NINE MONTHS ENDED
June 2014
1
Orlando Utilities Commission
Table of Contents
Management’s Discussion and Analysis
3
Statements of Revenues, Expenses and Changes
in Net Position based on Budget - Unaudited
7
Statements of Net Position - Unaudited
8
Statements of Cash Flows - Unaudited
9
Capital Plan
10
The unaudited statements presented in this interim financial report have been prepared in accordance with
generally accepted accounting principles and follow the standards outlined by the Governmental Accounting
Standards Board. It is management’s assertion that the management discussion and supporting statements do
not omit information necessary for a fair presentation nor do they improperly include untrue statements of a
material fact or statements of a misleading nature.
2
Management’s Discussion and Analysis
Income before contributions for the nine months ended June 30, 2014 was $55.5 million, $6.0 million higher than
budget and $17.4 million higher than prior year.
Operating Revenues:
Variance to Budget – Operating revenues, for the nine months ended June 2014, were $2.2 million lower than
budget. This variance was primarily due to lower than budget fuel and retail energy revenues of $7.8 million and
$0.7 million, respectively. Water revenues were also lower than budget $1.0 million driven by decreased
irrigation sales as a result of the higher than normal rainfall. These variances were offset by higher resale energy
revenues of $6.8 million, which was driven by weather resulting in $3.8 million of higher pool sales earlier this
year and higher inter-local agreement revenues of $1.7 million for the City of St. Cloud. Additionally, chilled
water revenues were $1.4 million higher than budget.
Variances to Prior Year – Operating revenues were $47.5 million higher than the prior year. Retail energy
revenues were $9.6 million higher than prior year as a result of a 4.1 percent increase in consumption.
Consistent with retail electric revenues, resale electric revenues earned through the St. Cloud inter local
agreement were $3.7 million higher than prior year. Additionally, agreements executed with the City of Winter
Park and the City of Lake Worth began in January 2014 and weather related unplanned sales increased resale
revenue by $5.2 million. Fuel revenues increased $28.3 million due to increased consumption as well as higher
fuel costs.
Operating Expenses:
Variances to Budget – Operating expenses were $6.5 million or 1.2 percent lower than budget primarily driven
by lower than expected fuel for generation and purchased power expenses. Unit department expenses were
$1.7 million higher than budget due to higher benefit costs of $2.0 million.
Variances to Prior Year – Operating expenses were $35.8 million or 7.1 percent higher than prior year due to
increased fuel for generation and purchased power costs of $28.3 million offset by lower capacity payments of
$1.2 million. Unit department expenses were $11.0 million higher than the prior year as a result of increased
salary, pension and medical costs of $5.0 million each. Depreciation and amortization expense was $2.2 million
lower than the prior year due to the implementation the depreciation study to align the depreciable life with the
asset-in-service life.
Non-Operating Income and Expenses:
Variance to the Budget and Prior Year – Net non-operating expenses were $1.6 million lower than budget and
$5.7 million lower than prior year. The variance to budget was primarily due to higher than expected rental
income, favorable investment valuation adjustment and lower interest rates on variable rate debt. The prior year
variance was due to lower interest expense as a result of the January 2013 bond refunding and positive
investment market position and favorable investment valuations.
Contributions in Aid of Construction:
Contributions in aid of construction were $5.5 million lower than budget and higher than prior year by $0.5 million
due to the timing of system development contributions for water infrastructure projects.
3
Dividend Payment:
The dividend agreement with the City of Orlando is based on 60% of budgeted income before contributions. The
budgeted amount for fiscal year 2014 is $48.6 million and is paid in equal amounts over the year. The amount
paid for the nine months ended June 2014 was $36.5 million.
Utility Plant:
Utility plant increased $22.8 million as of June 2014 compared to June 2013. Capital acquisitions for major
projects including the completion of two large transformer projects and the installation of digital meters
contributed to the increase in utility plant in service in excess of systematic depreciation charges.
Restricted and Internally Designated Assets:
Restricted and internally designated assets of $515.4 million were $12.2 million less than that of the prior year.
The change was due to the planned utilization of fuel stabilization funds of $26.5 million offset by increased debt
service requirements of $1.0 million and higher deposits and advances associated with the collection of system
development costs and customer deposits of $7.0 million and $4.8 million, respectively.
Current Assets:
Current assets were $46.5 million lower than prior year. Fuel for generation inventory decreased $12.0 million
from that of the prior year due to increased utilization of the Stanton Energy plants. Prepaid and other expenses
were lower than the prior year primarily due to lower collateral deposit requirements of $8.7 million and decreased
hedge derivative instruments of $12.0 million. In addition, customer and miscellaneous receivables were $6.5
million lower than the prior year.
Other Assets:
Other assets were $29.6 million higher than that of June 2013. This increase was related to the Board approved
deferral of the impaired electric and water meters, net of amortization, of $1.1 million and $2.7 million,
respectively. In addition, as a result of Duke Energy’s decision to close the Crystal River 3 (CR3) plant, OUC’s
has deferred property, plant, equipment and supplies in the amount of $14.6 million, net. OUC continues to work
with Duke Energy to estimate and understand the nature and extent of OUC’s potential impacts related to the
retirement of CR3. Fuel hedge derivative instruments also increased $17.3 from that of the prior year. These
variances were offset by the reclassification of prepaid pension to current of $3.6 million
Deferred Outflows of Resources:
Deferred outflows of resources decreased $14.9 million since June 2013. This change was driven by a decrease
in the fair value of interest rate swap derivatives and fuel hedge assets of $10.3 million and $4.6 million,
respectively.
Payables from Restricted and Current Assets:
Restricted and current payables were $13.2 million higher than that of June 2013. This change was the result
of an increase in vendor payables, including fuel purchases, and customer deposits in the amounts of $10.1
million and $5.0 million, respectively. Also, payables to state and local governments were 1.2 million higher than
the prior year. These variances were offset by a decrease in fuel hedge losses of $2.9 million.
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Other Liabilities:
Other liabilities were $8.5 million lower than that of the prior year. This change was primarily driven by the
utilization of fuel stabilization funds in the amount of $26.5 million, as a result of planned usage and the continued
systematic recognition of the deferred gain from the fiscal year 1999 sale of IRP of $3.4 million. These variances
were offset by increased unapplied contributions in aid of construction of $10.0 million and long term fuel hedge
derivative instruments of $12.3 million.
Long-term Debt:
Long-term debt, net decreased $70.5 million as a result of the payment of outstanding principal on October 1,
2013 of $52.0 million. Additionally, fair value derivative instrument losses associated with interest rate swap
agreements decreased $10.3 million. The remaining variance was due to systematic amortization of bond costs.
OUC’s credit ratings:
Fitch Investors Service
Moody’s Investors Service
Standard & Poor’s
AA
Aa2
AA
Deferred Inflows of Resources:
For the period ending June 2014, deferred inflows of resources decreased $9.2 million from that of June 2013
due to fair value changes for fuel hedge agreements.
5
Cash Flows
OUC’s cash and cash equivalents as of June 2014 were $159.2 million, $8.6 million higher than that of the
beginning of the fiscal year and $40.8 million higher than the prior year.
Cash provided by operating activities for the nine months ended June 2014 was $49.7 million higher than the
prior year. The primary drivers of this variance were increased cash received from customers of $45.3 million
and lower cash paid for fuel and purchased power and unit department costs of $13.3 million and $1.6 million,
respectively. These variances were offset by increased cash paid for salaries and benefits of $10.3 million.
Cash used in non-capital related financing activities during fiscal year 2014 was $36.5 million; an amount slightly
higher than the prior year.
Cash used in capital financing activities was $11.3 million higher than that of the prior year. The primary driver
of this change was increased collateral deposit requirements of $11.3 million and spending for capital related
projects of $2.9 million. This was offset by a $3.0 million decrease debt interest expense.
Investing activities for the nine month period ended June 2014 provided cash of $74.2 million, $149.9 million
higher than prior year. This variance was primarily due to a decrease in investment instruments with maturities
greater than three months.
Capital Plan
At June 30, 2014 capital expenditures of $102.7 million were $30.2 million or 22.7 percent under budget.
Electric Production capital expenditures of $38.1 million were $8.0 million lower than budgeted expectations.
Electric Transmission, Electric Delivery and Lighting capital expenditures at June 2014 were $33.1 million, net
of contributions. Capital spending was under budget $1.4 million and contributions in aid of construction were
over budget $4.2 million.
Water capital expenditures at June 2014 were $7.9 million, net of contributions in aid of construction of $7.1
million. Water projects were under budget by $3.1 million and contributions in aid of capital were $2.2 million
over budget expectations.
Chilled Water capital spending has been delayed and only small projects have been completed through June
2014.
Support Services capital expenditures at June 2014 were $23.6 million or $10.7 million under budget. Lower
spending on information technology projects was driving the variance.
6
Orlando Utilities Commission
Statements of Revenues, Expenses and Changes in Net Positions
Dollars in thousands
Actual
Budget
Actual
Year to Date
Year to Date
Year to Date
June 2014
June 2014
June 2013
Variance to Budget
Variance to Prior Year
Operating revenues
Retail energy
$
Resale energy
Fuel
247,638
9,613
4.0%
60,112
$
248,355
53,324
$
6,788
(717)
12.7%
-0.3%
$
238,025
51,211
$
8,901
17.4%
224,342
232,163
(7,821)
-3.4%
196,044
28,298
14.4%
Electric revenues
532,092
533,842
(1,750)
-0.3%
485,280
46,812
9.6%
Water revenues
46,979
48,015
(1,036)
-2.2%
46,599
380
0.8%
Other revenues
Lighting services
Chilled w ater revenues
Service fees & other revenues
Total operating revenues
9,604
9,435
169
1.8%
9,346
258
2.8%
21,467
20,112
1,355
6.7%
21,813
(346)
-1.6%
19,319
20,207
(888)
-4.4%
18,963
356
1.9%
629,461
631,611
(2,150)
-0.3%
582,001
47,460
8.2%
224,342
232,163
(7,821)
-3.4%
196,044
28,298
14.4%
-4.8%
Operating expenses
Fuel for generation and purchased pow er
Capacity payment
Unit department expenses
Depreciation and amortization
Payments to other governments and taxes
23,217
22,903
314
1.4%
24,400
(1,183)
171,076
169,406
1,670
1.0%
160,042
11,034
6.9%
83,455
83,742
(287)
-0.3%
85,624
(2,169)
-2.5%
(141)
-0.4%
38,971
39,338
(367)
-0.9%
39,112
541,061
547,552
(6,491)
-1.2%
505,222
35,839
7.1%
Interest income
4,143
4,001
142
3.5%
804
3,338
415.5%
Other income
7,184
6,309
875
13.9%
7,845
Interest expense
(44,218)
(44,821)
603
1.3%
(47,274)
3,057
6.5%
Total non-operating incom e and (expenses)
(32,891)
(34,511)
1,620
4.7%
(38,625)
5,734
14.8%
55,509
49,548
5,962
12.0%
38,154
17,355
45.5%
8,227
13,681
(5,454)
-39.9%
7,743
483
6.2%
Total operating expenses
Non-operating incom e and (expenses)
Incom e before contributions
Revenue from contributions in aid of construction
Dividend paym ents
(36,467)
Increase in net positions
27,269
Net positions - beginning of period
Net positions - end of period
(36,467)
$
26,762
$
-
0.0%
(35,250)
507
1.9%
10,647
1,104,219
$
1,131,488
(662)
(1,216)
$
16,622
-8.4%
-3.4%
156.1%
1,066,968
$
1,077,615
7
Orlando Utilities Commission
Statements of Net Position
Dollars in thousands
June 2014
June 2013
Variance to Prior Year
Assets
22,821
1.0%
Restricted and designated assets
515,372
527,566
(12,194)
-2.3%
Current assets
-16.3%
Utility plant
$
2,342,695
$
2,319,874
$
238,487
284,940
(46,453)
Other assets
67,721
38,111
29,610
77.7%
Deferred outflow s of resources
22,500
37,395
(14,895)
-39.8%
Total Assets and deferred outflow s
of resources
$
3,186,775
$
3,207,886
$
(21,111)
-0.7%
$
67,474
$
63,027
$
4,447
7.1%
Liabilities
Current liabilities - restricted
Current liabilities - unrestricted
195,875
187,122
8,753
4.7%
Other liabilities
309,280
317,729
(8,449)
-2.7%
Long-term debt, net
1,481,071
1,551,582
(70,511)
-4.5%
Total liabilities
2,053,700
2,119,460
(65,760)
-3.1%
1,587
10,811
(9,224)
-85.3%
1,131,488
1,077,615
Deferred inflow s of resources
Net position
Total liabilities, deferred inflow s of
resources and net position
$
3,186,775
$
3,207,886
$
53,873
5.0%
(21,111)
-0.7%
8
Orlando Utilities Commission
Statements of Cash Flows
Dollars in thousands
June 2014
June 2013
Cash flow from operating activities
Cash received from customers
$
Cash paid for fuel and purchased pow er
623,291
$
(217,176)
Cash paid for unit department expenses
Cash paid for salaries and benefits
577,990
(230,492)
(58,694)
(60,336)
(114,235)
(103,930)
Cash paid for other payments and taxes
(39,482)
(39,182)
Net cash provided by operating activities
193,704
144,050
Cash flow s from non-capital related financing activities
Dividend to the City of Orlando
(36,467)
(35,250)
Net cash used in non-capital related financing activities
(36,467)
(35,250)
(103,534)
(100,614)
(64,917)
(67,957)
Cash flow s from capital related financing activities
Utility plant net of contributions in aid of construction
Debt interest payments
Collateral deposits
Principal payments on long-term debt
Debt issuances
Debt issue expenses
Net cash used in capital related financing activities
(1,300)
10,000
(51,950)
(357,202)
-
306,741
(1,129)
(2,513)
(222,830)
(211,545)
Cash flow s from investing activities
Proceeds from sale and maturities of investment securities
Purchases of investment securities
320,166
297,660
(256,678)
(383,865)
Investments and other income received
10,748
10,492
Net cash provided by / (used in) investing activities
74,236
(75,713)
8,643
(178,458)
Net increase / (decrease) in cash and cash equivalents
Cash and Cash Equivalents - beginning of year
Cash and Cash Equivalents - current
150,545
296,872
$
159,188
$
118,414
$
88,400
$
76,780
Reconciliation of operating incom e to net cash provided by operating
activities
Operating income
Adjustm ents to reconcile operating incom e to net cash provided by
operating activities
Depreciation and amortization
Depreciation and amortization charged to fuel for generation and purchased pow er
Depreciation of vehicles and equipment charged to unit department expenses
83,455
85,624
1,883
1,608
(680)
2,323
Changes in assets and liabilities
Decrease in receivables and accrued revenue
18,182
4,700
Decrease / (increase) in fuel and materials and supplies inventories
20,862
(3,339)
Decrease in accounts payable
(8,881)
(18,615)
Increase in deposits payable and deferred costs
3,791
Decrease in stabilization and deferred revenue
Net cash provided by operating activities
81
(13,307)
$
193,705
(5,112)
$
144,050
9
Capital Plan
Dollars in thousands
Electric Production (1)
Adopted
Year to Date
Year to Date
2014
June 2014
June 2014
Plan
Budget
Actual
$
Transmission
59,089
$
46,104
$
Variance to Budget
38,135
$
7,969
17.3%
40,604
28,680
22,091
6,589
23.0%
(10,030)
(7,523)
(10,320)
2,797
37.2%
Transmission, net
30,574
21,157
11,771
9,386
44.4%
Electric Delivery
20,720
15,519
20,122
(4,603)
-29.7%
Electric Delivery contributions
(1,600)
(1,200)
(2,013)
Electric Delivery, net
19,120
14,319
18,109
(3,790)
4,365
3,259
3,817
(558)
-17.1%
565
753.3%
Transmission contributions
Lighting
Lighting contributions
(100)
Lighting, net
Water
Water contributions
Water, net
Chilled Water
Support Services
Total OUC
$
(75)
813
(640)
67.8%
-26.5%
4,265
3,184
3,177
7
0.2%
23,706
18,116
15,039
3,077
17.0%
(6,511)
(4,883)
(7,131)
2,248
46.0%
17,195
13,233
7,908
5,325
40.2%
800
594
20
574
96.6%
48,153
34,258
23,569
10,689
31.2%
30,160
22.7%
179,196
$
132,849
$
102,689
$
(1) - Totals are net of participant share.
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