC-E-11-12
Witness: Bruce N. Willams
Michael A. Curts
501 Eas Thomas Road
Phoenix, AZ 85012
mcuris401 imaol.com
Wiliam P. Sullivan
501 Eat Thomas Road
Phoenix, AZ 85012
wsu1ivan~cgsuslaw.com
Kaen Nally
MOYES, SELLERS, & SIMS
1850 Nort Centr Avenue, Suite 1100
Phoenix, AZ 85004
kenaly~lawms.com
Jeffey J. Woner
K.R. Saline & Assoc., PLC
160 N. Pasadena, Suite 101
Mesa, AZ 85201
iiw(gsaine.com
Scott Canty
General Counsel the Hopi Tribe
P.O. Box 123
Kykotsmovi, AZ 86039
Scanty0856tßao1.com
Cynthia Zwick
1940 E. Luke Ave
Phoenix, AZ 85016
czwickrgazcaa.org
Nicholas J. ~noch
349 Nort 4 Ave
Phoenix, AZ 85003
nick($lubinandenoch.com
Lar K. Udall
501 Eat Thomas Road
Phoenix, AZ 85012
ludallimcgsuslaw.com
Michael Grant
Gallagher & Kennedy, P .A.
2575 East Camelback Road
Phoenix, AZ 85016
MMGimgket.com
Gar Yaquinto
Arzona Investment Council
2100 NorthCentral, Suite 210
Phoenix, AZ 85004
gyaguitoimarzonac.org
David Berr
Western Resource Advocates
P.O. Box 1064
Scottsdale, AZ 85252-1064
azbluhll(gao1.com
Tim Hogan
Arzona Center for Law in the Public Interest
202 East McDowell Road
Suite 153
Phoenix, AZ 85004
thogan(gaclpLorg
Jeff Schlegel
SWEEP Arizona Representative
1167 W. Samalayuca Dr.
Tucson, AZ 85704-3224
schlegelj (gaol.com
Jay i. Moyes
MOYES, SELLERS, & SIMS
1850 Nort Central Avenue, Suite 1100
Phoenix, AZ85004
jimoyes(glawms.com
Rocky Mountain Power
Exhibit NO.5 Page 7 of 11
Case No. PAC-E-11-12
Witness: Bruce N. Wiliams
AppendìxA
iIl.
COMMISSIONERS
MIKE GLEAON. Chairn
WILUAM A. MUNDELL
JEFFHATCH-MILL
KRlnN K. MAYe
GARY PIERCE
Rocky Mountain Power
Exhibit No.5 Page 8 of 11 APPENDIX A
Case No. PAC-E-11-12 Page 1 of 2
Witness: Bruce N. Wiliams
KRISTIN K. MAYESCommion
ARIZONA CORPORATION COMMISSION
Direc Una: (6 541-4143
Fax (602 S4200765E-ml: kmgo
October 8t 2008
Mr. Don Bradt
President an CEO
Arizona Public Serice
400 No. Fift Street
M.S. 9042
Phoen, AZ 85004
Re: Impact of recent financial crisis on APS' access to commercial paper markets and
abüity to finance capital projects; forced cancellation of GeoSmart Solar Loan '
Program; transactons with investment banks; exposure to auction rate securities;
status of outages at Palo Verde Nuclear Generatig Station's Unit 3.
Dear Mr. Brandt:
As you know, the recent upheaval in Amerca's fiancial makets has had an unettling effect on
our national and local economies. It has also had serious consuences for individuals and
companies who need to accs ficing, as credit tightens and capital marets become less
fluid.
In recogntion of the current envionment, I wrte to request that you provide the Commssion
with inormation regading whether the unfolding events on Wall Stret have had an impact on
Arizona Public Serce Company ("APS"),.with a parcular focus on several area.
First, pleas tell the Commission whether APS has experience difficulty gaining access to short
or long ter debt markets. In paricular, have you see a decline in the Company's abilty to
issue commercial paper, a pratice that has become common among large utilities seeking to
make payments for short ten capita expenditues and operatig expenes. If so, pleae desbe
the ways in which you have responded to this deficiency in order to meet the Company's caital
need. Have you experienced additional expenses asciated with accessing these markets?
Wht is the short-term and long-ten impact to APS' plaed capital projects?
Second. APS recently reported to my offce that it was forced to scuttle its GeoSmar Solar
Finaning Progran - the program by which APS was offerng loans to customers wishing to
install solar panels who could not afford to do so solely using rebates - because Geeral Electrc
pulled its fudig due to the credit crisis. Please deta the cirumtaces surounding ths
program suspension and whether you believe APS wil be able to re-sta the progr in the
futue. Please also inform the Commission whether any other renewable energy or other capital
. expenditue programs have bee theatened or come under pressure as a result of the tightened
credit makets, and the Company's strategy for addressing these pressures.
120 WESTWASHTON, PHOlllC ARi¡ONA nGO"._'~OO WEST COESS STReE. ~ AlZO Q7.tM"__.cc......
Rocky Mountain Power
Exhibit No.5 Page 9 of 11 APPENDIX À
Case No. PAC-E-11-12 . Page 2 012
Witness: Bruce N. Willams
Page 2
Th pleae tell the Commission whether APS engaged in any signficant fiancial trnsactons
with Lehman Brothers, Amerca Interntional Group, Bea Steas, or any other investent
fu that has been the subject of recent bantcies or goverenta taeovers. If so, please
detail those transactions, and to what extent they have impacted the Company.
Fourt, it is my understanding tht APS has had some exposure to auction fate seurties. As
you know, the auction rate secties maret recently collapsed. Please desribe the Company's
auction rate securties holdings, what wort those securties now have, and what the Company
intends to do with those securties in order to miize any losses associated with them.
Finaly, as you know, Palo Verde Nuclear Genertig Station's ("PVNGS') Unit Thee was
down from September 27th to October lSI-mag for a second outage in less than a month.
Pleas~ tell the Commission how these Unit Thee outages wil impact the Copany's efforts to
resolve PVNGS'Category Four staus with the Nuclear Reguatory Commssion, as wen as the
estimate replacement costs that have been passed though the Company's Purchased Power and
Fuel Adjustment Claue as a result of these outages.
Thank you for your attention to these questions.
T;Ø
KnsMayes
Commissioner
Cc: Chairman Mike Gleasn
Commssioner Willam A. Mundell
Commissioner Jeff Hatch-Miler
Commissioner Gar Pìerce
Ernest Johnson
Janice Alward
Bnan McNeil
Rebecca Wilder
AppendixB
L_
Rocky Mountain Powér
Exhibit NO.5 Page 10 of 11
Case No. PAC-E-11-12
Witness: Bruce N. Wiliams
Rocky Mountain Power
Exhibit NO.5 page 110f 11 APPENDIX B
Case No. PAC-E-11-12
Witness: Bruce N. Wiliams Page 1 of 1
ZOU HAY 27 AM to= 55 Case No. PAC-E-11-12
Exhibit NO.6
f:3S¡ONWitness: Bruce N. Wiliams
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ROCKY MOUNTAI POWER
Exhibit Accompanying Direct Testimony of Bruce N. Willams
Standard & Poor's Ratings Direct Rating Factors
April 28, 2011
May 2011
Summary:
PacifiCorp
Primary Credit Analys
Anne Selting, San Francisco (1)415-371-5009; anne_selting~standardandpoors.com
Secondar Contct
Todd A Shipman, CFA, New York (1) 212-48-7676; todd_shipman~tandardandpoors.com
Table Of Contents
Rationale
Outlook
ww.stndardandpoors.com/ratingsdirect 1
863485 j 300030966
Rocky Mountain Power
Exhibit No.6 Page 2 of 4
Case No. PAC-E-11-12
Witness: Bruce N. Willams
Summary:
PacifiCorp
Credit Rating: A-/Stable/A-2
Rationale
The lA_' corporate credit ratings on PacifiCorp reflect what Standard & Poor's Ratings Services views as a
"significant" financial profile and is supported by its modest use of leverage to finance a large capital program and
adequate cash flow metrics. Its" excellent" business profile benefits from the geographical, market, and regulatory
diversity provided by its six-state service territory. PacifiCorpis an electic utility that serves customers under the
name Rocky Mountain Power in Utah, Wyoming, and Idaho, and as Pacific Power in Oregon, Washington, and
Californa. Utah and Oregon are the most important regions for the company, providing around 42% and 24% of
annual retail sales, respectively.
PacifiCorp's financial performance has held steady throughout the recession. The utility's credit metrics would have
deteriorated slightly in 2010 but for the benefits of bonus depreciation, which added $700 milion in deferred taes
to the company's $1.4 bilion in cash flow. Beneath this benefit, authorized rate increases in Utah, Wyoming, and
Idaho supported a 1 % increase in gross margin, but operating revenues and operating income for the year were both
down slightly, by 0.6% and 2.2%, respecively, largely due to lower wholesale volumes and margins and weaker
growth in retail sales. In 2010, fuds from operations (FFO) to total debt was 25%, FFO interest coverage was
5.4x, and leverage was 50%.
A key consideration in 2011 is whether resurgence in sales wil occur to rekidle modest growt. Although overall
2010 retail sales revenues increased by about 1 %, this growt has been led by Rocky Mountain Power (which
accounted for roughly two-thirds of retail sales). Utah's population and economic growth continue to outpace the
nation's. Declines have been meaningful for Pacific Power, with retail sales fallng a cumulative 4.4% over 2009 and
2010 on a weather-adjusted basis. Industrial load loss has ben especially significant in Oregon, but may have
bottomed.
Our expectation in 2011 is that the sales growth for Rocky Mountain Power market wil continue to improve. A
slower, more hesitant recovery appears likely for Pacific Power sales, and we expect retail sales though 2012 there
to remain below levels seen when MidAerican Energy Holdings Co. (MEHC; BBB+/Stable) acquired PacifiCorp in
March 2006. As a result, growth led by Rocky Mountain should produce financial metrics in line with past
performance, with FFO to total debt in the high teens and FFO interest coverage of 4.0x-4.5x. These expectations
do not reflect any additional benefits for bonus depreciation. Leverage is not forecst to change from its current level
of 50% of total capitalization.
PacifiCorp is wholly owned by MEHC. In tu, MEHC is privately held and majority owned by Berkshire
Hathaway (AA+/Stable/A-1+). MEHC's stated strategy when it acquired PacifiCorp was to invest significant capital
to upgrade its infrastructure. Its largest project is Energ Gateway, a new, 2,000-mile high-voltage transmission line
that is being constructed in segments. In the company's 2010 10-K filing, it disclosed that it expects to spend $6
bilion for the project, with about $1 billion of that amount to be spent over the next thee years. MEHC has
demonstrated a willngness to support the utility's capital program, providing PacifiCorp with $1.1 bilion equity
Standard & Poor's I RatiogsDiret on the Global Credit Portl I April 28. 2011 2
863485 ¡ 300030966
Rocky Mountain Power
Exhibit NO.6 Page 3 of 4
Case No. PAC-E-11-12 Summary' PacifiCorp
Witness: Bruce N. Willams .
contrbutions since 2006. This has allowed the company to grow without straining borrowings.
The company's consolidated earned return on equity, at 8.2 %, is below authorized levels, which var but are in the
area of 10%. For the company's investment strategy to succeed, PacifiCorp's customers wil be required to shoulder
nearly annual increases in electric rates at a time when utility regulators around the U.S. are especially focused on
holdig down costs. A March ruling in Idaho, which is a small portion of PacifiCorp's franchise, reduced the
company's request by $11 millon to $13.8 millon, noting that diffcult economic conditions challenge customer
ability to pay rate increases. Two large rate cases are in process in Utah and Wyoming. It has requested a $232
milion increase in Utah effective September 2011 that would increase rates an average of 14% if approved as filed.
Also pending is a $98 millon rate case in Wyoming, representing a 17% increase, with rates also requested to go
into effect in September.
Liquidity
On a stand-alone basis (i.e., unenhanced by the existing contingent equity agreement available to MEHC to support
any of its regulated subsidiaries, including PacifiCorp) we view the company's liquidity as "adequate" under our
corporate liquidity methodology. This methodology categorizes liquidity in five standard descriptors (exceptional,
strong, adequate, less th adequate, and weak). Projected sources of liquidity, which consist of operating cash flow
and available bank lines, exceed projected uses, the company's committed capital expenditures, debt maturities, and
common dividends by more than 1.2x over the next 12 months. Under our criteria, we exclude as sources of
liquidity any facilities expiring within one year of the liquidity assessment date. Ths assessment does not consider
MEHC draws on its contingent equity tht it could make to support PacifiCorp's projeced capital requirements and
debt maturities over the next two years.
As of Dec. 31, 2010, cash and cash equivalents totaled $31 millon. The utility maintains unsecured credit facilties
totaling nearly $1.4 bilion that mature 2012-2013. (A $760 milion facility decreases to $720 milion in July 2011.
This reduction is reflected in our liquidity calculations.) As of Dec. 31,2010, the company had additional
borrowing cal?acity of $1.1 bilion, because of $36 milion of borrowings under the facility and $304 millon of
liquidity reserved to support variable-rate tax-exempt bond obligations and letters of credit. There are no rating
triggers on the credit lines. PacifiCorp's next substatial long-term debt maturities are $587 milion due in 2011 and
$261 millon in 2013.
Outlook
The stable outlook on the PacifiCorp ratings incorporates our expecttion that MEHC wil continue to support the
utility by contributing suffcient equity to manage its debt levels to 50% of total capitalization on a fully adjusted
basis. We expect FFO to total debt and FFO interest coverage wil be in the high teens and the 4.0x-4.5x range,
respectively. We view these cash flow levels as minimum levels to maintain the rating. AJ in 2010, credit metrics
could exceed these levels ths year, depending on whether the company is able to utilze bonus depreciation benefits.
We do not expect upward ratings momentum for the utilty, given its heavy investment program. PacifiCorp benefits
from regulatory insulation from its parent. Our criteria provide tht the PacifiCorp corporate credit rating can be no
more than three notches above the MEHC consolidated credit rating. The companies are a notch apart. We do not
see significant risks that the utilty rating wil fall as a result of adverse rating changes on MEHC, which also has a
stable rating outlook.
ww.sandardandpoors.comJratingsdirect 3
H63485 i 300030966
Rocky Mountain Power
Exhibit NO.6 Page 4 of 4
Case No. PAC-E-11-12
Witness: Bruce N. Wiliams
Copyright (Ç 2011 by Standard & Poors Financial Services LLC (S&P), a subsidiary of The McGraw-Hil Companies, Inc. All rights reserved.
No content (including ratings, credit-related analyses and data, model, softare or other application or outut therfrom) or any part thereof (Content) may be modified,
reverse engineered, reproduced or distribute in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content
shall not be used for any unlawl or unauthorized purposes. S&P, its affliates, and any third-part providers, as well as their directrs, offcers, shareholders, employes or
agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availabilit of the Content S&P Parties are not responsible for any error or
omissions, reardless of the cause, for the results obtaine frm the use of the Content, or for the security or maintenance of any data input by the user. The Content is
provide on an 'as is. basis. S&P PARIES DISCLAIM ANY AND ALL EXPRESS DR IMPliED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, Am WARRANTIES OF
MERCHANTABILITY OR FITNESS FDR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFARE ERRORS DR DEFECTS, THATTHE CONTENT'S FUNCTIONING
Will BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFlARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any
part for any direc, indirect, incidentl, exemplary, compensatory, punitive, speial or consequential damages, cos, expenses, legal fe, or losses (including, without
limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of th possibilty of such damages.
Credit-related analyses, including ratings, and statements in the Cotent are statements of opinion as of the dat they are expressed and not sttements of fac or
recmmendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update th Content following publicaton in any
form or format. The Content should not be relied on and is not a substitut for the skil, judgment and experience of the user, its management, employees, advisors and/or
clients when making investment and other busines decisions. S&P's opinions and analyses do not address the suitabilty of any seurity. S&P does not ac as a fiduciary or
an investment advisor. While S&P has obtained information from sourcs it believes to be reliable, S&P does not peorm an audit and undertkes no duty of due dilgence or
independent verification of any information it reeives.
S&P keeps cerin activities of its business unit separate from eacl other in order to prserve the indpendence and objecvity of their respective activities. As a result,
certain business unit of S&P ma have informtion that is not available to other S&P business unit. S&P has established policies and procdures to maintain the
confidentiality of certain non-public information reeiv in connecion with each analytcal process.
S&P may receive compenstion for its ratings and cerain credit-related analyses, normally from issuers or underwiters of securities or from obligors. S&P reserves the rigti
to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, ww.stndardandpoors.com(freeofclrge). and
ww.ratingsdirect.com and ww.globalcreditportal.com (subscription), and may be distributed through other means. including via S&P publications and third-part
redistributors. Additional information about our ratings fees is available at ww.standardandpoors.com/usratingsfees.
The McGraw'HìI Companies : Ii ;4~ "; ": . "~
Standard & Poor's I RatingsDirect on the Global Credit Portl I April 28, 2011 4
863485 ! 300030966
iOll MAY 27 AM 10: 5S Case No. PAC-E-II-12
Exhibit NO.7
Witness: Bruce N. Wiliams
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ROCKY MOUNTAI POWER
Exhibit Accompanying Direct Testimony of Bruce N. Wiliams
Standard & Poor's Ratings Direct Rating Factors
October 7,2010
May 2011
PacifiCorp
Primary Credit Analy
Anne Selting, San Francisco (11415-371-500; anne_selting~standardandpoors.com
Secondary Contct
Todd A Shipman, CFA, New York (1) 212-48-7676; todd_shipman~standardandpoors.com
Table Of Contents
Major Rating Factors
Rationale
Outlook
ww.standardandpoors.com/raingsdirect 1
824972 ¡ 30UU30966
PacifiCorp
Major Rating Factors
Strengths:
· Maket and regulatory diversity is afforded by PacifiCorp's electrc utilty
business, which serves portions of six western U.S. states;
· Retail electric rates compare favorably with those of other electic suppliers
operating in the states PacifiCorp serves, suggesting that the company may
be able to maintain its competitive advantage despite its ongoing need for
rate relief to support a large capital program;
· The company has made progress in puttg into place fuel and purchased
power adjusters in the six states it serves (an adjuster was put into effect in
Idaho in 2009, and one is pendig in PacifiCorp's largest market, Utah);
· The completion of new natual gas plants, along with wind farm
investment, is reducing the company's reliance on purchased power; and
· A settlement reached in February 2010 regarding the contentious Klamath
hydro relicensing case has the potential to adequately address the company's
financial exposure if the project is decommissioned, which wil not occur
before 2020.
Rocky Mountain Power
Exhibit No. 7 Page 2 of 9
Case No. PAC-E-11-12
Witness: Bruce N. Wiliams
,mI'Olate Cret Båtig
A-/Stable/A-2
Weakesses:
· Despite the company's policy of fiing near annual rate cases in the states PacifiCorp serves, regulatory lag
continues to allow only modest improvement in the company's financial profile: Its return on equity remains
under authorized levels and although leverage has improved since Miclerica Energy Holdings Co. acquired
the utilty in 2006, cash flow metrics remain just adequate to support the rating;
· Regulators wil need to consistently support retail rate increases to recover PacifiCorp's planned capital
investments, although the recessionar environment has caused some scaling-back of capital plans; and
· Growth in the percentage of generation provided by natual gas costs mitigates some of the company's potential
exposure to carbon regulation, but introduces greater potential for cost volatilty.
Rationale
The 'A-' corporate credit rating on PacifiCorp (PPW) reflects its "excellent" business risk profie, evidenced by a
diverse and growing service territory, and "significat" financial risk profile. PPW has made modest strides in
improving regulatory outcomes which should put the company on a path to achieving cash flow coverage metics
that comfortably support the rating. The company has made progress in increasing core earnings amid a recession
and a period of heavy capital spending for the company. The company has achieved this by focusing on
strengthenig the regulatory mechanisms that are in place in the six states it serves and working to minimize
regulatory lag by fiing for nearly annual rate relief in almost all states it serves.
,
In 2010 PPW has contiued to receive revenue increases though rate case outcomes, fuel adjustments and other
recovery mechanisms. Highlights of key regulatory rulings that have provided increased revenues to the company in
Standard & Poor's I RatingsDireet on the Global Credit Portl I October 7, 2010 2
824972 1300030966
Rocky Mountain Power
Exhibit No. 7 Page 3 of 9
Case No. PAC-E-11-12 PacifiCorp
Witness: Bruce N. Willams
2010 include a Utah general rate increase beginning in Februar 2010 for $32 milion (or a 2% increase), and a $31
milion increase for the recovery of two major projects approved in June. Also in Utah the company's largest
market, the company has received approval to establish an energy cost adjustment mechanism, with the mechanism
design under consideration before the Uta Public Service Commission. In Januar 2010, the Oregon Public Utility
Commssion (OPUC) approved a stipulation in the company's 2009 general rate case increasing base rates by $42
milion, effective Feb. 2, 2010. In Januar 2010, PPW received a rate increase of $14 millon, or 5%, in Washington.
In March 2010, PPW filed a new general rate case in Oregon requesting an increase in the rates by $131 millon, or
13% increase, and in July reached a multipar stipulation for an increase of $85 milion, or 8%. If approved by the
OPUC, the rates wil be effective Jan. 1,2011.
As with many electric utilties, the company's 2008 and 2009 credit metrics have been buoyed by deferred tax
increases, which boosted funds from operations metrics. But these effect notwithstanding, the company's funds
from operations (FFO) to total debt has been consistently in the high teens, slightly below our expected credit
metrics for the rating, since it was acquired by MidAerican Energy Holdings Co. (MEHC; BBB+/Stable/--).
Leverage has also been somewhat high for the rating at 53% at yea-end 2009. However, we expect tht credit
metrics will improve in the coming years, producing FFO to total debt in the area of 20%, FFO interest coverage of
20% or better and in the range of 4.0x-4.5x, and leverage of about 50%. (We would note that PPW has, over the
last three years, produced FFO to total debt of more than 20%, but this is due to benefits of deferred taxes.)
PPW serves 1.7 milion customers in portons of six western states: Utah, Oregon, Wyoming, Washington, Idaho,
and Californa. The company operates as Pacific Power in Oregon, Washington, and California, and as Rocky
Mountain Power in Utah, Wyomig, and Idaho. The company's two largest markets, Utah and Oregon, accounted
for about 67% of the company's retail electric sales in 2009, with Wyomig and Washington at 25%, and the
balance being sold to customers in Idaho and California. As of Dec. 31,2009, the utilty's long-term debt was $6.4
bilion.
PPW completed $2.3 bilion in capital expenditures in 2009, up from $1.8 billon in 2008. The company projects
that it wil spend $4.6 bilion in 2010-2012, excluding non-cash allowance for funds used during constction. The
largest component of PPW's capital program is the construction of the Gateway transmission project, an estimated
$4.6 bilion, 2,000-mile tranmission line connecting portons of Wyoming, Utah, Idao, Oregon, and the
southwestern U.S. The project is being completed in phases, with initial portions of new lines being placed in service
as early as 2010 and a tentative completion date of 2018. About 34% of the company's total capital budget over the
next three years (2010-2012) is devoted to transmission investment, of which Gateway is a component. In 2008, the
Federal Energy Reguatory Commission awarded the company incentive rate treatment of 200 basis points for seven
of the eight project segments.
PPW is owned by MEHC. In tun, MEHC is privately held and majority owned by Berkshire Hathaway
(AA+/Stable/A-l+). MERC has demonstrated a willngness to deploy equity to support the utity's large capital
program, providing the utility with $865 milion in equity contributions since it purchased the company in March
2006. Although PPW is investing heavily in its system, we expct PPW distributions to MEHC to be minimaL.
MEHC's credit profile is supported by Berkshie Hathaway, which has in place though February 2011 a $3.5
bilion equity commtment agreement between itself and MEHC in which MEHC can unilaterally call upon
Berkshire Hathaway to support either its debt repayment or the capital needs of its regulated subsidiaries, includig
PP\v In March 2010, the agreement was extended through February 2014 at a lower level of $2 bilion. We view
ww.stndardandpoors.com/ratingsdiret 3
824972 i 30000966
Rocky Mountain Power
Exhibit NO.7 Page 4 of 9
Case No. PAC-E-11-12 P Fe
Witness: Bruce N. Willamsaci i orp
this agreement between PPW's parent and a .AA+' rated entity as reducing the likelihood of a PPW default.
Neverteless, we expect PPW to grow into a stand-alone credit profile consistent with the 'A-' rating on the
company. We take this view because the utility has no right to cause MEHC to make an equity contribution, either
from MEHC or via Berkshie Hathaway though an MEHC board request. Although MEHC would tyically have
strong incentives to support the utility by tapping the Berkshire Hathaway contingent equity, we would note that in
a catastrophic utility event, MEHC would be expected to do so only if doing so were in the parent's best economic
interests. Such a scenario is remote and would require an unprecedented event such as what occurred during the
western energy crisis, when regulators refused to allow utilties to recover power procurement costs.
Short-term credt factors
On a stand-alone basis (i.e., unenhanced by the existing contingent equity agreement available to MEHC to support
any of its regulated subsidiaries, including PPW) we view PPW's liquidity as "strong" under our corporate liquidity
methodology. This methodology categorizes liquidity in five standard descriptors (exceptional, strong, adequate, less
than adequate, and weak). Projected sources of liquidity, which consist of operating cash flow and available bank
lines, exceed projected uses, the company's committed capital expenditures, debt maturities, and common dividends
by about 1.5x. Under our criteria, we exclude as sources of liquidity any facilities expiring within one year of the
liquidity assessment date. Presuming that MEHC draws on its contingent equity to support PPW's projected capital
requirements and debt maturities over the next two years, liquidity would be bolstered to more than 2x, or
" exceptionaL. "
As of June 30,2010, PPW.s cash and cah equivalents totaled $110 milion. The utilty maintains unecured credit
facilities totaling nearly $1.4 bilion that mature 2012-2013. As of June 30, 2010, PPW had additional borrowing
capacity of $1.1 bilion, because $304 millon of liquidity is reserved to support variable-rate tax-exempt bond
obligations and letters of credit. There are no rating triggers on the credit lines. PPW's next substantial long-term
debt matuities are $600 miiion due in 2011 and $284 milion in 2013.
Outlook
The stable outlook on the PPW ratings incorporates our expectation that MEHC wil continue to support the utilty
by contrbuting equity suffcient to ensure that fully adjusted debt to total capitalization is managed over the next
few years to a level of closer to 50% and that FFO to total debt and FFO interest coverage wil be in the area of
20% and the 4.0x-4.5x range, respectively. Given that PPW's financial risk profile is weak for the ratings, we do not
expect near-term upward ratings momentum for the utility. PPW's regulatory and structural insulation shields the
utilty from MEHC credit deterioration, to an extent. Specifically, our criteria provide that the PPW corporate credit
rating can be no more than three notches above the MEHC consolidated credit rating. The company is comfortbly
within this range, so we do not see significant risks that the utility rating wil fall as a result of adverse rating
changes on MEHC, which also has a stable rating outlook.
Table 1.
PacífiCorp -- Peer Comparison*
Rating as of Sept. 22. 2010
PacifiCrp Portland General Electric Co. Pacific Gas & Electric Co.
A-/Stable/A-2 BBB/Stable/A-2 BBB+/Watch Neg/A-2
Standard & Poor's I RatingsDirect on the Global Credit Portl I October 7. 2010 4
824972 1 30003G966
Rocky Mountain Power
Exhibit NO.7 Page 5 of 9
C~se No. PAC-E-11-.1~ PacifiCorp
Witness: Bruce N. Williams
Table 1.
Pacifiß6rp -- Peer Comparison" (cont)
--Average of past thre fiscal years-
(MiL. $)
Revenues
Net income from cont. oper.
Funds from operations (FFOI
Capital expenditures
Cash and short-term investments
Debt
Preferred stock
Equity
Debt and equity
Adjusd ratios
EBIT interest coverage (x)
FFO int. cov. Ix)
FFO/debt (%)
Discretionary cash flow/debt (%)
Net cash flow/capex (%)
Total debtdebt plus equity (%)
Return on common equit 1%)
Common dividend payout ratio (unadj.) (%)
.Fully adjusted (including postretirement obligations).
4.404.3
479.7
1.342.3
1,850.2
134.7
6.641.7
34.2
5.926.2
12.567.9
1.64.0
109.0
326.5
511.4
38.0
1,875.2
0.0
1,40.3
3.279.5
13,218.9
1,157.7
3,030.0
3,437.7
175.7
12.662.8
258.0
10.032.3
22.695.2
2.8
4.3
20.2
(10.5)
725
52.8
7.2
2.
2.2
3.5
17.4
(14.4)
51,5
57.2
6.3
59.6
2.9
4.1
23.9
(14.1)
71.2
55.8
11.1
49.6
Table 2.-
PacifiCorp -- financial Summary*
--Fiscal year ended Dec. 31--
20 20 207 20 20
Rating history A./Stable/ A-2 A.!Watch Neg/A.l A./Stable/ A.l A-/Stable/A-1 A-/Stable/A-l
(Mil. $)
Revenues 4,457.0 4,498.0 4,258.0 4,154.1 3.896.7
Net income from continuing operations 542.0 458.0 439.0 307.9 360.7
Funds from operations (FFO)1.60.1 1,272.1 994.8 927.6 864.5
Capital expenditures 2.297.1 1.57.0 1,496.4 1.375.0 1,03.5
Cash and short-term investments 117.0 59.0 228.0 59.0 119.6
Debt 7,415.8 6.635.9 5.873.5 5,473.6 5,185.3
. Preferred stock 20.5 41.0 41.0 41.3 41.3
Equity 6.711.5 5.987.0 5.080.0 4,426.8 3.750.7
Debt and equity 14.127.3 12.622.9 10.953.5 9.900.4 8.936.0
Adjusted raios
EBIT interest coverage (x)2.7 2.8 2.8 2.5 3.0
FFO jnt. coy. (x)4.9 4.2 3.5 3.8 3.8
FFO/debt (%)23.7 19.2 16.9 16.9 16.7
Discretionary cash flow/debt (%)(10.21 (10.7)(10.5)(10.7)(5.6)
ww.stndardandpoors.com/ratingsdirect 5
82492 i 30003096£
Rocky Mountain Power
Exhibit No. 7 Page 6 of 9
Case No. PAC-E-11-12 PacifiCorp
Witness: Bruce N. Willams
Table 2.
PacifiCorp -- Financial Summary* (cont.)
Net cash flow/capex (%1
Debtdebt and equity (%)
Return on common equity (%)
Common dividend payout ratio (unadj.) (%)
'Fully adjusted (including postretirement obligationsl.
76.6
52.5
7.0
7.0
723
52.6
6.8
0.0
66.3
53.6
7.8
0.0
66.1
55.3
6.2
5.2
66.7
58.0
8.9
49.1
Table 3.
Reconciliation Of PacifiCorp Reported Amounts With Standard & Poor's Adjusted Amounts (MiL. S)*
.-Fiscal year ended Dec. 31. 20.
PacifiCorp reportd amount
Operaing Operaing Operatngincomincomeincoe Cash flow Cashflow
Shareholders'(before (befre (afr Intrest from frm Dividends Capital
Debt equit D&A)D&A)DBA)expense operations operaions paid expenditres
Reported 6,416.0 6.732.0 1.609.0 1.609.0 1.060.0 359.0 1.50.0 1.500.0 2.0 2.328.0
Stndard & Poor's adjustent
Operating 36.5 5.0 2.3 2.3 2.3 2.7 2.7 4.1leases
Interediate 20.5 (20.5)1.0 (1.0)(1.0)(1.0)hybrids
reported as
equity
Postretirement 369.9 20.0 20.0 20.0 5.0 33.8 33.8
benefit
obligations
Accrued 111.0
interest not
included in
reported debt
Capitalized 35.0 (35.0)135.0)(35.0)interest
Power purchase 395.7 63.3 63.3 25.8 25.8 37.5 37.5
agreements
Aset 66.3 9.0 9.0 9.0 9.0 5.2 5.2
retirement
obligations
Reclassification 83.0
~f nonoperating
income
(expenses)
Reclassification 217.0
of
working-capital
cash flow
changes
Total 999.8 (20.5)97.3 94.6 140.2 78.2 43.1 260.1 (1.0)(30.9)adjustments
Standard & Poor's I RatingsDirec on the Global Credit Portl I October 7, 2010 6
824972 i 300030966
Rocky Mountain Power
Exhibit No. 7 Page 7 of 9
Case No. PAC-E-11-12 PacifiCorp
Witness: Bruce N. Wiliams
Table 3.
Reconcilation Of PacifCorp Reported Amounts With Standard & Poor's Adjusted Amounts (MiL. $)* (cont.)
Stndard 8i Poor's adjusted amounts
Operating
income Cash flow Funds
(before Interes frm frm Dividends Capitl
Debt Equit D8 EBITDA EBIT expense operions operations paid expenditures
Adjusted 7,415.8 6,711.5 1,706.3 1,703.6 1.200.2 437.2 1.54.1 1.60.1 1.0 2.297.1
*PacifiCorp reported amounts shown are taken from the company's financial stateents but might include adjustments made by data providers or recassifications made by
Standard & Poor's analysts. Please note that two report amounts loperating income before O&A and cash flow from operations) are used to derie more than one Standard
& Poor's-adjusted amount (operating income before O&A and EBITOA. and cash flow fro operations and funds frm operations. respectively). Consequenly, the first secion
in some tables may feature duplicate descriptions and amounts.
Balmgs ne:tail i~ Ðf f1l?rotlef 7 ~~ ûi'
PacifCorp
Corprate Credit Rating
Commercial Paper
Loal Curr
Preferred Stock (1 Issue)
Senior Seured (69 Issues)
Senior Unsecured (1 Issul
Senior Unsecured (2.lsses)
Corpor Creit Rangs Histry
27.Mar.200
lB.Sep-200
22.Mar.200
DB.Mar-2oo6
Busines Risk Profile
Financial Risk Prfile
Relaed Enties
CE Casecnan War and Enery Co. Inc.
Senior Seured (1 Issue)
CE Elecc UJC Funding Co.
Issuer Credit Rating
Senior Unsecured (1 Issuel
CE Generaion LLC
Senior Seured (1 Issue)
Cordova Energy Co. LL
Senior Secured (1 Issuel
lowa-lllnois Gas 8i Electic Co.
Senior Unsecured (5 Issues)
Ke Rivr Gas Transision Co.
Senior Secured (2 Issues)
MidAmrica Ener Co.
Issuer Creit Rating
A-!Stable/A.2
A-2
BBB
A
A.
NDveloping
A-/Sta'ole/A.2
A.NJatrh Neg/A.l
A./Sta'ole/ A.1
A./Stable/ A.2
Exellent
Significant
B8+/Stable
BB8+!Stable/ A-2
BB8+!Stable
S8+/Stable
SB/Stable
A./M
A./Stable
A-!Stable/A.2
ww.stndardandpoors.com/ratingsdiret 7
8249721300030965
Rocky Mountain Power
Exhibit No.7 Page 8 of 9
Case No. PAC-E-11-12 ~ fiC
Witness: Bruce N. Willams aCt i orp
;MI$Il~lliUA", ¡Jj ~¡i:íìgfiï,.m;l.I*~tiÌ"' "" " '3 ~ -
Commercial Paper
Local Curren
Preferrd Stock /1 Issue)
Senior Unsecured (9 Issues)
Senior Unseured (2 Issues)
Midrican Ener Holding Co.
Issuer Credit Rating
Preferred Stock /2 Issues)
Senior Unsecured (8 Issues)
MidAiC8n Funding LLC
Senior Seured /2 Issuesl
Midwes Power Sy Inc.
Senior Unsecred (1 Issue)
Norter Elecc Disbuton Ud.
Issuer Credit Rating
Senior Unsecured /1 Issue)
Nortern Elecri Finance PLC
Seior Unsecured (1 Issue)
Nortm Elc PLC
ISSuer Credit Rating
Senior Unsecure /1 Issue)
Norter Nallral Gas Co.
Issuer Credit Rating
Senior Unseured (5 Issues)
Saltn Sea Fuing Corp.
Senior Secured (2 Issues)
Yorkhire Electit Distbution PL
Issuer Credit Rating
Senior Unsecure (1 Issue)
Senior Unseure (1 Issue)
Yorkhire Eleccity Group PLC
Issuer Credit Rating
Yorkhire Power Gro Ud.
Issuer Credit Rating BB8+/Stable/A-2Senior Unsecured (1 Issue) BB8+
*Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit raings on the global scale are comparable across countries. Standard
& Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country.
A-2
BB8+
A-
A-/A-2
BB8+/Stable/-
BBB-
BB8+
BB8+
A-/A-
MStable/--
A-
A-lStable
BB8+/Stable/ A-2
A-
A/table/-
A
BBB-lStable
A-lStable/A-2
A-
A-/Stale
BB8+/Stable/ --
Standard &ç Poor's I RatingsDirect on the Global Credit Portl I October 7,2010 8
824972 ! 3003()966
Rocky Mountain Power
Exhibit No. 7 Page 9 of 9
Case No. PAC-E-11-12
Witness: Bruce N. Willams
Copyright (f 2010 by Standard & Poor's Financial.-dONT COLOR="BLUE";:Services LLC (S&Pk/FONT;:. a subsidiary of The McGraw-Hil Companies,
No content (including ratings. credit-related analyses and data. model. softre or other application or output therefrm) or any part thereof (Contentl may be modified.
reerse engineed. reproduced or distribued in any form by any means. or stored in a database or retrieval system. without the prior wrtten permission of S&P. The Content
shall not be used for any unlawl or unauthorized purposes. S&P. its afliates, and any third-par providers, as well as their direcors. ofcers. shareholders, employees or
agents (collectively S&P Partiesl do not guarantee the accuracy, completeness, timeliness or availability of the Content S&P Partes are not responsible for any errors or
omission, regardless of the cause. for the results obtine frm the use of the Contet, or for the security or maintenance of any data input by the user. The Content is
provded on an 'as is' basis. S&P PARTIES DISCLAIM Am ANO ALL EXPRESS OR IMPliED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, Am WARRANTIES OF
MERCHANTABILITY OR ATNESS FOR A PARTICULAR PURPOSE OR USE. FREEDOM FROM BUGS, SOFTARE ERORS DR DEFECTS, THT THE CONTENT'S FUNCTIONING
WilL BE UNINTERRUPTEO OR THAT THE CONTENT Will OPERTE WITH Am SOFTARE OR HADWARE CONFIGURATION. In no event shall S&P Parties be liable to any
part for any direct. indiret. incidenl, exemplary. compensatory. punitve, speial or consequential damages, costs. expense, legal fes. or losses (including, without
limitation. lost income or lost profits and opportunity costsl in connetion with any us of the Content even if advised of the possibilit of suh damages.
Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not stements of fact or
recommendations to purchase, hold. or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any
form or format The Content should not be relied on and is not a substitute for the skill. judgment and experience of the user, its management, employes. advisors and/or
clients when making investment and other business decisions. S&P's opinions and analyses do not address the suitbilit of any security. S&P does not ac as a fiduciary or
an investment adviso. While S&P has obtained information from sources it believes to be reliable, S&P does not perorm an audit and undertakes no duty of due dilgene or
independent verification of any inforation it reeives.
S&P keeps ceain acivities of it business units separate from each othr in ordr to preserve the independence and objectivit of their respecive activities. As a result,
certain business unit of S&P may have informaton that is not available to other S&P business units. S&P has esablished policies and produres to maintain the
confidentality of certain non-public information received in connecion with each analytical proæs.
S&P may reeiv compesation for its ratings and certain credit-related analyes, normally from issuers or underwiters of securities or from obligors. S&P reseres th right
to disseminate its opinions and analyses. S&P's public ratings and analyes are made available on its Web sites. ww.standardandpoor.com (fr of chargel. and
ww.ralingsdirect.com and ww.globalcreditportl.com (subsciption). and may be distributed through other means. including via S&P publicaions and third-part
redistribu10rs. Additional information about our ratings fees is available at ww.standardandpoors.com/usratingslees.
The McGrowHifCampames ,~~~'" ~,""
ww.standardandpoors.com/ratingsdirect 9
824972 ¡ 300030866
,. ,- f'
inn tõtl\Y 21 AM 10= 55 Case No. PAC-E-l1-12Exhibit NO.8
Witness: Bruce N. Wiliams
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ROCKY MOUNTAI POWER
Exhibit Accompanying Direct Testimony of Bruce N. Wiliams
Standard & Poor's Ratings Direct Rating Factors
April 30, 2010
May 2011
PacifiCorp
Primary Credit Analys
Anne Selting. San Francisco (1) 415.371-5009: anne_selting(?standardandpoors.com
Secondary Credit Analys:
Todd A Shipman. CFA. New York (1) 212-438-7676; todd_shipman(?andardandpoors.com
Table Of Contents
Major Rating Factors
Rationale
Outlook
ww.sndardandpoors.com/ratingsdirect 1
791J125 13C'O3091J6
Rocky Mountain Power
Exhibit No.8 Page 2 of 10
Case No. PAC-E-11-12
Witness: Bruce N. Willams
PacifiCorp
Major Rating Factors
Strengt:
· Market and regulatory diversity afforded by PacifiCorp's electic utility
business, which serves portons of six western U.S. states;
· Retal electric rates compare favorably with those of other electric suppliers
operating in the states PacifiCorp serves, suggesting that the company may
be able to maintain its competitive advantage despite its ongoing need for
rate relief to support a large capital program;
· The company has made progress in putting into place fuel and purchased
power adjusters in the six states it seres (an adjuster was put into effect in
Idaho in 2009, and one is pending in PacifiCorp's larest market, Utah);
· The completion of 1,068 megawatts of new natual gas plants, along with
wind farm investment, is reducing the company's reliance on purchased
power; and
· A tentative resolution in the contentious Klath hydro relicensing case has
the potential to adequately address the company's fincial exosure if the
projec is decommissioned, as is now envisioned.
Corporate Credit Rating
A-/Stable/A-2
Weakesses:
· Despite recent rate relief in nearly all states PacifiCorp serves, regulatory lag continues to allow only modest
improvement in the company's financial profile: Its retun on equity remains under authorized levels and
although leverage has improved since MidAerican Energy Holdings Co. (MEHC) acquired it in 2006, cash flow
metcs remain weak;
· Reguators wil need to consistently support retil rate increases to recover PacifiCorp's planned capital
investments, although the recessionary environment has caused some scaling.back of capital plans;
· Growt in the percentage of generation provided by natual gas costs mitigates some of the company's potential
exposure to carbon regulation, but introduces greater potential for cost volatility.
Rationale
The 'A-' corporate credit rating (CCR) on PacifiCorp reflects its "excellent" business risk profie, evidenced by a
diverse and growing service territory, and "aggessive" fiancial risk profile that reflects a large capital program and
the need to shore up its cash flow metrics. Whle the ring-fenced utility's credit metrIcs are more consistent on a
stand-alone basis with a 'BBB' category ratig, Standard & Poor's Ratings Services expects that management wil
achieve cash flow metrics more consistent with an 'A' category rating over the next several years. PacifiCorp is
owned by MidAerican Energy Holdings Co. (MEHC; BBB+/Stablel--). In tu, MEHC is privately held and
majority owned by Berkshire Hathaway (AA+/StablelA-1+), which at year-end 2009 had an 89.5% interest in
MEHC on an undiuted basis. (MEHC's remainng common equity is owned by Walter Scott (9.7%) and President
and Chief Executive Offcer Greg Abel (0.8%)). MEHC has demonstrated a wilingness to deploy equity to support
the utility's large capital program, providing the utility with $865 milion in equity contributions since it purchased
Standard & Poor's I RatngsDireet on the Global Credit Porl I April 30. 2010 2
796125130030966
Rocky Mountain Power
Exhibit NO.8 Page 3 of 10
Case No. PAC-E-11-12 PacifiCorp
Witness: Bruce N. Wiliams
the company in March 2006.
MEHC's credit profile is supported by Berkshire, which has in place though February 2011 a $3.5 bilion equity
commitment agreement beteen itself and MEHC in which MEHC can unilaterally call upon Berkshire to support
either its debt repayment or the capital needs of its regulated subsidiaries, including PacifiCorp. In March 2010, the
agreement was amended to extend through February 2014 at a lower level of $2 bilion. We view this agreement
between PacifiCorp's parent and a 'AA+' rated entity as reducing the likelihood of a PacifiCorp default.
Neverteless, we expect PacifiCorp to grow into a stand-alone credit profie consistent with the 'A-' rating on the
company. We take this view because the utility has no right to cause MEHCto make an equity contribution, either
from MEHC or via Berkshire though an MEHC board request. While MEHC would typically have strong
incentives to support the utility by tapping the Berkshire contingent equity, we would note that in a catastrophic
utility event, MEHC would be expected to do so only if doing so were in the economic best interests of the parent.
Such a scenario is remote and would requie an unprecedented event such as what occurred durng the western
energy crisis, when regulators refused to allow utilities to recover power procurement costs.
PacifiCorp serves 1.7 millon customers in portons of six western states: Utah, Oregon, Wyoming, Washington,
Idaho, and California. The company operates as Pacific Power in Oregon, Washington, and California, and as
Rocky Mountain Power in Utah, Wyoming, and Idaho. The company's two largest markets, Utah and Oregon,
accounted for about 67% of the company's retail electic sales in 2009, with Wyoming and Washington at 25%,
and the balance being sold to customers in Idaho and California. As of Dec. 31, 2009, the utilty's long-term debt
was $6.4 bilion. Consolidated long-term debt at MEHC (which includes PacifiCorp's debt) was nearly $20 bilion
as of the same date.
Supportive rate case outcomes remain key to maintaining and improving upon the company's financial perrormance.
When MEHC purchased PacifiCorp in 2006 from ScottshPower, the utilty had consistently been unable to earn its
authorized return on equity (ROE), which vares by jurisdicton but ranges from 10% to 10.6%. Mauagement has
focused on improving its returns, with some success. In 2009, our calculations sugest that the consolidated ROE
for PacifiCorp was 8.5%. Reguatory lag remains an issue for the company, although the company is permitted
under state regultion to use forward test years for rate cases in Utah, Oregon, Wyoming, and California. (Idaho
and Washington require historical test years.)
In 2009, several paries, interveners, and the company reached a setlement to implement fuel and purchased power
adjustments, which the IPUC approved. The Utah Public Service Commssion (UPSC) is considering the design of a
new fuel adjuster, and the company in February 2010 filed to seek approval to defer the difference between the net
power costs allowed in the company's 2009 rate case and actual costs incured. That request is pending before the
commission.
Recent general rate case activity includes the company's settlement agreement with the UPSC on Feb. 18,2010, for a
retail rate increase of $32 millon, an average price increase of 2 %, as compared with the orignal $67 millon
sought. In Wyoming, the company has filed a general rate case with the Wyoming Public Service Commission for an
increase of as much as $71 million. Early this year, the commssion in Oregon approved a stipulation agreement that
includes an annual increase to $42 millon, as well as thee tariff riders for the collecton of an additional $8 millon
that is associated with various cost initiatives over the course of the next thee years. In Washington, the commission
and PacifiCorp reached a settlement agreement for an anual increase of $14 milion, or an average price increase of
ww.stndardandpoors.com/ratingsdirect 3
796125 I 30()030966
Rocky Mountain Power
Exhibit NO.8 Page 4 of 10
Case No. PAC-E-11-12 PacifiCorp
Witness: Bruce N. Willams
5%. Pro forma rate adjustments in California were made in January 2009 to addrss energ cost adjustments and
attition adjustments. The company has filed a general rate case with the California Public Utilities Commission for
an anual increase of $8 milion that remains pending.
PacifiCorp completed $2.3 bilion in capital expenditures in 2009, up from $1.8 bilion in 2008. The company is
projected to spend $4.6 bilion in 2010-2012, excluding non-cash allowance for fuds used durng construction. The
largest component of PacifiCorp's capital program is the constructon of the Gateway transmission projec, an
estimated $4.6 bilion, 2,000-mile transmission line connectig portions of Wyoming, Uta, Idaho, Oregon, and the
southwestern U.S. The project is being completed in phases, with initial portions of new lines being placed in service
as early as 2010 and a completion date scheduled for 2018. About 34% of the company's total capital budget over
the next three years (2010-2012) is devoted to transmission investment, of which Gateway is a component. In 2008,
the Federal Energy Regulatory Commission awarded the company incentive rate treatment of 200 basis points for
seven of the eight project segments.
Lower fuel prices, decreased volume of wholesale electricity purchases, and favorable rate approvals on retail
electricity sales and sales of renewable energy credits affected PacífiCorp's 2009 results. Although revenues declined
slightly, by almost 1 %, gross margins per megawatt-hour sold increased by almost 6%, as did the company's
earnings before interest and taxes. Operating income increased about 11 % due in large part to retail revenues
increases provided by regulatory rate relief. For 2009, cash flows from operations rose by $508 millon to $1.5
bilion, but the majority of this was attbutable to the deferred income taxes. In 2009, retail sales declined by 3%,
while wholesale sales were approximately flat. About 30%-32% of PacifiCorp's total electric sales are to industrial
customers. As a result, we had expected sales contraction to be a drag on 2009 performance, as industrial sales are
more sensitive to the business cycle than is residential electrc consumption. Industrial sales declined 7% in 2009.
Year-end leverage for the company was 53%, virtually unchanged year over year. Borrowing in 2009 was partially
offset by $125 million of equity contribution from MEHe. These equity investments wii be key to maintaining a
balanced capital structre throughout the company's capital program. Debt to total capitalization reflects several
adjustments we make, the largest of which include adding $395 milion for power purchase obligations and $370
milion for post-retirement obligations. We expect tht PacifiCorp wil not be in a position to make distributions to
its parent while it is executing its capital program and that MEHC wil manage PacifiCorp's debt leverage
downward to the 50% area in the next several years.
Short-term credit factors
The company's liquidity position is strong. The PacifiCorp 'A-2' short-term rating reflects that although the
contingent equity agreement beteen MEHC and Berkshire supports MEHC and its subsidiaries, the agreement is
not a source of instantaneous liquidity. The agreement allows Berkshire up to 180 days to fund a request by MEHC.
Given the recent turmoil in both the liquidity and capital markets, we have taken a firmer view on the need to link
the PacifiCorp short-term ratings to its stand-alone credit quality, which supports an 'A-2' shott-term rating.
However, we note that although Berkshire contractually has up to six months to respond to an MEHC call for
liquidity, it has strong economic incentives to do so.
PacifiCorp's cash and cash equivalents totaled $117 milion as of Dec. 31,2009. In addition, the company has
$1.395 bilion in unsecured revolving credit structured in two separate agreements: an $800 million line expiring
July 2013 and a $700 milion line extending through October 2012. The company had letters of credit in place for
$258 milion, leaving $1.137 bilion available under its revolving facilties.
Standard & Poor's I RatingsDirect on the Global Credit Portl I April 30. 2010 4
796125 ! 30003096
Rocky Mountain Power
Exhibit NO.8 Page 5 of 10
Case No. PAC-E-11-12 PacifiCorp
Witness: Bruce N. Willams
Outlook
The stable outlook on the PacifiCorp ratigs incorporates our expectation that MEHC wil continue to support the
utilty by contributig equity sufficient to ensure that our fully adjusted debt to total capitalization is managed over
the next few years to an adjusted level of closer to 50% and that FFO to total debt and FFO interest coverage wil
be 20% or better and in the range of 4.0x-4.5x, respectively. Given thatPacifiCorp's finncial risk profile is weak
for the current ratigs, we do not expect near-term upward ratings momentum for the utility. PacifiCorp's
regulatory and structural insulation shields the utility from some MEHC credit deterioration, to an extent.
Specifically, our criteria provide that the PacifiCorp CCR can be no more than thee notches above the MEHC
consolidated credit rating. The company is comfortbly within this range, so we do not see significantprospees for
the utilty rating to fall as a result of adverse rating changes on MEHC, which also enjoys a stable outlook.
Table 1.
PacifiCorp -- Peer Comparisnn*
Rating as of April 28, 2010
PacifiCorp Portland General Electc Co. Pacific Gas 8i Eleec Co.
A-/Stable/A-2 BBB/Stble/A-2 BBß+/Stable/A-2
--Averge of past three fiscal years--
(Mil. $)
Revenues
Net income from cont. oper.
Funds from operations (FFO)
Capital expenditures
Debt
Equity
Adjusted raios
Oper. income (bet. O&Al/revenues (%)
EBIT interest coverage (xl
EBIIDA interest coverage (x)
Return on capital (%)
FFO/debt (%)
OebVEBIIDA (x)
*Fully adjusted (including postretirement obligaions).
4,404.3
479.7
1,342.3
1.850.2
6,641.
5,926.2
35.8
2.8
4.0
8.0
20.2
4.2
1,764.0 13,218.9
109.0 1.57.
326.5 3,030.0
511.4 3.437.7
1,875.2 12,662.8
1.404.3 10,032.3
25.9 29.3
2.2 2.9
3.8 4.4
7.6 10.2
17.4 23.9
4.1 3.3
Table 2.
PacifiCorp -- Financial Summarv*
--Fscal year ended Mar. 31-
20 20 20 20 2Ð
Rating history A-lStable/ A-2 A-/Stable/A-1 A-/Stable/ A-1 A-/Stable/ A-1 A-/Stable/ A-1
(Mil. $)
Revenues 4.457.0 4.498.0 4,258.0 4,154.1 3,896.7
Net income from continuing operations 542.0 458.0 439.0 307.9 360.7
Funds from operations (FFOI 1.60.1 1.272.1 99.8 927.6 864.5
Capital expenditures 2,297.1 1.57.0 1.496.4 1,375.0 1,030.5
Cash and short-term investents 11.0 59.0 228.0 59.0 119.6
ww.stndardandpoors.com/ratingsdirect 5
796125 I 3D0030%6
Rocky Mountain Power
Exhibit NO.8 Page 6 of 10
Case No. PAC-E-11-12 PacifiCorp
Witness: Bruce N. Willams
Table 2.
PacifiGorp -- Financial SummarV* (cont)
Debt 7,415.8 6.635.9 5,873.5 5,473.6 5,185.3
Preferred stock 20.5 41.0 41.0 41.3 41.3
Equity 6,711.5 5,987.0 5,080.0 4,426.8 3,750.7
Debt and equity 14.127.3 12.622.9 10,953.5 9,900.4 8,936.0
Adjusted ratios
EBIT interest coverage (x)2.7 2.8 2.8 2.5 3.0
FFO int. cov. (xl 4.9 4.2 3.5 3.8 3.8
FFO/debt (%)23.7 19.2 16.9 16.9 16.7
Discretionaiy cash flow/debt (%)110.2)(10.7)(10.5)(10.7)(5.6)
Net cash flow/capex(%)76.6 72.3 66.3 66.1 66.7
Debtdebt and equity (%)52.5 52.6 53.6 55.3 58.0
Return on common equity (%)7.0 6.8 7.8 6.2 8.9
Common dividend payout ratio (unadj.) (%)7.0 0.0 0.0 5.2 49.1
*fully adjusted (including postetirement obligations).
Table 3.
Reconcilatioß Of PacifiCorp Reported Amounts With Standard & Poor's Adjusted Amounts (MiL. $)*
--Fiscal year ended Dec. 31. 2O
PacifCorp reprted amount
Operatng Operating Operating
income income income Cash flow Cash flow
Shareholders'(before (before (afer Interest from frm Dividends Capital
Debt equit D&A)DaA)D&I expense operions operations paid expenditures
Reported 6.16.0 6,732.0 1,609.0 1,609.0 1,060.0 359.0 1,500.0 1,500.0 2.0 2,328.0
Standard & Por's adjustnt
Operating 36.5 5.0 2.3 2.3 2.3 2.7 2.7 4.1
leases
Intermediate 20.5 (20.51 1.0 (1.0)(1.0)(1.0)
hybridsreported as
equity
Postetirement 369.9 20.0 20.0 20.0 5.0 33.8 33.8
benefit
obligations
Accrued 11.0
interest not
included in
reported debt
Capitalized 35.0 (35.0)(35.0)(35.0)interest
Power purchase 395.7 63.3 63.3 25.8 25.8 37.5 37.5
agreements
Asset 66.3 9.0 9.0 9.0 9.0 5.2 5.2
retirement
obligations
Reclassification 83.0
of nonoperating
income
(expenses)
Standard & Poor's I RatingsDirect on the Global Credit Porl I April 3D, 201 0 6
796125 \ 3ÐOfl30966
Rocky Mountain Power
Exhibit NO.8 Page 7 of 10
Case No. PAC-E-11-12 PacifiCorp
Witness: Bruce N. Willams
Table 3.
Reconcíliation Of PacífíCorp Reported Amounts With Standard & Poor's Adjusted Amounts íMit Sl* ícont.l
Reclassification
of
working-eapital
cash flow
changes
Total 999.8
adjustments
Standard & Poor's adjusted amount
217.0
(20.5)97.3 94.6 140.2 78.2 43.1 260.1 (1.0)(30.9)
Operating
income Cash flow Funds
(before Interes frm frm Divdend Capital
Deb Equit D&A)EBITDA EBIT expens operaions operatons peid expenditures
Adjusted 7,415.8 6,711.5 1.706.3 1.03.6 1,200.2 437.2 1.543.1 1,760.1 1.0 2.297.1
'PacifiCorp reported amounts shown are taken from the company's financial statements but might include adjustment mad by data proiders or relassifications made by
Standard & Poor's analyts. Please note that two report amounts (operating income before D&A and cash flow from operaions) are used to derive more than one Standard
& Poor's-adjusted amount (operating income before O&A and EBITDA. and cash flow from operations and funds from operations. respectively). Consequently. the first section
in some tables may feature duplicate descriptions and amounts.
Ratngs Detail ¡As Of Ä::nì 3D. 2ß'û,'
PacifiCorp
Corprate Creit Rating
Comercial Par
Loal Currcy
Prefe Sto (1 Isse)
Seior Seured (70 Issues)
Seior Unsecred (1 Issue)
Seior Unsecured (3 Isses)
Seior Unsecure (2 Issues)
Corp Credit Rangs Histry
27 -Mar-2O
18-Se2O
22-Mar-206
OO-Mar-20
25-May-2005
Bune Ris Prole
Finanial Ris Prole
Rel8l Enes
CE Cen Wat and Energ Co. Inc
Senior SeclJ 11 Issue)
CE Elecc U.K. Funding Co.
Issuer Creit Rating
Senior Unsecured (1 Issue)
CE Generon LL
Seior Secured (1 Issue)
Cordova Ene Co. LL
Seior Secured (1 Issue)
A-lStable/A-2
A-2
BBB
A
A-
MA-2
Alveloping
A-/Stable/A-2
A-Niatch NegA-1
A-/Stable/A-l
A-/Sble/A-2
A-Niatch Neg/A-2
Excellen
Aggressive
BB-/Stable
BBBtlStable/A-2
BB8lStable
BBtlStable
BB/Stable
ww.stndardandpoors.com/ratingsdirect 7
786125! 30030966
Rocky Mountain Power
Exhibit NO.8 Page 8 of 10
Case No. PAC-E-11-12 PacifiCorp
Witness: Bruce N. Wiliams
Raings ÐeaillAs Of A¡y:. 3rt 7Q:Oì*(cont)
Iowa-Illnoi Gas 8i Elec Co.
Senior Unsure (5 Issues)
Ke Rivr Gas Transmision Co.
Senior Seured (2 Issuesl
MidAri En Co.
Issr Credit Raing
Commercial Paper
Locl Currency
Prefrr Stock (1 Issue)
Senior Unsecured (9lsues)
Senior Unsecured (2lssuel
MidAmercan Ene Holdings Co.
Issuer Credit Rating
Preferred Stck (2 Issues)
Senior Unsecured (8 Issuesl
MidArican Funding LLC
Senior Sere (2 Issues)
Midwe Power Sy Inc.
Senior Unseured (1 Issel
Noltem Elecc Distbuton Lt.
Issuer Credit Rating
Senior Unseure (1 Issue)
Nom Elc Fina PLC
Senior Unsecure (1 Issue)
Noltam Elecc PLC
Issuer Creit Rating
Senior Unsecured (1 Issue)
Noram Nltrel Gas Co.
Issuer Credit Raing
Seior Unsecred (5 Issues)
Salt Sea Fumling Co.
Senior Sered (3 Issue)
Ut Power 8i Ught Co.
Senior Secured (1 Issue)
Yorkire Elecci Distbuton PLC
Issuar Credit Rang
Senior Unsecured (1 Issuel
Seior Unsecured (1 Issue)
Yorire Eleccit Grp PLC
Issuer Creit Rating
Yorhire Power Group Lt.
Issuer Credit Rating BB8+/Stable/A-2Senior Unseed (1 Issuel BBB+
'Unless otherise noted. all ratings in this repor are global scle ratings. Standard & Poor's creit ratings on the globl scale are comparable across countries. Standard
A-/M
A-lStale
A-/Stale/A-2
A-2
888+
A-
A-1M
BB8+/Stable/--
BBB-
888+
BBB+
A-/A-
A-/Stable/--
A-
A-/Stable
BB8+/Stable/ A-2
A-
Altable/-
A
BBB-/Stable
AAegativ
A-lStable/A-2
A-
A-lStable
BB8+lStable/-
Stadard & Poor's I RatingsDirect on the Global Credit Portl I April 30. 2010 8
796125 i 300030966
Rocky Mountain Power
Exhibit NO.8 Page 9 of 10
Case No. PAC-E-11-12 Pa Fe
Witness: Bruce N. Willams ci i orp
& Poor's credit ratings on a national scale are relative to obligor or obligations within that speific country.
Ifatings Detail ¡ ks 0f APf1J 3G it)' m~(coßt.j
ww.standanlandpoors.com/ratingsirect 9
796125 ! 300Q30966
Rocky Mountain Power
Exhibit NO.8 Page 10 of 10
Case No. PAC-E-11-12
Witness: Bruce N. Wiliams
Copyright ( c ) 201 0 by Standard & Poor's Financial Servces LLC (S&P), a subsidiary of The McGra-Hil Companies, inc. All nghts reserved.
No conte (including ratings, credit-related analyses and data, modeL, softare or other applicaton or output therefrom) or any part thereof (Content) may be moified,
revers engineered, reprouced or distributed in any form by any means, or store in a database or retrieval syem, withut the pnor written permission of S&P. The Content
shall not be used for any unlawfl or unauthonzed purpses. S&P, its affliates, and any third-part providers, as well às their directors, officers, shareholders, employees or
agents (collecively S&P Parties) do not guarantee the acuracy, completeness, timeliness or availabilit of the Content S&P Parties are not responsible for any errors or
omissions, regardless of the cause, for the result obtaine from the use of the Content, or for the security or maintenance of any data input by the user. The Content is
provided on an 'as is' basis. S&P PARTIES DISCLAIM Am AND All EXPRESS OR IMPLED WARRANTIES, INCLUDING. BU NOT LIMITED TO. ANY WARRANTIES OF
MERCHANTABILITY OR FINESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFlARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING
WILL BE UNINTERRUPTED OR THAT THE CONTENT WilL OPERATE WITH AN SOFlARE OR HARDWARE CONFIGURA nON. In no event shall S&P Parties be liable to any
part for any diret, indirect incidenlal, exemplary. compensatory. punitive, special or consequential damages, costs. expenses. legal fees, or losses (including, without
limitation, lost income or los profits and opportunity cost) in connection with any use of the Content even if adised of the possibility of such damaes.
Creit-related analyses, including ratings, and statements in the Content are sttements of opinion as of the date they are expessed and not statements of fact or
recmmendations to purchase, hold, or sell any securites or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any
form or fomat The Content should not be relied on and is not a substitue for the sjii, judgment and experience of the user, its management employee, advisors and/or
clients when making investment and other business decisions. S&P's opinions and analyses do not address the suitabilit of any security. S&P does not act as a fiduciary or
an investment advisor. While S&P has obtained information from sources it believe to be reliable, S&P does not perform an audit and undertkes no duty of due dilgence or
independent verification of any information it receives.
S&P keeps certain activities of its business units separate from each other in order to prerve the independence and objectivity of their respecive acivities. As a result.
certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procdures to maintain the
confdentiality of certin non-public information reeive in connection with each analytical procss.
S&P may reeive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of secunties or frm obligors. S&P reservs the nght
to disseminate it opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, ww.standardandpoors.com (free of charge), and
ww.ratingsdiree.com and ww.globalcreitortl.com (subscripton), and may be distnbuted though other means, including via S&P publicaions and third-part
redistributors. Additional information about our ratings fees is available at ww.stndardndpoors.com/usratingsfees.
The McGraw'HiI Companies ¿~;,c ::\S:, ,C,~ ,
Standard & Poor's I RatingsDirect on the Global Credit Portl I April 30. 2010 10
796125 ! :iüûl3G966
EJVED
LOn t\A 1 2.1 M~ \0: 55 Case No. PAC-E-l1-12
Exhibit NO.9
Witness: Bruce N. Wiliams
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ROCKY MOUNTAI POWER
Exhibit Accompanying Direct Testimony of Bruce N. Wiliams
Cost of Long Term Debt
May 2011
AV
E
R
A
G
E
LI
N
E
AM
O
U
N
T
IS
S
U
A
N
C
E
RE
D
E
M
P
T
I
O
N
NE
T

P
R
O
C
E
E
D
S
AN
N
U
A
L

DE
B
T

IN
T
E
R
E
S
T
AL
L
-
I
N
OR
i
G
LI
N
E
NO
.
DE
S
C
R
I
P
T
I
O
N
OU
T
S
T
A
N
D
I
N
G
EX
P
E
N
S
E
S
EX
P
E
N
S
E
S
TO

CO
M
P
A
N
Y

SE
R
V
I
C
E

C
O
S
T
RA
T
E
CO
S
T
LI
F
E
NO
.
1
1
2
To
t
a
l

F
i
r
s
t

M
o
r
t
g
a
g
e

B
o
n
d
s
$5
,
7
2
7
,
4
3
3
,
8
0
0
($
6
0
,
3
7
0
,
2
6
0
)
($
3
2
,
0
9
5
,
6
2
0
)
$5
,
6
3
4
,
9
6
7
,
9
2
0
$3
5
7
,
5
8
8
,
5
0
0
6.
0
8
6
%
6.2
4
3
%
23
.
2
2
3
3
4
Su
b
t
o
t
a
l

-

P
o
l
l
u
t
i
o
n

C
o
n
t
r
o
l

R
e
v
e
n
u
e

B
o
n
d
s

s
e
c
u
r
e
d

b
y

F
M
B
s
$4
0
0
,
4
7
0
,
0
0
0
($
1
0
,
5
6
0
,
8
1
0
)
($
9
,
5
5
0
.
1
9
4
)
$3
8
0
,
3
5
8
,
9
9
6
$1
1
,
3
3
8
,
2
8
5
2.
5
4
1
%
2.
8
3
1
%
28
.
0
4
5
Su
b
t
o
t
a
l

-

P
o
l
l
u
t
i
o
n

C
o
n
t
r
o
l

R
e
v
e
n
u
e

B
o
n
d
s
$3
3
7
,
9
0
0
,
0
0
0
($
4
,
2
9
4
,
2
3
2
)
($
7
,
6
2
1
,
2
2
9
)
$3
2
5
,
9
8
4
,
5
3
9
$5
,
1
0
0
,
1
1
5
1.
3
4
6
%
1.
5
0
9
%
27
.
8
5
6
To
t
a
l

P
o
l
l
u
t
i
o
n

C
o
n
t
r
o
l

R
e
v
e
n
u
e

B
o
n
d
s
$7
3
8
,
3
7
0
,
0
0
0
($
1
4
,
8
5
5
,
0
4
2
)
($
1
7
,
1
7
1
,
4
2
3
)
$7
0
6
,
3
4
3
,
5
3
5
$1
6
,
4
3
8
,
4
0
0
1.
9
9
4
%
2.
2
2
6
%
27
.
9
6
7
7
8
To
t
a
l

C
o
s
t

o
f

L
o
n
g

T
e
r
m

D
e
b
t
$6
,
4
6
5
,
8
0
3
,
8
0
0
($
7
5
,
2
2
5
,
3
0
2
)
($
4
9
,
2
6
7
,
0
4
3
)
$6
,
3
4
1
,
3
1
1
,
4
5
5
$3
7
4
,
0
2
6
,
9
0
0
5.
6
1
8
%
5.
7
8
5
%
23
.
8
8
9
9
10
*a
v
e
r
a
g
e

o
f

t
h
e

5

q
u
a
r
t
e
r
-
e
n
d
i
n
g

b
a
l
a
n
e
e
s

s
p
a
n
n
i
n
g

t
h
e

f
i
s
c
a
l

y
e
a
r
10
11
11 ~f
i
~
$
l
9'

(
I

2
:
0
CD

C
D

0
'
.
"
en

Z

;
:
"
'
!'
!
=

~
~
OJ
-
o
'

c
:
~
)
:
c
o
~
CD

n
;
;

:
l
;Z
~
c
g

-
0
~.
.
.
.

~
æi
\
a
~
~
c
,
(J
Rocky Mountain Power
Exhibit No. 9 Page 2 of 3
Case No. PAC-E-11-12
Witness: Bruce N. Wiliams
~ g
- N ~ ~ ~ ~ ~ 00 ~ ~ = ~ ~ ~ ~ ~ ~ ~ ~ ~ M ~ ~ ~ ~ ~~ ~ ~ g~ ~ ~ ~ ~ ~ ~ ~ ~ e; ~ ~; ~ ~~ ~ ~ ~ ~ ~ ~
....
i:~.."....~
I
&lE-
i:..'"
~ ~gni
~ 8
~
~ ~
~ "'S
~~ ~"..
g
!........":l ~ ~~~..à ~ ~ti ..
z
z '"~i:
~~ S..~..
¡;..
..'""..
~
'"~ e
'"~f!..
ê.. i!" ~ê!d~
~ ~ §
:;
~..
~
~
....~3
c
~ ;2c ..
~ ¡:~¡: '"~ ..
.."¡:~z'"'" ""'.. ~'"f!
1;¡; ~ ~
~.. ~
NO\N_"'''ICi=O\O\MO\OOO_NNV)t-Vl",Q\OOlrV;i.o~\O~i.oo!'r-Nt-int-MO\Q\I/¡¡NMt-'O\Ot-tIEF~'C_"'~EA.... ..
~~~~*~~~~~~~~ra~~r.oöoõoõoôoòoòoc
~ ~ ~~ ~ ~ ggog g g g g g~;;~~~~EÃ
8ggggggg\O'o"l\OOOOONCIo\",~r-ÑO"'''''MffN":OOO-..O\t-f'MNO\OOMOMf"EAM"'M'OOr-OÓo\..EA f. !i _ ¡¡ lA If.. ..
0000000=¡A 'i ¡¡ EA Go.¡¡ EA fl
£~aaaaa~
gggggggg\O"'"l\OOOOONQO~i.r-NÓ-.M~NvOOQ\-O\t-lfMNO'OOMOM"iEA t""'M'oóC- oõ 0\"'..Ei EA ., .. ¡¡ EA It.. ..
0000000gggggggN"'NM"'OO"''¿Óo'Nt-O-viro"It-NNO\l"\D'o'" 0\ .¿ oó .¿ oó 0\li__No:__EA EAEAf:Ii¡¡
o\OO--NN_-NNNNNNN
sssšsss
~~~~~~~
NNNNNNN~~~~~~~3~333~3
š
~ ê
~..
_NM"IV'\Ot- .,~~~~~~~~~888888:
~~~~~~
.g.g.g.g.g~v. Cf 00 v. tl ~.~.~.~.~.~ I~~~~~Š:::::::::: luuuuu ='"
8", -~ g~ §~ a 8~ ~ g~ g~ a a a ~ ~~ ~~OO_oo""""NooOO""MM""N~~~~;:~:1~~~gg~f;~oó .. ô M .. .¿ .. ..:f ..., oo~ 0\ 0\ 0\. 0'" f'N--N--NMMN--MEA..EAEAEAEAEAEAEAEAEAEAEAEAEA ~
~.~ ~ ~ ~ ~ ~ ~ ~ $ ~ ~ ~ ~ ~:g~g~~~~~~~~~::~ãi: vi vi r- vi .n \Ó .n \Ó .n \Ò .n \Ò M ~
N 0' ir \0 M .. MOO 0 \0 0\0 \0 0Moo-\OO'M"=O'NOooNONO'-O'..\oNooooON\o\o-Ooô .¿ oô oô oô oô oô 0\ 0\ 0\ oô oò oò 0\~.~ ~ ~.~ ~ ~ ~ ~ ~ ~ ~ ~ ~
o _ir 0 ir "= 0\ "= 0' 0' .. .. M 0 '"~~f2$f2~::~r:t:::~M~S~~~~~:i~g~~~~g~~~..MooNM..O'M_OO_\O\Of"ir" N~ r- .¿ r- -. i. 0\ v~ \O~ \O~ i. r- t- 'I0\ 0\ 0' 0' 0. 0\ v 0\0\ 0\ 0\ 'o M M NM__N_NMirirvNM\ON..EA EA EA EA (¡ EA EA EA EA EA EA EA ~ EA añ..
oO\oooiroooooooo'iEA-EAEAEAo\EAEAEAEAEACAfAEA..~ ~ ~~ ~ ~'" - ..e ~ e
---------------OOiroir__\O__MM..O..gg::~M~~ggÑ~~~~~e=
.. -. 0""" v~ N OÓ M ..~N _~ oo~ O\~""'¿~:2~~~~;:e~~~&;g~~i ~ ti ti ti ti ie ~ ti ;r i ~ d i-----.-- ----e-e
§ggg§§§§ggg§§§g!!!!!!!!ii!!!!!Sì~~g~~~~\Oir~~~~~iÄ EA EA EA EA EA EA EA EA EA EA fA fA fA iñ..
gggggggggg§g§g
§§§§§§§§§§~~~§ôôôôôôôôôôôôôôOoooooirooooiriro~~~t4~t4t4~~:2t4t4~~
00000000000000 ff___MMMMMM_M_M_N
_M v-"= ir \0.... 00 00 0\0\-::~::~~~~~~~~~~~ir ir ir ir ir ir _ _ ir ir ir ir ir ir~~~§~~~~~§§~~~
ê~~~~Q~~~~~~~~-OO"=-vOOOvM....ooooN
~ ~~ ~ ~ ~ ~ ~ ~ § § ~ ~ ~
=88~~8~8~ã~~88§æC;N~C;~N~~~~~NNN~z rI ~ z ~ ~ ~ ~o ~;a ~ ~ ~:;
.g .g .g .g .g .g .g .g .g .g .g .g .g .g ~ø~~~~~~~oo~~~~~_
~~~~~~~~~~~~~~i
~~~~~~~~~~~~~~'$000000000000000\oirirooiroiriririrooir..0\ V 0\ .. 0\ N _ .. N \0 M ir 0 00 0\\Ó .n ~ i: .n .n \Ò .n ,¿ .n \Ó vi .¿ M tt
NOOOooOOOOOOO=O\N"=ONOOvNoirirN..-:ir'-~~~O'.,..~O\~v~N~r-~vNNMO\O\oo..O\V..o=!~~~:3a~~~3~~~~EAEAEA EA ~
~ ~ ~ $ ~ ~ ~. ~ ~ ~ ~ ~ ~~SS~~~~~~ggt!~~0' 0\ 0\ 0\ 0\ 0\ 0\ 0\ :2 0\ 0\ 0\ 0\
ooO\ooooO\NNNO'O'NN;g~;g~~:1~~~~~~0\ 0\ 0\ 0\ .n vi vi vi vi vi vi vi0' 0\ 0' 0' 00 00 00 00 00 00 00 00EA EA EA EA EA EA .. EA EA EA fA EA
v 0' O\_OM.. 0.. O'..M 0\ON 0\0 v N v .. .. ir _ 0\ N~ to qto~ "=~ oo.,ti ~ O\~_.. '- "t:1~~~~~~::~~~Ñ~~~~~;r~ ~~~~~~~fA-__"' EAEA_EAEAEA..EA.EA EA EA ~
---------o 0 0 0 .. 00 \0 v N- _.N ..EA EA EA EA ~., ~~ ~~ ~~ ~~ ~~ ~ r:~ :;oo\OMOMVV....NM.._iroooovNM_Nvo\O\Oir..eeee~eee;
-------------\o--O\NO'..\oNOMVCO\..O\MMvO\vOOvO\\C
-:rt ~rt v., \O.,rt ~rt'o~ N~ir "tlIo\Niroo..MNirooMONv .. _ 0 _ EA _.N _ M M M NEAEA__EA_EAEA_EAEAEA'.--ee- --~---~
000000000000=
â~ââââââ~..~.,ââ~000000000000=oo~o~q q v~q o~o~o.,o~q o~"tVNMlIN-NMirirllv'"EA___EAEAEAEA_EAEAEAClfAEACA EA ~
ogooggoooooo
~~ââ~â~~~~~.,~â~~
~~ 8~8~~tg.,~g~g..g~ g~g~~~~~r.~~t2~~:2~EA fAEA EA
~~~~~~~~~g~g~
_____NNN__NM________NNMNõ:::::~õoo::~::r:õ~~~~~~~~~~~::ooo\o\O'M--NNN--0000_000__00
_____MMN__NN~$$$~~ê~$.~.~~~~~£~~SS~~:s.~0000_000__00
~-----MNN--NNt:ÕõõõõõõõS8~~:gNNNNNNNNNNNNU
3 ~ fr ~ ~ ;¡; t ~ ~ ; ; =.. IZIZIZ Q.... r,.-.......c
.g .g .g .g .g .g .g .g .g .g .g .g ~~~~~~~~~~~~~š
.!! .!! .!! .!! .!! .!! .~ .!! .~ .~ .~ .~ .s~~~~~~~~~~~~~
~ ~ ~ ~ ~. ~ .~ ~ ~ ~J ~ ~ ~
ir ir M ir 0\ \0 00 ir M .. '0.. 0\_o\o\o\NNMMlIMNN\C0\ oò oõ oò oò oò oô oô oô oô oô oõ oê
~g~g8~~~~~~~OÓN"~oóir"OÓI""Ñr-~~5a3~~~~ai~EA EAEA IifA t;
~~~~~~~~~~~~. ~ ~ ~.~ ~ ~ ~ ;; ~ ~oò 0\ 0. 0\ 0\ 0\. oò 0\ oõ oô 0\
IrOOOOOMIr\OV"NNNMNNlIO\irNirooooooooooO\ooOir~~~~~~g~g:~EAEA4;~fofA~fAfA~
~~~g~~~Ñ:;~~vO'lIMooO\-ooNNitN~NlI~OÓo\""OÔNN~'¿=~~S~~~~~~~~~~~~:iii~~"ci~~fA io EA ~ CAt;
-----------..\oNM......-O'MNoo\oOlloo..Noooo"l..\OlIMVOOM\OO\O'ooitg~~~~~r~~!~~e..e..i...NN-~..e eeeee ë
~:=õõ~êõ6õôõõO\ ~~N..-..M"=O\O'N-tnoooi--N\o--NO'tn-n_"o"inoôt-ôoó..t-f"..M..OMooooirl"=e~e~~e~~EAef'- -- -- ~
8888888888ã$
§~§§~§~§§~§§§§iÔll~oo~Nôôi.'¿-.in.,--EA_ir_NMfAEA\OEAEA EAEA EAEAEA t;
00000000008888888888§§§§§§~§~~ôi.oôMôo~ir~\O~-.i.__EA_ir_NNEAEAVlEA ~fAEAEAEA
00000000000\MMMMMMMMMMN
~§~~~s~~~~S~ ~ ~~ ~ 2š ~ S S000000--0.0
~~~§§~~~~~S ~ ~ ~ ~ ~. ~ ~ S S000000--00
~
MNMNNNNNMM~_ N N N N N NN.(" M ~0000000000NNNMNNNMNN¡i~~~rIrI~88~~~
.g .g .g .g .g .g .g .g .g .g~
~ ~ ~ ~ ~ i;.~ ~ ~ ~ ¡
~~~~~~~~~~i
~ ~ ~ ~ ~ ~ ~ ~ .~ ~ ¡;MlI.._MirOOOOMMQ-OO--OOONN..oô oô oò oõ oôoô oô oô oò oò oê
~ g - M M oiir \0 .. 00 ~ ~ = ~ ~ ~ ~ ~ ~ ~ ~ ~ Ñ ~ ~ ~ ~ ~ ~ ~ ~ g ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ :; ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
~~~~~~$.~ool".."4"4irO-.~~~~~~~~r-oõoòoòoõoòoôoe
NE
T

P
R
O
C
E
E
D
S

T
O

C
O
M
P
A
N
PR
I
C
I
P
A
L

A
M
O
U
N
T
TO
A
L
PE
R
.
I
O
O
LI
N
E
IN
R
E
T
IS
S
U
A
N
C
E
MA
1
1
OR
I
G
OR
I
G
I
N
A
L
AV
E
R
A
G
E
IS
S
U
A
N
C
E
RE
D
E
M
P
T
I
O
N
DO
L
L
A
R
PR
I
C
I
P
A
L
MO
N
E
Y

TO

AN
U
A
L

DE
B
T

LI
N
E
NO
.
RA
T
E
DE
S
C
R
I
T
I
O
N
DA
T
E
DA
T
E
LI
E
IS
S
U
E
OU
f
T
A
N
D
I
N
G
.
EX
E
N
S
E
S
EX
E
N
S
E
S
AM
O
U
N
AM
O
U
N
CO
M
P
A
N
SE
R
V
I
C
E

C
O
S
T
NO
.
(a
)
(b
)
(c
)
(d
)
(e
)
(g
)
(h
)
(i
)
(j)
(k
)
(I
)
(m
)
(n
)
54
7.2
6
0
%
Se
r
i
e
s

F

d
u
e

J
u
l

2
0
2
3
07
/
2
2
/
9
3
07
1
2
1
2
3
30
$1
1
,
0
0
0
,
0
0
0
$1
1

,
0
0
0
,
0
0
0
($
1
0
0
,
6
2
2
)
($
5
8
9
,
0
6
2
)
$1
0
,
3
1
0
,
3
1
6
$9
3
.
7
3
0
7.
8
0
4
%
$8
5
8
,
4
4
0
54
55
7.2
6
0
%
Se
r
i
e
s

F

d
u
e

J
u
l

2
0
2
3
07
/
2
2
/
9
3
07
/
2
1
2
3
30
$2
7
,
0
0
0
,
0
0
0
$2
7
,
0
0
0
,
0
0
0
($
2
4
6
.
9
8
1
)
($
1
.
4
4
5
,
8
8
0
)
$2
5
,
3
0
7
,
1
3
9
$9
3
.
7
3
0
7.
8
0
4
%
$2
.
1
0
7
,
0
8
0
55
56
7.2
3
0
%
Se
r
i
e
s

F

d
u
e

A
u
g

2
0
2
3
08
1
1
6
/
9
3
08
/
1
6
/
2
3
30
$1
5
,
0
0
0
.
0
0
0
$1
5
.
0
0
0
,
0
0
0
($
1
3
7
,
2
1
1
)
($
2
6
8
,
6
2
4
)
$1
4
,
5
9
4
,
1
6
5
$9
7
.
2
9
4
7.4
5
7
%
$1
,
1
1
8
,
5
5
0
56
57
7.2
4
0
%
Se
r
i
e
s

F

d
u
e

A
u
g

2
0
2
3
08
/
1
6
/
9
3
08
/
1
6
/
2
3
30
$3
0
,
0
0
0
.
0
0
0
$3
0
.
0
0
0
,
0
0
0
($
2
7
4
,
4
2
3
)
($
5
3
7
,
2
4
8
)
$2
9
,
1
8
8
,
3
2
9
$9
7
.
2
9
4
7.4
6
7
%
$2
,
2
4
0
.
1
0
0
57
58
6.7
5
0
%
Se
r
i
e
s

F

d
u
e

S
e
p

2
0
2
3
09
1
1
4
/
9
3
09
1
1
4
/
2
3
30
$2
,
0
0
0
,
0
0
0
$2
,
0
0
0
,
0
0
0
($
1
5
,
3
0
0
)
$0
$1
,
9
8
4
,
7
0
0
$9
9
.
2
3
5
6.8
1
0
%
$1
3
6
.
2
0
0
58
59
6.7
2
0
%
Se
r
i
e
s

F

d
u
e

S
e
p

2
0
2
3
09
/
1
4
/
9
3
09
1
1
4
1
2
3
30
$2
.
0
0
0
,
0
0
0
$2
,
0
0
0
,
0
0
0
($
1
5
,
3
0
0
)
$0
$1
.
9
8
4
,
7
0
0
$9
9
.
2
3
5
6.7
8
0
%
$1
3
,
6
0
0
59
60
6.7
5
0
%
Se
r
i
e
s

F

d
u
e

S
e
p

2
0
2
3
09
/
1
4
/
9
3
09
1
1
4
1
2
3
30
$5
.
0
0
0
.
0
0
0
$5
,
0
0
0
,
0
0
0
($
3
8
,
2
5
0
)
($
3
4
,
1
6
9
)
$4
,
9
2
7
,
5
8
1
$9
8
.
5
5
2
6.8
6
5
%
$3
4
3
,
2
5
0
60
61
6.
7
5
0
%
Se
r
i
e
s

F

d
u
e

O
c
t

2
0
2
3
10
/
2
3
/
9
3
10
/
2
6
/
2
3
30
$1
2
.
0
0
0
,
0
0
0
$1
2
,
0
0
0
,
0
0
0
($
9
1
,
3
9
6
)
$0
$1
1
,
9
0
8
,
6
0
4
$9
9
.
2
3
8
6.8
1
0
%
$8
1
7
,
2
0
0
61
62
6.
7
5
0
%
Se
r
i
e
s

F

d
u
e

O
c
t

2
0
2
3
10
/
2
3
/
9
3
10
/
2
6
/
2
3
30
$1
6
,
0
0
0
,
0
0
0
$1
6
,
0
0
0
,
0
0
0
($
1
2
1
,
8
6
1
)
$0
$1
5
,
8
7
8
,
1
3
9
$9
9
.
2
3
8
6.8
1
0
%
$1
,
0
8
9
,
6
0
0
62
63
6.
7
5
0
%
Se
r
i
e
s

F

d
u
e

O
c
t

2
0
2
3
10
/
2
3
/
9
3
10
/
2
6
1
2
30
$2
0
,
0
0
0
,
0
0
0
$2
0
,
0
0
0
,
0
0
0
($
1
5
2
,
3
2
6
)
$0
$1
9
,
8
4
7
.
6
7
4
$9
9
.
2
3
8
6.8
1
0
%
$1
,
3
6
2
,
0
0
0
63
64
7.
0
4
4
%
Su
b
t
o
t
a
l

-

S
e
r
i
e
s

F

M
T
N
s
30
51
4
0
,
0
0
0
,
0
0
0
(5
1
,
1
9
3
,
6
7
0
)
(5
2
,
8
7
4
,
9
8
3
)
51
3
5
,
9
3
1
,
3
4
7
7.
2
9
1
%
51
0
,
2
0
8
.
0
2
0
64
65
65
66
6.
7
1
0
%
Se
r
i
e
s

G

d
u
e

J
a
n

2
0
2
6
01
1
2
3
/
9
6
01
1
1
5
1
2
6
30
$1
0
0
,
0
0
0
,
0
0
0
$1
0
0
,
0
0
0
,
0
0
0
($
9
0
4
,
4
6
7
)
$0
$9
9
,
0
9
5
,
5
3
3
$9
9
.
0
9
6
6.7
8
1
%
$6
,
7
8
1
,
0
0
0
66
67
6.
7
1
0
%
Su
b
t
o
t
a
l

-

S
e
r
i
e
s

G

M
T
N
s
30
51
0
0
,
0
0
0
,
0
0
0
(5
9
0
4
,
4
6
7
)
50
$9
9
,
0
9
5
,
5
3
3
6.7
8
1
%
56
,
7
8
1
,
0
0
0
67
68
68
69
6.0
8
6
0
/
.
To
t
a
l

F
I
r
s
t

M
o
r
t
g
a
g
e

B
o
n
d
s
23
55
,
7
2
7
,
4
3
3
,
8
0
0
($
6
0
,
3
7
0
,
2
6
0
)
($
3
2
,
0
9
5
,
6
2
0
)
55
,
6
3
4
,
9
6
7
,
9
2
0
6.2
4
3
%
53
5
7
,
5
8
8
,
5
0
0
69
70
70
71
71
72
1.2
5
2
%
11
1
7
/
9
4
05
1
0
1
1
1
3
18
$4
0
,
6
5
5
.
0
0
0
$4
0
,
6
5
5
,
0
0
0
($
8
7
4
,
1
5
9
)
($
7
4
,
9
1
2
)
$3
9
,
7
0
5
,
9
2
9
$9
7
.
6
6
6
1.9
6
%
$5
6
7
,
5
4
4
72
73
4.
0
0
2
%
Co
n
v
e
r
s
e

8
8

d
u
e

J
a
n

2
0
1
4
01
/
1
4
/
8
8
01
1
0
1
1
1
4
26
$1
7
,
0
0
0
.
0
0
0
$1
7
,
0
0
0
,
0
0
0
($
1
5
5
,
9
7
0
)
($
5
7
9
,
8
4
9
)
$1
6
,
2
6
4
,
1
8
1
$9
5
.
6
7
2
4.
2
7
9
%
$7
2
7
,
4
3
0
73
74
4.
0
0
2
%
Sw
e
e
t
w
a
t
e
r

8
4

d
u
e

D
e
c

2
0
1
4
12
/
1
2
/
8
4
12
/
0
1
1
1
4
30
$1
5
,
0
0
0
.
0
0
0
$1
5
,
0
0
0
,
0
0
0
($
2
2
7
,
8
8
7
)
$0
$1
4
,
7
7
2
,
1
1
3
$9
8
.
4
8
1
4.
0
9
1
%
$6
1
3
,
6
5
0
74
75
1.
5
7
%
Li
n
c
o
l
n

9
1

d
u
e

J
a
n

2
0
1
6
01
1
1
7
/
9
1
01
1
0
1
1
1
6
25
$4
5
.
0
0
0
.
0
0
0
$4
5
,
0
0
0
,
0
0
0
($
7
7
1
,
8
3
6
)
($
2
,
5
7
8
,
6
0
2
)
$4
1
,
6
4
9
,
5
6
2
$9
2
.
5
5
5
1.7
2
4
%
$7
7
5
,
8
0
0
75
76
4.
2
2
9
%
Fo
r
s
y
t

8
6

d
u
e

D
e
c

2
0
1
6
12
/
2
9
/
8
6
12
/
0
1
/
1
6
30
$8
,
5
0
0
,
0
0
0
$8
,
5
0
0
,
0
0
0
($
3
0
4
,
8
2
4
)
$0
$8
,
1
9
5
,
1
7
6
$9
6
.
4
1
4
4.
4
4
6
%
$3
7
7
.
9
1
0
76
77
5.
7
4
5
%
Li
n
c
o
l
n

9
3

d
u
e

N
o
v

2
0
2
1
11
0
1
1
9
3
11
0
1
1
1
28
$8
,
3
0
0
,
0
0
0
$8
,
3
0
0
,
0
0
0
($
4
2
6
,
1
0
5
)
($
4
1
4
,
7
7
8
)
$7
.
4
5
9
,
1
1
7
$8
9
.
8
6
9
6.5
3
6
%
$5
4
2
,
4
8
8
77
78
5.
7
7
0
%
Em
e
r
y

9
3
A

d
u
e

N
o
v

2
0
2
3
11
1
0
1
1
9
3
11
1
0
1
1
2
3
30
$4
6
,
5
0
0
,
0
0
0
$4
6
.
5
0
0
.
0
0
0
($
1
,
6
2
4
,
7
9
3
)
($
2
,
8
4
2
.
0
5
3
)
$4
2
.
0
3
3
,
1
5
4
$9
0
.
3
9
4
6.5
0
0
%
$3
,
0
2
2
.
5
0
0
78
79
5.
7
4
5
%
Em
e
r
y

9
3
B

d
u
e

N
o
v

2
0
2
3
11
1
0
1
1
9
3
11
1
0
1
1
2
3
30
$1
6
,
0
0
,
0
0
0
$1
6
,
4
0
0
.
0
0
0
($
1
,
0
1
5
,
0
5
1
)
($
8
1
9
,
5
5
7
)
$1
4
,
5
6
5
,
3
9
2
$8
8
.
8
1
3
6.6
0
4
%
$1
,
0
8
3
,
0
5
6
79
80
1.
5
5
%
Ca
r
b
o
n

9
4

d
u
e

N
o
v

2
0
2
4
11
1
7
/
9
4
11
0
1
1
2
4
30
$9
,
3
6
5
,
0
0
0
$9
,
3
6
5
.
0
0
0
($
2
0
6
,
5
1
9
)
($
5
8
,
5
7
4
)
$9
.
0
9
9
,
9
0
7
$9
7
.
1
6
9
1.2
6
8
%
$1
1
8
,
7
4
8
80
81
1.7
3
%
Co
n
v
e
r
s
e

9
4

d
u
e

N
o
v

2
0
2
4
11
1
7
/
9
4
11
0
1
/
2
4
30
$8
,
1
9
0
,
0
0
0
$8
,
1
9
0
,
0
0
0
($
2
0
9
,
7
7
8
)
($
8
6
.
3
2
3
)
$7
.
8
9
3
,
8
9
9
$9
6
.
3
8
5
1.1
9
%
$1
0
8
,
0
2
6
81
82
1.3
0
%
Em
e
r
y

9
4

d
u
e

N
o
v

2
0
2
4
11
1
1
7
/
9
4
11
1
0
1
1
2
4
30
$1
2
1
,
9
4
0
,
0
0
0
$1
2
1
.
9
4
0
.
0
0
0
($
3
,
2
7
4
,
2
4
6
)
($
1
.
9
2
5
.
7
6
7
)
$1
1
6
,
7
3
9
,
9
8
7
$9
5
.
7
3
6
1.
4
0
5
%
$1
,
7
1
3
,
2
5
7
82
83
1.8
1
%
Li
n
c
o
l
n

9
4

d
u
e

N
o
v

2
0
2
4
11
1
7
/
9
4
11
1
0
1
/
2
4
30
$1
5
,
0
6
0
,
0
0
0
$1
5
,
0
6
0
,
0
0
0
($
4
2
2
,
8
5
8
)
($
8
1
,
4
2
7
)
$1
4
,
5
5
5
,
7
1
5
$9
6
.
6
5
1
1.
4
1
8
%
$2
1
3
,
5
5
1
83
84
1.3
4
%
Sw
e
e
t
w
a
t
e
r

9
4

d
u
e

N
o
v

2
0
2
4
11
1
7
/
9
4
11
1
0
1
1
2
4
30
$2
1
,
2
6
0
,
0
0
0
$2
1
.
2
6
0
,
0
0
0
($
5
1
0
,
4
7
9
)
($
8
8
,
3
5
2
)
$2
0
,
6
6
1
,
1
6
9
$9
7
.
1
8
3
1.
2
4
7
%
$2
6
5
,
1
1
2
84
85
4.
2
3
1
%
Co
n
v
e
r
s
e

9
5

d
u
e

N
o
v

2
0
2
5
11
1
1
7
/
9
5
11
1
0
1
1
2
5
30
$5
,
3
0
0
,
0
0
0
$5
,
3
0
0
,
0
0
0
($
1
3
2
.
0
4
3
)
$0
$5
,
1
6
7
,
9
5
7
$9
7
.
5
0
9
4.3
8
1
%
$2
3
2
,
1
9
3
85
86
4.
3
3
0
%
Li
n
c
o
l
n

9
5

d
u
e

N
o
v

2
0
2
5
11
1
1
7
/
9
5
11
1
0
1
1
2
5
30
$2
2
,
0
0
0
,
0
0
0
$2
2
,
0
0
0
,
0
0
0
($
4
0
4
.
2
6
2
)
$0
$2
1
,
5
9
5
,
7
3
8
$9
8
.
1
6
2
4.4
4
1
%
$9
7
7
,
0
2
0
86
87
2.
5
4
1
%
Su
b
t
o
t
a
l

-

S
e
c
u
r
e
d

P
C
R
B
s
28
$4
0
0
,
4
7
0
,
0
0
0
(5
1
0
,
5
6
0
,
8
1
0
)
(5
9
,
5
5
0
,
1
9
4
)
$3
8
0
,
3
5
8
,
9
9
6
2.
8
3
1
%
51
1
,
3
3
8
,
2
8
5
87
88
88
89
1.2
8
%
Sw
e
e
t
w
a
t
e
r

8
8
B

d
u
e

J
a
n

2
0
1
4
01
1
1
4
/
8
8
01
1
0
1
1
1
4
26
$1
1
,
5
0
0
,
0
0
0
$1
1
,
5
0
0
,
0
0
0
($
8
4
,
8
2
2
)
($
3
9
2
,
2
5
0
)
51
1
.
0
2
2
.
9
2
8
59
5
.
8
5
2
1.1
7
%
$1
5
1
,
4
5
5
89
90
1.2
4
%
Sw
e
e
t
w
a
t
e
r

9
0
A

d
u
e

J
u
l

2
0
1
5
07
/
2
5
1
9
0
07
/
0
1
/
1
5
25
$7
0
,
0
0
0
,
0
0
0
57
0
,
0
0
0
,
0
0
0
(5
6
6
0
,
7
5
0
)
(5
7
9
5
,
1
2
2
)
56
8
,
5
4
4
,
1
2
8
59
7
.
9
2
0
1.
2
2
1
%
$8
5
4
,
7
0
0
90
91
1.4
2
%
Em
e
r

9
1

d
u
e

J
u
l

2
0
1
5
05
/
2
3
/
9
1
07
/
0
1
1
1
5
24
$4
5
,
0
0
0
.
0
0
0
$4
5
,
0
0
0
,
0
0
0
($
8
7
2
,
5
0
5
)
($
2
,
5
6
8
,
8
5
9
)
$4
1
,
5
5
8
.
6
3
6
59
2
.
3
5
3
1.
5
2
2
%
$6
8
4
,
9
0
0
91
~
(
)

m
:
:
92
1.8
1
%
Sw
e
e
t
w
a
t
e
r

8
8
A

d
u
e

J
a
n

2
0
1
7
01
1
1
4
/
8
8
01
1
0
1
1
1
7
29
$5
0
,
0
0
0
,
0
0
0
55
0
,
0
0
0
,
0
0
0
($
4
2
2
,
4
4
3
)
($
8
8
2
,
1
0
1
)
54
8
.
6
9
5
,
4
5
6
$9
7
.
3
9
1
1.2
9
0
"
1
0
$6
4
5
,
0
0
0
92
;:
l
l

~
O
93
1.4
0
%
Fo
r
s
y
t
h

8
8

d
u
e

J
a
n

2
0
1
8
01
1
1
4
1
8
8
01
1
0
1
1
1
8
30
$4
5
,
0
0
0
,
0
0
0
54
5
,
0
0
0
,
0
0
0
($
3
8
0
,
1
9
8
)
($
1
,
0
1
3
,
2
8
3
)
54
3
,
6
0
6
.
5
1
9
59
6
.
9
0
3
1.
2
6
4
%
$5
6
8
,
8
0
0
93
ff

g
¡

õ
'
~
94
1.3
8
%
Gi
e
l
l
e

8
8

d
u
e

J
a
n

2
0
1
8
01
/
1
4
/
8
8
01
1
0
1
1
1
8
30
$6
3
,
0
0
0
,
0
0
0
$4
1
,
2
0
0
,
0
0
0
($
3
5
1
,
9
0
5
)
($
1
,
0
0
6
,
0
1
3
)
53
9
,
8
4
2
,
0
8
2
59
6
.
7
0
4
1.
2
7
0
%
55
2
3
,
2
4
0
94
en

Z

:
:
!'

9

Z
~
95
1.
2
8
0
%
Co
n
v
e
r
s
e

9
2

d
u
e

D
e
c

2
0
2
0
09
1
2
9
/
9
2
12
/
0
1
1
2
0
28
$2
2
,
4
8
5
.
0
0
0
52
2
,
4
8
5
,
0
0
0

.
($
2
4
2
,
1
6
4
)
($
3
0
3
,
3
0
3
)
52
1
,
9
3
9
,
5
3
3
59
7
.
5
7
4
1.
8
4
%
$3
1
1
,
1
9
2
95
OJ
-
0
9

c
:
96
1.
2
8
2
%
Sw
e
e
t
w
a
t
e
r

9
2
A

d
u
e

D
e
c

2
0
2
0
09
/
2
9
1
9
12
/
0
1
1
2
0
28
$9
.
3
3
5
,
0
0
0
$9
,
3
3
5
,
0
0
0
($
1
6
7
,
5
2
4
)
($
1
3
4
,
0
9
4
)
$9
,
0
3
3
.
3
8
2
59
6
.
7
6
9
1.
4
2
1
%
$1
3
2
,
6
5
0
96
2
:
i

(
0

:
:
97
1.
2
8
2
%
Sw
e
e
t
w
a
t
e
r

9
2
B

d
u
e

D
e
c

2
0
2
0
09
/
2
9
/
9
2
12
/
0
1
1
2
0
28
$6
,
3
0
5
,
0
0
0
$6
,
3
0
5
,
0
0
0
($
1
5
1
,
9
0
8
)
($
9
7
,
7
3
5
)
$6
,
0
5
5
,
3
5
7
$9
6
.
0
4
1
1.
4
5
3
%
$9
1
,
6
1
2
97
ló

n

-
0

§
I
98
1.3
4
%
Sw
e
e
t
w
a
t
e
r

9
5

d
u
e

N
o
v

2
0
2
5
12
/
1
4
/
9
5
11
0
1
1
5
30
$2
4
,
4
0
0
,
0
0
0
$2
4
,
4
0
0
.
0
0
0
($
2
2
5
.
0
0
0
)
($
4
2
8
,
4
6
9
)
$2
3
,
7
4
6
,
5
3
1
$9
7
.
3
2
2
1.
2
4
1
%
53
0
2
,
8
0
4
98
Zm
~

:
:
99
6.1
5
0
%
Em
e
r
y

9
6

d
u
e

S
e
p

2
0
3
0
09
/
2
4
/
9
6
09
/
3
0
/
3
0
34
$1
2
.
6
7
5
,
0
0
0
51
2
,
6
7
5
.
0
0
0
($
7
3
5
,
0
1
3
)
50
$1
1
,
9
3
9
,
9
8
7
$9
4
.
2
0
1
6.5
7
8
%
58
3
3
,
7
6
2
99
.
.
!

C
D

"
"
;¡
.
.
w
~
10
0
1.3
4
6
%
Su
b
t
o
t
a
l
-

U
n
s
e
c
u
r
e
d

P
C
R
B
s
28
$3
3
7
,
9
0
0
,
0
0
0
($
4
,
2
9
4
,
2
3
2
)
(5
7
,
6
2
1
,
2
2
9
)
53
2
5
,
9
8
4
,
5
3
9
1.
5
0
9
%
55
,
1
0
0
,
1
1
5
10
0
=r
\
s
.
~
10
1
10
1
~
W
10
2
1.9
9
4
%
To
t
a
l

P
C
R
B

O
b
l
i
g
a
t
i
o
n
s
28
57
3
8
,
3
7
0
,
0
0
0
(5
1
4
,
8
5
5
,
0
4
2
)
(5
1
7
,
1
7
1
,
4
2
3
)
57
0
6
,
3
4
3
,
5
3
5
2.
2
2
6
%
51
6
,
4
3
8
,
4
0
0
10
2
II
10
3
10
3
10
4
5.
6
1
8
%
To
t
a
l

L
o
n
g
-
T
e
r
m

D
e
b
t
24
$6
,
4
6
5
,
8
0
3
,
8
0
0
(5
7
5
,
2
2
5
,
3
0
2
)
($
4
9
,
2
6
7
,
0
4
3
)
56
,
3
4
1
,
3
1
1
,
4
5
5
5.
7
8
5
%
$3
7
4
,
0
2
6
,
9
0
0
10
4
10
5
10
5
im\l~Y 21 ~t\\O: 55 Case No. PAC-E-II-12
Exhibit No. 10
Witness: Bruce N. Wiliams
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ROCKY MOUNTAI POWER
Exhibit Accompanying Direct Testimony of Bruce N. Wiliams
Stadad & Poor's Ratings Direct Rating Factors
May 7, 2007
May 2011
Criteria I Corporates I Utilties:
Standard & Poor's Methodology For
Imputing Debt For U.S. Utilities'
Power Purchase Agreements
Primary Credit Analyst
David Sodek. New York 0)212-48-7969: david_bodek~andardandpoors.com
Secondary Credit Analys:
Richard W Cortright. Jr., New York (1) 212-438-7665; richard_cortight(!standardandpoors.com
Solomon B Samson, New York (1)212-438-7653; soLsamson(!standardandpoors.com
Table Of Contents
The Mechanics OfPPA Debt Imputation
Risk Factors
Ilustration Of The PPA Adjustment Methodology
Short-Term Contracts
Evergreen Treatment
Analytical Treatment Of Contracts With All-In Energy Prices
Transmission Arrangements
PPAs Treated As Leases
Evaluating The Effect Of PPAs
ww.sndardandpoolS.coratingsdirect
Stadard & Poots. All right resered. No rerint or dissminaon wilou S&P's perission. See Term of
UselOisclaimer on tle last page.
1
582634 i ,,4)572291
Rocky Mountain Power
Exhibit No. 10 Page 2 of 7
Case No. PAC-E-11-12
Witness: Bruce N. Wiliams
Criteria I Corporatesl Utilities:
Standard & Poor's Methodology For Imputing
Debt For U.S. Utilities' Power Purchase
Agreements
For many years, Stadad & Poor's Ratings Service has viewed power supply agreements (PPA) in the U.S. utility
sector as creating fixed, debt-like, fiancial obligations tht represent substitutes for debt-financed capital
investments in generation capacity. In a sense, a utility that has entered into a PPA has contracted with a supplier to
make the financial investment on its behalf. Consequently, PPA fied obligations, in the form of capacity payments,
merit inclusion in a utility's financial metrics as though they are part of a utility's permanent capital strcture and
are incorporated in our assessment of a utility's creditworthiness.
We adjust utilities' financial metrics, incorporating PPA fixed obligations, so that we can compare companies that
finance and build generation capacity and those that purchase capacity to satisfy customer needs. The analytical goal
of our financial adjustments for PPAs is to reflect fied obligations in a way that depicts the credit exposure that is
added by PPAs. That said, PPAs also benefit utilities that enter into contracts with suppliers because PPAs wil
typically shift various risks to the suppliers, such as construction risk and most of the operating risk. PPAs can also
provide utilities with asset diversity that might not have been achievable through self-build. The principal risk borne
by a utility that relies on PPAs is the recovery of the financial obligation in rates.
The lvfechanics Of PPA Debt Imputation
A starting point for calculating the debt to be imputed for PPA-related fixed obligations can be found among the
"commitments and contingencies" in the notes to a utility's financial statements. We calculate a net present value
(NPV) of the stream of the outstandig contract' capacity payments reported in the financal statements as the
foundation of our financial adjustments.
The notes to the financial statements enumerate capacity payments for the five years succeeding the annual report
and a "thereafter" period. Whle we have access to proprietary forecasts that show the detail underlying the costs
that are amalgamated beyond the five-year horion, others, for purposes of calculating an NP~ can divide the
amount reported as "thereafter" by the average of the capacity payments in the preceding five years to derive an
approximate tenor of the amounts combined as the sum of the obligations beyond the fifth year.
In calculating debt equivalents, we also include new contracts that wil commence during the forecast period. Such
contracts aren't reflected in the notes to the ficial statements, but relevant information regarding these contracts
are provided to us on a confidential basis. H a contract has ben executed but the energy wil not flow until some
later period, we won't impute debt for that contract until the year that energy deliveries begin under the contract if
the contract represents incremental capacity. However, to the extent that the contract wil simply replace an exiring
contract, we wil impute debt as though the future contract is a continuation of the existing contract.
We calculate the NPV of capacity payments using a discount rate equivalent to the company's average cost of debt,
net of securitization debt. Once we arrive at the NPV, we apply a risk factor, as is discussed below, to reflect the
benefits of regulatory or legislative cost recovery mechanisms.
Standard & Poor's RatingsDiret I May 7, 2007 2
Stadard & Poor's. All nght reservd. No reprnt or disseminaii without S&P's pennission. See T ars of Use/Discaimer on the last page.5826341 300572291
Criter Corporates Utilities: Standard & Poor's Methodology For Imputing Debt For U.S. Utilities' Power
Rocky Mountain Power Purchase Agreements
Exhibit No. 10 Page 3 of 7
Case No. PAC-E-11-12
Witness: Bruce N. WiliamsBalance sheet debt is increased by the risk-factor-adjusted NPV of the stream of capacity payments. We derive an
adjusted debt-to-capitaliztion ratio by addig the adjusted NPV to both the numerator and the denominator of that
ratio.
We calculate an implied interest expense for the imputed debt by multiplying the same utility average cost of debt
used as the discount rate in the NPV calculation by the amount of imputed debt. The adjusted FFO-to-interest
expense ratio is calculated by adding the implied interest expense to both the numerator and denominator of the
equation. We also add implied depreciation to the equation's numerator. We calculate the adjusted
FFO-to-total-debt ratio by adding imputed debt to the equation's denominator and an implied depreciation expense
to its numerator.
Our adjusted cash flow credit metrics include a depreciation expense adjusnnent to FFO. This adjusnnent represents
a vehicle for capturing the ownership-like attbutes of the contracted asset and tempers the effec of imputation on
the cash flow ratios. We derive the depreciation expense adjustment by multiplying the relevant year's capacity
payment obligation by the risk factor and then subtractg the implied PPA-related interest expense for that year
from the product of the risk factor times the scheduled capacity payment.
Risk Factors
The NPVs that Standard & Poor's calculates to adjust reported financial metrics to capture PPA capacity payments
are multiplied by risk factors. These risk factors typically range between 0% to 50%, but can be as high as 100%.
Risk factors are inversely related to the strengt and availability of regatory or legislative vehicles for the recovery
of the capacity costs associated with power supply arrangements. The strongest recovery mechanisms translate into
the smallest risk factors. A 100% risk factor would signfy that all risk related to contractal obligations rests on the
company with no mitigating regulatory or legislative support.
For example, an unegulted energy company that has entered into a tollng arrangement with a third-par supplier
would be assigned a 100% risk factor. Conversely, a 0% risk factor indicates that the burden of the contractual
payments rests solely with ratepayers. This type of arrangement is frequently found among regulated utilities that act
as conduits for the delivery of a third par's electcity and essenrially deliver power, collec charges, and remit
revenues to the suppliers. These utilities have tyically been direced to sell all their generation assets, are barred
from developing new generation assets, and the power supplied to their customers is sourced through a state auction
or third parties, leaving the utilties to act as intermediaries between retail customers and the electicity suppliers.
Intermediate degrees of recovery risk are presented by a number of regulatory and legslative mechanisms. For
example, some regulators use a utility's rate case to establish base rates that provide for the recvery of the fixed
costs created by PPAs. Although we see this type of mechanism as generally supportive of credit quality, the fact
remains tht the utility wil need to litigate the right to recover costs and the prudence of PPA capacity payments in
successive rate cases to ensure ongoing recovery of its fixed costs. For such a PPA, we employ a 50% risk factor. In
cases where a regulator has established a power cost adjustment mechanism that recovers all prudent PPA costs, we
employ a risk factor of 25% because the recovery hurdle is lower than it is for a utility that must litigate time and
again its right to recover costs.
We recogne that there are certain jurisdictions that have true-up mechanisms that are more favorable and frequent
than the review of base rates, but still don 't amount to pure pass-through mechanims. Some of these mechanisms
ww.sndardandpoors.com/ratingsdirect 3
Stndard & Poor's. All rights reserv. No reprint or disseminaton wiout S&P's permission. See Term of Use/Discimer on th lest pag.58263413005729 ;
Criteria Corporates Utilities: Standard & Poor's Methodology For Imputing Debt For U.S. Utilities' Power
Rocky Mountain Power Purchase Agreements
Exhibit No. 10 Page 4 of 7
Case No. PAC-E-11-12
Witness: Bruce N. Wiliams
are triggered when certin finncial thresholds are met or after prescibed periods of time have passed. In these
instances, in calculating adjusted ratios, we wil employ a risk factor beteen the revised 25% risk factors for
utilties with power cost adjustment mechanisms and 50%.
Finally, we view legislatively created cost recovery mechasms as longer lasting and more resilent to change than
regulatory cost recover vehicles. Consequently, such mechanisms lead to risk factors between 0% and 15%,
depending on the legislative provisions for cost recovery and the supply function borne by the utility. Legislative
guarantees of complete and timely recovery of costs are parcularly important to achieving the lowest risk factors.
Illustration Of The PPA Adjustment Methodology
The calculations of the debt equivalents, implied interest expense, depreiation expense, and adjusted financial
metrics, using fisk factors, are ilustrated in the followin example:
Example Of Power-Purchase Agreement Adjustment
($O)Asumption Year 1 Year 2 Year 3 Year 4 Year 5 Thereaftr
Cash from oprations 2,000.000
Funds from operations 1.500,000
Interest expense 44,000
Directly iS$oed debt
Short-term debt 600,000
Long-term due within one year 300,000
Long-term debt 6.500,000
Shareholder's Equity 6,000,000
Fixed capacity commitments 600.000 600,000 600,000 600,00 600,000 600.000 4,200.000*
NPV of fixed capacit conitents
Using a 6.0% discount rate 5,030,306
Application of an assumed 25%1,257,577
risk factor
Implied interest expense'75,455
Implied depreciation expense 74,545
Unadjused ratos
FFD to interest (x)4.4
FFD to total Deb (%)20.0
Debt to capitalization (%)55.0
Ratios adjusd for debt imputaton
FFO to interest (x)§4.0
FFO to total debt (%)**18.0
Debt to capitalization (%)n 59.0
*Thereafter aproimate years: 7. ~The current year's implied interest is subtcted from the produc of the nsk factor multiplied by the current year's æpacity paymnt.
§Adds implied interest to the numerator and denominator and adds implied depreciation to FFO. ** Adds implied depreciation expense to FFO and implied debt to repored
debt. ~ ~Adds implied debt to both the numerator and the denominator. FFO-Funds from operations. NPV--Net present velue.
Standard & Poor's Rating.Dire I May 7,2007 4
Standar & Poor's. All rihts reserv. No reprint or dissemillion wiou S&P's permission. See Ters of UselOisimer on the last pa.582634 i 300572291
Criteria Corporates Utilities: Standard & Poor's Methodology For Imputing Debt For U.S. Utilities' Power
Rocky Mountain Power Purchase Agreements
Exhibit No. 10 Page 5 of 7
Case No. PAC-E-11-12
Witness: Bruce N. Willams
Short-Term Contracts
Standard & Poor's has abandoned its historical practce of not imputing debt for contracts with terms of thee year
or less. However, we understand that there are some utilities that use short-term PPAs of approximately one year or
less as gap filers pending the construction of new capacity. To the extent that such short-term supply arrangements
represent a nomial percentage of demand and serve the purposes described above, we wil neither impute debt for
such contract nor provide evergreen treatment to such contracts.
Evergreen Treatment
The NPV of the fixed obligations assocated with a portolio of short-term or intermediate-term contracts can lead
to distortions in a utilty's financial profile relative to the NPV of the fixed obligations of a utilty with a portolio of
PPAs that is made up of longer-term commtments. Where there is the potential for such distortions, rating
committees wil consider evergreen treatment of existing PPA obligations as a scenario for inclusion in the rating
analysis. Evergreen treatment extends the tenor of short- and intermediate-term contrcts to reflect the long-term
obligation of electric utilities to meet their customers' demand for electicity.
While we have concluded that there is a limted pool of utilities whose portolios of existing and projected PPAs
don't meangfully correspond to long-term load serving obligations, we wil neverteless apply evergreen treatment
in those cases where the portfolio of existing and projeced PPAs is inconsistent with long-term load-servng
obligations. A blanket application of evergreen treatment is not warranted.
To provide evergreen treatment, Stadard & Poor's starts by looking at the tenor of outstanding PPAs. Others can
look to the "commtments and contingencies" in the notes to a utilty's financial statements to derive an
approximate tenor of the contracts. If we conclude that the duration of PPAs is short relative to our targeted tenor,
we would then add capacity payments until the targeted tenor is achieved. Based on our analysis of several
companies, we have determined tht the evergreen extension of the tenor of existing contracts and anticipated
contracts should extend contract to a common lengt of about 12 yeas.
The price for the capacity that we add will be derived from new peaker entr economics. We use empirical data to
establish the cost of developing new peakig capacity and reflect regonal differences in our analysis. The cost of
new capacity is translated into a dollar per kilowatt-year (kW-year) figure using a weighted average cost of capital
for the utilty and a proxy capital recovery period.
Analytical Treatment Of Contracts With All-In Energy Prices
The pricing for some PPA contracts is stated as a single, all-in energ price. Standard & Poor's considers an implied
capacity price that fuds the recovery of the supplier's capital investment to be subsumed within the all-in energ
price.. Consequently, we use a proxy capacity charge, stted in $/k \1 to calculate an implied capacity payment
associated with the PPA. The $/kW figure is multiplied by the number of kilowatts under contract. In cases of
resources such as wind power that exhbit very low capacity factors, we wil adjust the kilowatts under contract to
reflect the anticipated capacity factor that the resource is expeced to achieve.
We derive the proxy cost of capacity using empirical data evidencing the cost of developing new peaking capacity.
ww.standardandpoors.com/raingsdirect 5
Standard & Poor's, All rights resei. No reprnt or disseination wilout S&P's pennission. See Term of UseDisclaimer on the la page.582634 ! 300572291
Critera Corporates Utilities: Standard & Poor's Methodology For Imputing Debt For U.S. Utilities' Power
Rocky Mountain Power Purchase Agreements
Exhibit No. 10 Page 6 of 7
Case No. PAC-E-11-12
Witness: Bruce N. WillamsWe will reflect regional differences in our analysis. The cost of new capacity is translated into a $/kW figure using a
weighted average cost of capital and a proxy capital reovery period. This number wil be updated from time to time
to reflect prevailng costs for the development and financing of the marginal unit, a combustion turbine.
Transmission Arrangements
In recent years, some utilities have entered into long-term transmission contracts in lieu of building generation. In
some cases, these contract provide access to specific power plants, while other transmission arrangements provide
access to competitive wholesale electicity markets. We have concluded tht these types of transmission
arrangements represent extensions of the power plants to which they are connected or the markets that they serve.
Irrespective of whether these transmission lines are integral to the delivery of power from a specifc plant or are
conduits to wholesale markets, we view these arrangements as exbiting very strong parallels to PPAs as a
substitute for investment in power plants. Consequently, we wil impute debt for the fixed costs associated with
long-term transmission contracts.
PPAs Treated As Leases
Several utilities have reported that their accountats dictate that certain PP As need to be treated as leases for
accounting purposes due to the tenor of the PPA or the residual value of the asset upon the PPA's expiration. We
have consistently taken the position that companies should identify those capacity charges that are subject to
operating lease treatment in the financial statements so that we can accord PPA treatment to those obligations, in
lieii of lease treatment. That is, PPAs that receive operating lease treatment for accounting purposes won't be subject
to a 100% risk factor for analytcal purposes as though they were leases. Rather, the NPV of the stream of capacity
payments associated with thes PPAs wil be reduced by the risk factor that is applied to the utility's other PPA
commitments. PPAs that are treated as capital leases for accounting purposes wil not receive PPA treatment because
capital lease treatment indicates that the plant under contract economically "belongs" to the utility.
Evaluating The Effect Of PPAs
Though history is on the side of full cost recovery, PPAs neverteless add financial obligations that heighten
financial risk. Yet, we apply risk factors that reduce debt imputation to recogize that utilities that rely on PPAs
tranfer signficant risks to ratepayers and suppliers.
Additional Contct
Arthur F Simonson, New York (1) 212-438-2094: artuuimonson~tandardandpoors.com
Arleen Spangler, New York (1) 212-438-2098; arleen_spangle~standardandpoors.com
Scott Taylor, New York (1) 212-438-2057; scott_taylo~standardandpoors.com
John W Whitlock. New York (1) 212-438-7678; john_whitlock(standardandpors.com
Standard & Poor's RatingsDirect I May 7. 2007 6
Stadard & Po's. All nghts resrvd. No repr or disseminaton wiout S&P's peission. See Terms of UselOisclaimer on 1le last page.582634 ! 3005728;
Rocky Mountain Power
Exhibit No. 10 Page 7 of 7
Case No. PAC-E-11-12
Witness: Bruce N. Willams
Copyright ~ 2009 Stndard & Poor's. a division of The McGra-Hil Copanies, Inc. (S&P). S&P and/or its third party licensors have exclusiv proprietary rights in the data or
information provided herein. This data/information may only be use internlly for busines purposes and shall not be used for any unlawful or unauthomed purposes.
Dissemination. distribution or reproducton of this data/infrmation in any form is strictly prohibited excpt with the prior writen perission of S&P. Beus of the
possibility of human or mechanical error by S&P, it affiliates or it third part licensors, S&P. its afilates and its third part licensors do not guarantee the accuracy.
adequacy, completeness or availabilty of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. S&P
GIVES NO EXRESS OR IMPliED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR RTNESS FOR A PARTICULAR PURPOSE
OR USE. In no event shall S&P, it affilates and its third part licensors be liable for any direct. indire speial or conseuential damages in connetion with subscriber's or
otlers use of the data/inforation contained herein. Accss to t1e data or information contained herein is $tbject to termination in the event any agreement with a third-
part of information or softare is terminated.
Analytic servces provded by Standard & Poots Ratngs Services (Ratings Seces) are the reslt of separate activities designed to preserv the independence and objectivity
of ratings opinions. The credit ratings and observations contained herein are solely statements of opinion and not sttements of fa or remmendations to purchase. hold, or
sell any securities or make any other investment decisions. Acordingly, any user of thè information contained herein should not rely on any creit rating or other opinion
contained herein in making any invesment decision. Ratings are based on infoation received by Ratings Services. Other divisions of Standrd & Poor's may have
information t1at is not available to Ratings Services. Standard & Poor's has estblished policies and procedures to maintain t1e confidentiality of non-public informion
received during the ratings proess.
Ratings Services reeives compensation for its ratings. Such compensation is normally paid either by th issuers of such securities or third parties partcipaing in marketing
the securities. While Standard & Poor's reservs the right to disseminate t1e rating, it receives no payment for doing so. except for subscriptions to its publications.
Additional information about our ratings fees is available at ww.standardandpoors.com/usratingsfees.
Arr Passwords/user IDs issued by S&P to users are single user-deicated and may ONLY be used by the individual to whom they have been assigned. No sharing of
passwords/user IDs and no simultaneous access via t1e same passwo/user 10 is permitt. To reprnt translate, or use the data or information othr thn as provided
herein. conta Client Services, 55 Water Stree. New York. NY 10041; (1 )212.43.7280 or by e-mail to:resech_requ~standardandpoors.com.
Coright ~ 1994-209 Standard & Poo's. a division of The McGraw-Hil Companies. All Rights Resered.The McGraw'HilfComaanies -~~~",%~~ ~
ww.sandardandpoors.comlratingsdirect 7
582634 i 3007291
tn,' ~'AY 21 AM 10: 56 Case No. PAC-E-II-12
Exhibit No. 11
Witness: Bruce N. Willams..1:~
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ROCKY MOUNTAI POWER
Exhibit Accompanying Direct Testimony of Bruce N. Wiliams
PCRB Variable Rates
May 2011
Rocky Mountain Power
Exhibit No. 11 Page 1 of 3
Case No. PAC-E-11-12
Witness: Bruce N. Wiliams
Indicative Forward PCRB Variable Rates
For Quarter End Periods for Year Ending December 31, 2011
Jan-OO
Feb-OO
Mar-OO
Apr-OO
May-OO
Joo-OO
Jul-OO
Aug-OO
Sep-OO
Oct-OO
Nov-OO
Dec-OO
Jan-Q1
Feb-01
Mar-01
Apr-01
May-01
Joo-01
JuI-Ol
Aug-01
Sep-01
Oct-01
Nov-01
Dec-01
Jan-02
Feb-02
Mar-02
Apr-02
May-02
Joo-02
Ju1-02
Aug-02
Sep-02
Oct-02
Nov-02
Dec-02
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Joo-03
JuI-03
Aug-03
Sep-03
Oct-03
Nov-03
Dec-03
Jan-04
Feb-04
Mar-04
Apr-04
May-04
Joo-04
JuI-04
30 DayLIBOR
Daily Ave
(a)
Floating Rate PCRBs
Daily Ave
(b)
PCRB/LIBOR
(b)/(a)
5.81%
5.89%
6.05%
6.16%
6.54%
6.65%
6.63%
6.62%
6.62%
6.62%
6.63%
6.68%
5.88%
5.53%
5.13%
4.82%
4.16%
3.92%
3.82%
3.64%
3.17%
2.48%
2.13%
1.96%
1.81%
1.85%
1.9%
1.86%
1.84%
1.84%
1.83%
1.80%
1.82%
1.81%
1.44%
1.42%
1.6%
1.4%
1.1%
1.31%
1.1%
1.6%
1.1%
1.1%
1.2%
1.2%
1.3%
1.5%
1.1%
1.0%
1.09%
1.0%
1.0%
1.5%
1.41%
3.33%
3.62%
3.68%
4.02%
4.89%
4.35%
3.99%
4.09%
4.50%
4.36%
4.33%
4.14%
3.10%
3.59%
3.18%
3.72%
3.38%
3.03%
2.65%
2.36%
2.42%
2.18%
1.79%
1.64%
1.49%
1.39%
1.46%
1.8%
1.67%
1.58%
1.49%
1.49%
1.69%
1.84%
1.66%
1.7%
1.40%
1.43%
1.45%
1.2%
1.6%
1.8%
1.2%
1.6%
1.24%
1.24%
1.6%
1.2%
1.1%
1.7%
1.20%
1.27%
1.29%
1.28%
1.26%
57%
62%
61%
65%
75%
65%
60%
62%
68%
66%
65%
62%
53%
65%
62%
77%
81%
77%
69%
65%
76%
88%
84%
84%
82%
75%
77%
85%
91%
86%
81%
83%
93%
102%
115%
110%
103%
107%
111%
115%
119%
119%
102%
104%
111%
111%
121%
114%
110%
107%
110%
115%
117%
102%
89%
Page 1 of 3
Rocky Mountain Power
Exhibit No. 11 Page 2 of 3
Case No. PAC-E-11-12
Witness: Bruce N. Willams
Indicative Forward PCRB Variable Rates
For Quarter End Periods for Year Ending December 31,2011
Aug-04
Sep-04
Oct-04
Nov-04
Dec-04
Jan-05
Feb-05
Mar-05
Apr-05
May-05
Joo-05
Ju1-05
Aug-05
Sep-05
Oct-05
Nov-05
Dec-05
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Joo-06
Ju1-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Joo-07
Ju1-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Joo-08
Ju1-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
30 Day LIDOR
Daily Ave
(a)
Floating Rate PCRBs
Daily Ave
(b)
PCRB/LIDOR
(b)/(a)
1.60%
1.8%
1.90%
2.19%
2.39%
2.49%
2.61%
2.81%
2.97%
3.09%
3.25%
3.43%
3.69%
3.78%
3.99%
4.15%
4.36%
4.48%
4.58%
4.76%
4.92%
5.08%
5.24%
5.37%
5.35%
5.33%
5.32%
5.32%
5.35%
5.32%
5.32%
5.32%
5.32%
5.32%
5.32%
5.32%
5.52%
5.48%
4.98%
4.75%
5.00%
3.95%
3.14%
2.80%
2.79%
2.63%
2.47%
2.46%
2.47%
2.94%
3.87%
1.68%
1.01%
0.39%
0.46%
1.40%
1.49%
1.72%
1.65%
1.67%
1.78%
1.88%
1.95%
2.50%
2.93%
2.39%
2.28%
2.44%
2.55%
2.66%
2.93%
3.10%
3.02%
3.13%
3.11%
3.45%
3.52%
3.74%
3.60%
3.53%
3.61%
3.57%
3.62%
3.70%
3.64%
3.63%
3.64%
3.79%
3.90%
3.76%
3.66%
3.76%
3.84%
3.56%
3.53%
3.25%
3.02%
2.86%
3.79%
2.23%
1.93%
2.77%
4.12%
3.03%
4.57%
4.89%
2.34%
1.02%
0.70%
0.68%
88%
83%
91%
75%
70%
72%
72%
69%
84%
95%
74%
67%
66%
68%
67%
71%
71%
67%
68%
65%
70%
69%
71%
67%
66%
68%
67%
68%
69%
68%
68%
68%
71%
73%
71%
69%
68%
70%
72%
74%
65%
76%
91%
135%
80%
73%
112%
168%
123%
155%
126%
139%
101%
181%
147%
Page 2 of3
Rocky Mountain Power
Exhibit No. 11 Page 3 of 3
Case No. PAC-E-11-12
Witness: Bruce N. Willams
Indicative Forward PCRB Variable Rates
For Quarter End Periods for Year Ending December 31,2011
30 DayLIBOR Floating Rate PCRBs
Daily Ave Daily Ave PCRB/LIBOR
(a)(b)(b)l(a)
Mar-09 0.53%0.66%124%
Apr-09 0.45%0.63%140%
May-09 0.35%0.53%153%
Joo-09 0.32%0.45%143%
Ju1-09 0.29%0.41%142%
Aug-09 0.27%0.43%158%
Sep-09 0.25%0.40%161%
Oct-09 0.24%0.39%159%
Nov-09 0.24%0.37%157%
Dec-09 0.23%0.38%165%
Jan-1 0 0.23%0.32%138%
Feb-1 0 0.23%0.32%137%
Mar-1 0 0.24%0.32%135%
Apr-1O 0.26%0.35%134%
May-1O 0.33%0.34%101%
Joo-1O 0.35%0.33%93%
Ju1-1O 0.33%0.30%90%
Aug-1O 0.27%0.31%115%
Sep-1O 0.26%0.31%119%
Oct-1 0 0.26%0.27%106%
Nov-1O 0.25%0.27%107%
Dec-1 0 0.26%0.29%110%
Jan-11 0.26%0.26%100%
Feb-11 0.26%0.26%98%
Mar-11 0.25%0.24%96%
Average 94%
Histoncal ttoatmg
Forward 30 Day Rate PCRB 1 30 Day Forecast Floatig
LIBOR*LIBOR RatePCRB
(1)(2)(1)*(2)
6/30/2011 0.48%94%0.45%
9/30/2011 0.82%94%0.77%
12/3112011 1.6%94%1.09%
* Source: Bloomberg L.P. (3/31/11)
Page 3 of3
E\\fED
10n l'lA ~ 21 A~ \0: 56 Case No. PAC-E-II-12
Exhibit No. 12
Witness: Bruce N. Wiliams
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ROCKY MOUNTAIN POWER
Exhibit Accompanying Direct Testimony of Bruce N. Wiliams
Cost of Preferred Stock
May 2011
To
t
a
l

Pa
r

An
n
u
a
l
or

S
t
a
t
e
d
Ne
t
Ne
t
%o
f
Li
n
e
Is
s
u
a
n
c
e
Ca
l
l
Di
v
i
d
e
n
d
Sh
a
r
e
s
Va
l
u
e
Pre
m
i
u
m

&
Pr
o
c
e
e
d
s
Gr
o
s
s
Co
s
t

o
f
An
n
u
a
l
Li
n
e
No
.
De
s
c
r
i
p
t
i
o
n

o
f
l
s
s
u
e
Da
t
e
Pr
i
c
e
Ra
t
e
O/S
O/
S
(E
x
p
e
n
s
e
)
to

Co
m
p
a
n
y

Pr
o
c
e
e
d
s
Mo
n
e
y
Co
s
t
No
.
(i
)
(2
)
(3
)
(4
)
(5
)
(6
)
(7
)
(8
)
(9
)
(1
0
)
(1
1
)
1
5%

P
r
e
f
e
r
r
e
d

S
t
o
c
k
,

$
1
0
0

P
a
r

V
a
l
u
e

.
(a
)
11
0
.
0
0
%
5.
0
0
0
%
12
6
,
2
4
3
$1
2
,
6
2
4
,
3
0
0
($
9
8
,
0
4
9
)
$1
2
,
5
2
6
,
2
5
1
99
.
2
2
3
%
5.
0
3
9
%
$6
3
6
,
1
5
6
1
2
2
3
Se
r
i
a
l

P
r
e
f
e
r
r
e
d
,

$
1
0
0

P
a
r

V
a
l
u
e
3
4
4.
5
2
%

S
e
r
i
e
s
Oc
t
-
5
5
10
3
.
5
0
%
4.
5
2
0
%
2,
0
6
5
$2
0
6
,
5
0
0
($
9
,
6
7
6
)
$1
9
6
,
8
2
4
95
.
3
1
4
%
4.
7
4
2
%
$9
,
7
9
3
4
5
7.
0
0
%

S
e
r
e
s
(b
)
No
n
e
7.
0
0
0
%
18
,
0
4
6
$1
,
8
0
4
,
6
0
0
(c
)
$1
,
8
0
4
,
6
0
0
10
0
.
0
0
0
%
7.
0
0
0
%
$1
2
6
,
3
2
2
5
6
6.
0
0
%
S
e
n
e
s
(b
)
No
n
e
6.0
0
0
%
5,
9
3
0
$5
9
3
,
0
0
0
(c
)
$5
9
3
,
0
0
0
10
0
.
0
0
0
%
6.
0
0
0
%
$3
5
,
5
8
0
6
7
5.0
0
%

S
e
n
e
s
(b
)
10
0
.
0
0
%
5.0
0
0
%
41
,
9
0
8
$4
,
1
9
0
,
8
0
0
(c
)
$4
,
1
9
0
,
8
0
0
10
0
.
0
0
0
%
5.0
0
0
%
$2
0
9
,
5
4
0
7
8
50
4
0
%

S
e
r
i
e
s
(b
)
10
1
.
0
0
%
50
4
0
0
%
65
,
9
5
9
$6
,
5
9
5
,
9
0
0
(c
)
$6
,
5
9
5
,
9
0
0
10
0
.
0
0
0
%
50
4
0
0
%
$3
5
6
,
1
7
9
8
9
4.
7
2
%

S
e
r
i
e
s
Au
g
-
6
3
10
3
.
5
0
%
4.7
2
0
%
65
,
8
5
4
$6
.
5
8
5
,
4
0
0
($
2
8
,
5
9
6
)
$6
,
5
5
6
,
8
0
4
99
.
5
6
6
%
4.
7
4
1
%
$3
1
2
,
1
8
6
9
10
4.
5
6
%

S
e
r
i
e
s
Fe
b
-
6
5
10
2
.
3
4
%
4.5
6
0
%
81
,
3
2
6
$8
,
1
3
2
,
6
0
0
($
4
7
,
1
7
)
$8
,
0
8
5
,
4
2
3
99
0
4
2
0
%
4.
5
8
7
%
$3
7
3
,
0
1
0
10
11
11
12
Ma
y
-
9
5
(d
)
$6
7
,
9
5
5
12
13
Oc
t
-
9
5
(e
)
$8
4
,
0
1
9
13
14
14
15
To
t
a
l

C
o
s
t

o
f

P
r
e
f
e
r
r
e
d

S
t
o
c
k
5.
0
3
2
%
40
7
,
3
3
1
$4
0
,
7
3
3
,
1
0
0
($
1
8
3
,
4
9
8
)
$4
0
,
5
4
9
,
6
0
2
5.4
2
7
%
$2
,
2
1
0
,
7
4
0
15
16
16
17
17
18
(a
)

I
s
s
u
e

r
e
p
l
a
c
e
d

6
%

a
n
d

7
%

p
r
e
f
e
r
r
e
d

s
t
o
c
k

o
f

Pa
c
i
f
i
c

P
o
w
e
r

&

L
i
g
h
t

C
o
m
p
a
n
y

a
n
d

N
o
r
t
h
w
e
s
t
e
r
n

E
l
e
c
t
r
c

C
o
m
p
a
n
y
18
19
an
d

5
%

p
r
e
f
e
r
r
e
d

s
t
o
c
k

o
f

Mo
u
n
t
a
i
n

S
t
a
t
e
s

P
o
w
e
r

C
o
m
p
a
n
y
,

m
o
s
t

o
f

wh
i
c
h

s
o
l
d

i
n

t
h
e

1
9
2
0
'
s

a
n
d

1
9
3
0
'
s
.
19
20
(b
)

T
h
e
s
e

i
s
s
u
e
s

r
e
p
l
a
c
e
d

a
n

i
s
s
u
e

o
f

Th
e

C
a
l
i
f
o
r
n
a

O
r
e
g
o
n

P
o
w
e
r

C
o
m
p
a
n
y

a
s

a

r
e
s
u
l
t

o
f

th
e

m
e
r
g
e
r

o
f

th
a
t

C
o
m
p
a
n
y

i
n
t
o

P
a
c
i
f
i
c

P
o
w
e
r

&

L
i
g
h
t

C
o
.
20
21
(c
)

O
r
i
g
i
n
a
l

i
s
s
u
e

e
x
p
e
n
s
e
/
p
r
e
m
i
u
m

h
a
s

b
e
e
n

f
u
l
l
y

a
m
o
r
t
i
z
e
d

o
r

e
x
p
e
n
s
e
d
21
22
(d
)

C
o
l
u
m

1
1

i
s

t
h
e

a
f
t
e
r
-
t
a

a
n
n
u
a
l

a
m
o
r
t
i
z
a
t
i
o
n

o
f

e
x
p
e
n
s
e
s

r
e
l
a
t
e
d

t
o

t
h
e

8
.
3
7
5
%

Q
U
I
D
S

d
u
e

6
/
3
0
/
3
5

w
h
i
c
h

w
e
r
e

r
e
d
e
e
m
e
d

1
1
/
2
0
/
0
0
.
22
23
(e
)

C
o
l
u
m

1
1

i
s

t
h
e

a
n
n
u
a
l

a
m
o
r
t
i
z
a
t
i
o
n

o
f

e
x
p
e
n
s
e
s

r
e
l
a
t
e
d

t
o

t
h
e

8
.
5
5
%

Q
U
I
D
S

d
u
e

1
2
/
3
1
1
2
5

w
h
i
c
h

w
e
r
e

r
e
d
e
e
m
e
d

1
1
1
2
0
/
0
0
.
23
24
24
~
Q

~

$
I
1l
l
ß
~
~
g¡

z

;
+
-
.
..

!
=

z

s
:
OJ
-
U
!
=

g
2
;
i
.
.
:
:
£
o
N
í
i
z
m

~
:
,
.
~
c
o
"
"
::
.
.
c
o

0
=
~
.
.
:
E
¡¡
N
O

~
3
-
II

.
.