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A 65-mile segment of the Mona-Oquirrh transmission line is a single-circuit 500-kV transmission line, and a 35mile segment is a double-circuit 345-kV transmission line.
• The construction of Lake Side 2 totaling $156 million, which is expected to be placed in-service in mid-2014.
• Emissions control equipment on existing generating facilities totaling $57 million for installation or upgrade of sulfur dioxide scrubbers, low nitrogen oxide burners and particulate matter control systems.
• Distribution, generation, mining and other infrastructure totaling $574 million.
• Transmission system investments totaling $311 million, including construction costs for the Mona-Oquirrh transmission line.
• The construction of Lake Side 2 totaling $232 million.
• Emissions control equipment on existing generating facilities totaling $75 million for installation or upgrade of sulfur dioxide scrubbers, low nitrogen oxide burners and particulate matter control systems.
• Distribution, generation, mining and other infrastructure totaling $728 million.
• Transmission system investments totaling $216 million, including permitting and right-of-way costs for the MonaOquirrh transmission line.
• Emissions control equipment on existing generating facilities totaling $189 million for installation or upgrade of sulfur dioxide scrubbers, low nitrogen oxide burners and particulate matter control systems, including costs for projects that were placed in-service in the spring and fall of 2011.
• The development and construction of Lake Side 2 totaling $180 million.
• Distribution, generation, mining and other infrastructure totaling $921 million.
Financing Activities Short-term Debt and Revolving Credit Facilities Regulatory authorities limit PacifiCorp to $1.5 billion of short-term debt. PacifiCorp had no short-term debt outstanding as of December 31, 2013 and 2012. For further discussion, refer to Note 6 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
In June 2013, PacifiCorp issued $300 million of 2.95% First Mortgage Bonds due June 2023. The net proceeds were used to fund capital expenditures and for general corporate purposes, including a portion of the common stock dividend paid to PPW Holdings in June 2013.
In January 2012, PacifiCorp issued $350 million of 2.95% First Mortgage Bonds due February 1, 2022 and $300 million of 4.10% First Mortgage Bonds due February 1, 2042. The net proceeds were used to repay short-term debt, fund capital expenditures and for general corporate purposes. In March 2012, PacifiCorp issued an additional $100 million of 2.95% First Mortgage Bonds due February 1, 2022. The net proceeds were used to redeem $84 million of tax-exempt bond obligations prior to scheduled maturity with a weighted average interest rate of 5.72%, to repay short-term debt and for general corporate purposes.
PacifiCorp currently has regulatory authority from the OPUC and the IPUC to issue an additional $550 million of long-term debt.
PacifiCorp must make a notice filing with the WUTC prior to any future issuance. PacifiCorp currently has an effective shelf registration statement filed with the SEC expected to provide for future first mortgage bond issuances through October 2016.
PacifiCorp made repayments on long-term debt totaling $278 million and $101 million during the years ended December 31, 2013 and 2012, respectively.
As of December 31, 2013, PacifiCorp had $559 million of letters of credit providing credit enhancement and liquidity support for variable-rate tax-exempt bond obligations totaling $546 million plus interest. These letters of credit were fully available as of December 31, 2013 and expire periodically through March 2015.
As of December 31, 2012, PacifiCorp had $68 million of tax-exempt bond obligations with fixed interest rates, ranging from 3.90% to 4.13%, scheduled to reset to variable or fixed interest rates in June 2013. In June 2013, $17 million of these tax-exempt bond obligations were redeemed and retired prior to their scheduled 2014 maturity date. The interest rates for the remaining $51 million, with maturity dates ranging from 2014 to 2025, were reset to variable interest rates with a weighted average interest rate of 0.22% as of December 31, 2013.
PacifiCorp's Mortgage and Deed of Trust creates a lien on most of PacifiCorp's electric utility property, allowing the issuance of bonds based on a percentage of utility property additions, bond credits arising from retirement of previously outstanding bonds or deposits of cash. The amount of bonds that PacifiCorp may issue generally is also subject to a net earnings test. As of December 31, 2013, PacifiCorp estimated it would be able to issue up to $8.8 billion of new first mortgage bonds under the most restrictive issuance test in the mortgage. Any issuances are subject to market conditions and amounts may be further limited by regulatory authorizations or commitments or by covenants and tests contained in other financing agreements. PacifiCorp also has the ability to release property from the lien of the mortgage on the basis of property additions, bond credits or deposits of cash.
PacifiCorp may from time to time seek to acquire its outstanding debt securities through cash purchases in the open market, privately negotiated transactions or otherwise. Any debt securities repurchased by PacifiCorp may be reissued or resold by PacifiCorp from time to time and will depend on prevailing market conditions, PacifiCorp's liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
In 2013, PacifiCorp redeemed and canceled all remaining outstanding shares of its redeemable preferred stock at stated redemption prices, which in aggregate totaled $40 million, plus accrued and unpaid dividends. As of December 31, 2013, PacifiCorp had nonredeemable preferred stock outstanding with an aggregate stated value of $2 million.
In February 2014, PacifiCorp declared a dividend of $500 million payable to PPW Holdings in March 2014.
In 2013 and 2012, PacifiCorp declared and paid dividends of $500 million and $200 million, respectively, to PPW Holdings.
PacifiCorp manages its capitalization and liquidity position to maintain a prudent capital structure with an objective of retaining strong investment grade credit ratings, which is expected to facilitate continuing access to flexible borrowing arrangements at favorable costs and rates. This objective, subject to periodic review and revision, attempts to balance the interests of all shareholders, customers and creditors and provide a competitive cost of capital and predictable capital market access.
Under existing or prospective authoritative accounting guidance, such as guidance pertaining to consolidations and leases, it is possible that new purchase power and gas agreements, transmission arrangements or amendments to existing arrangements may be accounted for as capital lease obligations or debt on PacifiCorp's financial statements. While PacifiCorp has successfully amended covenants in financing arrangements that may be impacted, it may be more difficult for PacifiCorp to comply with its capitalization targets or regulatory commitments concerning minimum levels of common equity as a percentage of capitalization.
This may lead PacifiCorp to seek amendments or waivers under financing agreements and from regulators, delay or reduce dividends or spending programs, seek additional new equity contributions from its indirect parent company, MEHC, or take other actions.
Future Uses of Cash
PacifiCorp has available a variety of sources of liquidity and capital resources, both internal and external, including net cash flows from operating activities, public and private debt offerings, the issuance of commercial paper, the use of unsecured revolving credit facilities, capital contributions and other sources. These sources are expected to provide funds required for current operations, capital expenditures, debt retirements and other capital requirements. The availability and terms under which PacifiCorp has access to external financing depends on a variety of factors, including PacifiCorp's credit ratings, investors' judgment of risk and conditions in the overall capital market, including the condition of the utility industry in general.
PacifiCorp has significant future capital requirements. Capital expenditure needs are reviewed regularly by management and may change significantly as a result of these reviews, which may consider, among other factors, changes in environmental and other rules and regulations; impacts to customers' rates; outcomes of regulatory proceedings; changes in income tax laws; general business conditions; load projections; system reliability standards; the cost and efficiency of construction labor, equipment and materials; commodity prices; and the cost and availability of capital. Prudently incurred expenditures for compliance-related items, such as pollution-control technologies, replacement generation, hydroelectric relicensing, hydroelectric decommissioning and associated operating costs are generally incorporated into PacifiCorp's rates.
PacifiCorp estimates that it will spend approximately $3.1 billion on capital projects over the next three years, excluding noncash equity AFUDC and other non-cash items. These capital projects include transmission investments; installation of emissions control equipment on existing generating facilities; new generating resources; and distribution investments in new connections, lines and substations.
Forecasted capital expenditures, which exclude non-cash equity AFUDC and other non-cash items, for the years ended December 31
are as follows (in millions):
The capital expenditure estimate for transmission system investment includes projects associated with the Energy Gateway
Transmission Expansion Program totaling $349 million, including the following estimated costs:
• $190 million for the Sigurd-Red Butte transmission line that is expected to be placed in-service in 2015.
• $159 million for other segments associated with the Energy Gateway Transmission Expansion Program that are expected to be placed in-service over the next several years, depending on siting, permitting and construction schedules.
The capital expenditure estimate for environmental projects includes emissions control equipment to meet anticipated air quality and visibility targets, including the reduction of sulfur dioxide, nitrogen oxides and particulate matter emissions. This estimate includes the installation of new or the replacement of existing emissions control equipment at a number of units at several of PacifiCorp's coal-fueled generating facilities, including Jim Bridger Units 3 and 4.
The capital expenditure estimate for other includes operating projects that consist of routine expenditures for distribution, generation, mining and other infrastructure needed to serve existing and expected demand, and the remaining $36 million of costs associated with Lake Side 2 that is expected to be placed in-service in mid-2014.
Obligations and Commitments Contractual Obligations PacifiCorp has contractual cash obligations that may affect its consolidated financial condition. The following table summarizes
PacifiCorp's material contractual cash obligations as of December 31, 2013 (in millions):
(1) Consists of principal and interest for tax-exempt bond obligations with interest rates scheduled to reset periodically prior to maturity. Future variable interest rates are assumed to equal December 31, 2013 rates. Refer to "Interest Rate Risk" in Item 7A of this Form 10-K for additional discussion related to variable-rate liabilities.
(2) Commodity contracts are agreements for the delivery of energy. Capacity contracts are agreements that provide rights to energy output, generally of a specified generating facility. Forecasted or other applicable estimated prices were used to determine total dollar value of the commitments for purposes of the table.
(3) Includes environmental and hydroelectric relicensing commitments recorded in the Consolidated Balance Sheets that are contractually or legally binding and contributions expected to be made to the PacifiCorp Retirement Plan during 2014 as disclosed in Note 9 of Notes to Consolidated Financial Statements in Item 8 of this Form 10-K. Excludes regulatory liabilities and employee benefit plan obligations that are not legally or contractually fixed as to timing and amount. Deferred income taxes are excluded since cash payments are based primarily on taxable income for each year. Uncertain tax positions are also excluded because the amounts and timing of cash payments are not certain.
Regulatory Matters PacifiCorp is subject to comprehensive regulation. In addition to the discussion contained herein regarding regulatory matters, refer to Item 1 of this Form 10-K for further discussion regarding PacifiCorp's general regulatory framework.
State Regulatory Matters
In March 2013, PacifiCorp filed its annual EBA with the UPSC requesting recovery of $17 million in deferred net power costs for the period January 1, 2012 through December 31, 2012 over a two-year period. In September 2013, PacifiCorp filed a stipulation with the UPSC providing for recovery of $15 million over a two-year period. In October 2013, the UPSC approved the stipulation with the new rates effective November 2013.
In March 2013, PacifiCorp filed with the UPSC to return $3 million to customers through the REC balancing account. In May 2013, the UPSC issued an order approving the new rates as filed effective June 2013 on an interim basis. In August 2013, the UPSC issued a final order approving the interim rates as final.