If you ever need a handy, dandy road map of corporate scheming, look no further than quarterly earnings calls. Tony the Trickster and his merry band of profiteering pirates tried to put a big smiley face on their poor performance for investors during FirstEnergy's Q2 2012 earnings call on Tuesday.
You can read the transcript of the call here.
Here's a couple of items to look for as you read:
1. FirstEnergy's "derecho" storm costs will be at least $130M. 70% of that amount will be capital expense that they will recover within existing regulatory mechanisms. The other 30% will be "deferred." This simply means the company will create a debt that they will recover from ratepayers at a later date (with carrying costs!) FE says they will file a request in West Virginia in the 3rd quarter to set up the deferral. They already have the regulatory structure in place to do this in the other states. FE says that WV took the worst damage hit, so I'll assume WV will also get the lion's share of the repair cost.
2. FirstEnergy's finance guy is pretending that the company has no idea why residential demand is still dropping. He thinks it's due to the economy and unemployment. Mark Clark thinks people without jobs sit home in the dark and don't use electricity because they can't afford to pay the bill. Can any of you tell me why residential demand may still be falling? Any kindergarteners reading this blog that are smarter than overpaid electric company bigwigs? Apparently a light bulb (it was most definitely a CFL) finally went on over the head of Donny the Gregarious, who pondered whether energy efficiency was having a "dampening effect" on residential consumption. Ya think?
3. Lower operating costs due to "merger synergies" (most overused corporate buzzword, ever) and lower storm repair costs (remember this was before the "derecho") were an earnings driver for the quarter.
4. Picture this... Tony the Trickster reassured the analysts by telling them that his staff presented him with a weekly win/lose customer switching report. See? Being a CEO who makes millions every year really is as simple as sitting around, smoking cigars, and looking at pictures!
5. FirstEnergy mentioned that transmission drives their profit... over and over again, in many different ways. Has FirstEnergy told you lately that transmission is where they're hanging their hat to meet next year's "guidance"? Yes, it's true, FirstEnergy needs to "accelerate" that $1B in "transmission spend" and push it up to 2012 or 2013, instead of later years. Here's why: Transmission spending earns a bigger return, 12.7% for their TrAILCo affiliate's projects. Once they've spent capital on transmission assets, it begins earning in the world's sweetest investment account with absolutely NO RISK involved! The quicker they can "deposit" their "transmission spend" in their own little investment account, the sooner it can start earning big profits that will enable even bigger earnings. There's just one little problem -- sometimes Tony can't "accelerate" his "transmission spend" fast enough and get his transmission projects ramrodded through with enough alacrity to satisfy his financial needs. Whatever could it be that might get in Tony's way?
"The real issue I see in terms of being able to get many of those transmission facilities in place, will not necessarily be driven by the construction schedule, but will be more affected by our ability to acquire rights of way, abilities to get outside crews in to support it, and doing that and getting the permits necessary to complete that amount of work in the timeframe that we’ve laid out in front of us.
So, we have some work to do, there’s a lot involved in the process, we’re in the early stages now, we’re preparing environmental impact statements and all of the other parts, pieces and parts that will require regulatory approval, primarily from siting organizations, and as we move in that timeframe, we’ll be better able to predict when we will have the particular parts of those projects in place. Because this is not just one project, there are a number of things that are going to be done. Substations are going to be enhanced, additional ones are going to be built, new lines are going to be brought in to serve those."
Delay might not be Tony's friend, but it can be a transmission opponent's BFF!
You can read the transcript of the call here.
Here's a couple of items to look for as you read:
1. FirstEnergy's "derecho" storm costs will be at least $130M. 70% of that amount will be capital expense that they will recover within existing regulatory mechanisms. The other 30% will be "deferred." This simply means the company will create a debt that they will recover from ratepayers at a later date (with carrying costs!) FE says they will file a request in West Virginia in the 3rd quarter to set up the deferral. They already have the regulatory structure in place to do this in the other states. FE says that WV took the worst damage hit, so I'll assume WV will also get the lion's share of the repair cost.
2. FirstEnergy's finance guy is pretending that the company has no idea why residential demand is still dropping. He thinks it's due to the economy and unemployment. Mark Clark thinks people without jobs sit home in the dark and don't use electricity because they can't afford to pay the bill. Can any of you tell me why residential demand may still be falling? Any kindergarteners reading this blog that are smarter than overpaid electric company bigwigs? Apparently a light bulb (it was most definitely a CFL) finally went on over the head of Donny the Gregarious, who pondered whether energy efficiency was having a "dampening effect" on residential consumption. Ya think?
3. Lower operating costs due to "merger synergies" (most overused corporate buzzword, ever) and lower storm repair costs (remember this was before the "derecho") were an earnings driver for the quarter.
4. Picture this... Tony the Trickster reassured the analysts by telling them that his staff presented him with a weekly win/lose customer switching report. See? Being a CEO who makes millions every year really is as simple as sitting around, smoking cigars, and looking at pictures!
5. FirstEnergy mentioned that transmission drives their profit... over and over again, in many different ways. Has FirstEnergy told you lately that transmission is where they're hanging their hat to meet next year's "guidance"? Yes, it's true, FirstEnergy needs to "accelerate" that $1B in "transmission spend" and push it up to 2012 or 2013, instead of later years. Here's why: Transmission spending earns a bigger return, 12.7% for their TrAILCo affiliate's projects. Once they've spent capital on transmission assets, it begins earning in the world's sweetest investment account with absolutely NO RISK involved! The quicker they can "deposit" their "transmission spend" in their own little investment account, the sooner it can start earning big profits that will enable even bigger earnings. There's just one little problem -- sometimes Tony can't "accelerate" his "transmission spend" fast enough and get his transmission projects ramrodded through with enough alacrity to satisfy his financial needs. Whatever could it be that might get in Tony's way?
"The real issue I see in terms of being able to get many of those transmission facilities in place, will not necessarily be driven by the construction schedule, but will be more affected by our ability to acquire rights of way, abilities to get outside crews in to support it, and doing that and getting the permits necessary to complete that amount of work in the timeframe that we’ve laid out in front of us.
So, we have some work to do, there’s a lot involved in the process, we’re in the early stages now, we’re preparing environmental impact statements and all of the other parts, pieces and parts that will require regulatory approval, primarily from siting organizations, and as we move in that timeframe, we’ll be better able to predict when we will have the particular parts of those projects in place. Because this is not just one project, there are a number of things that are going to be done. Substations are going to be enhanced, additional ones are going to be built, new lines are going to be brought in to serve those."
Delay might not be Tony's friend, but it can be a transmission opponent's BFF!
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