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CH Energy Group, Inc. (NYSE:CHG)

84th Annual Meeting of Shareholders Conference Call

April 24, 2012 10:30 am ET

Executives

Steven V. Lant – Chairman, President and Chief Executive Officer

Denise Doring VanBuren – Corporate Secretary and Vice President, Corporate Communications

John E. Gould – Executive Vice President and General Counsel

Steven V. Lant

Good morning ladies and gentlemen.

Denise Doring VanBuren

Good morning.

John E. Gould

Good morning.

Steven V. Lant

It is now 10:30 and I call to order this Annual Meeting of Shareholders of CH Energy Group. I am Steven Lant, Chairman of your Board of Directors. Pursuing to the bylaws, I’m designated as the presiding officer of this meeting. I take great pleasure in welcoming you to this annual meeting of shareholders.

Before we begin with the substance of the meeting, please allow me to introduce those gathered with me at the podium this morning. John E. Gould, Executive Vice President & General Counsel; and Denise D. VanBuren, Corporate Secretary & Vice President of Corporate Communications of CH Energy Group and Central Hudson. Denise has a few introductory comments to deliver.

Denise Doring VanBuren

Thank you, Steve and good morning. I would like to address a few administrative points today. Today’s meeting is being recorded and is also being webcast. (Inaudible) the corporation does not allow any other photograph, video or tape recording during this meeting. As a courtesy to other shareholders, please be sure to silence your cellphone or pager during this mornings meeting.

I note that during today’s meeting the directors, the officers and employees of CH Energy Group participants may discuss management’s intentions, beliefs, expectations, projections, or make other statements that are not historical in nature.

In that regard and in accordance with the rules and regulations of the Securities and Exchange Commission I refer you to the paragraph regarding forward-looking statements and other matters related to the proposed acquisition of CH Energy Group, by Fortis Inc. that appear on pages two to four of the presentation that Mr. Lant will deliver later this morning. Please note that forward-looking statements are subject to assumptions, risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks are discussed in more detail in the Corporation’s Annual Report and Form 10-K for the year ended December 31, 2011 under the section labeled risk factors. A copy of the Annual Report and Form 10-K is available on the back of the room and also in the Investor Relation section of our website at the link for SEC filings.

Please also note that any discussion at this meeting about the proposed Fortis transaction does not constitute a felicitation of a proxy from a shareholder with respect to that transaction. Shareholders will receive in approximately three to four weeks a definitive proxy statement regarding the proposed transaction. A special meeting of shareholders is tentatively scheduled to be held in June to review and approve the proposed acquisition by Fortis.

Steven V. Lant

Thank you, Denise. Again, we appreciate your interest in coming here today and your personal participation in the business of this meeting. This is a meeting to vote on the items specified in the notice submitting of shareholders and in the proxy statement as filed with the Securities and Exchange Commission and sent to you in March. There are three matters to be voted on at this meeting, the first matter is the election of nine nominees to serve as directors, all of whom have been nominated to be reelected at this meeting, each to serve a one-year term to expire at the annual meeting of shareholders to be held in 2013 or until a successor is elected and qualified.

In this connection, I point out that the Director’s terms of service may end prior to the next Annual Meeting of shareholders if – as we expect the acquisition of CH Energy Group by Fortis Inc. is finalized prior to the schedule date of the Annual Meeting in April of 2013.

The second is the matter of the non-binding advisory vote on the compensation of the named executive officers as disclosed in the 2012 proxy statement. and thirdly, ratification of the appointment of PricewaterhouseCoopers LLP as the corporation’s independent public accounting firm for 2012. In a few minutes I will review in greater detail each of these agenda items.

Only those persons who were shareholders of record on March 1, 2012 are entitled to vote on the matters before this meeting. we have placed on each chair, a copy of the agenda and a set of rules of procedure that govern this meeting. I will be delivering a presentation to you later this morning. I believe that the presentation will serve to anticipate some questions that you may have. Therefore we request that your reserve your questions or comments until the question-and-answer period noted in the agenda. In addition, the employees of CH Energy Group and its subsidiaries present here today are wearing distinctive nametags, so that they can be easily identified if you would like to discuss anything with us following the meeting. We welcome your interest on any subject.

The proxy statement sent to shareholders noted that are presented as the PricewaterhouseCoopers LLP the corporation’s independent accountants would be present at this meeting and I would like to introduce them to you at this time, Shawn Furner and Tom Mcguinness, the partners signed to our account. Thank you, gentlemen for being here today.

As indicated in the proxy statement, these representatives will be available to respond to any appropriate questions during the question-and-answer period. I would like to now introduce the members of your incumbent Board of Directors all of whom have been nominated to be re-elected at this meeting, each to serve a one-year term to expire at the Annual Meeting of shareholders to be held in 2013 or until a successor is elected and qualified. I would ask each Director to stand for a moment, as I introduce him or her, and I would ask that you withhold your recognition until all have been introduced.

Margarita K. Dilley has been a Director since 2004. she is the Consultant and Former Vice President, Chief Financial Officer and a Director of Astrolink International LLC, a satellite telecommunications firm. Ms. Dilley is Chair of the Audit Committee and a member of the Governance and Nominating Committee. I note that with respect to Ms. Dilley’s membership on the Audit Committee, the Board of Directors has determined that Ms. Dilley meets the Securities and Exchange Commission criteria for an Audit Committee Financial Expert and the New York Stock Exchange standard of having accounting or related financial management expertise.

Steven M. Fetter has been a Director since 2002. he is the President of Regulation UnFettered, an energy industry advisory firm. He is the former Chairman of the Michigan Public Service Commission and was the Majority Counsel, Michigan State Senate. He also served as the Group Head and Managing Director of the Global Power Group at Fitch Ratings. Mr. Fetter is Chair of the Governance and Nominating Committee, and he is the member of the Audit Committee.

Stanley J. Grubel has been a Director since 1999. He is a consultant and was most recently Vice President and General Manager of Philips Semiconductor Manufacturing, and before that, Chief Executive Officer of MiCRUS. Mr. Grubel is Chair of the Compensation Committee and a member of the Audit Committee.

Manuel J. Areola has been a Director since 2006. He is the Chairman, President and Chief Executive Officer of The Aloaris Group and he is the former President of Phelps Dodge Industries. Mr. Iraola is the Member of the Strategy and Finance Committee and the Compensation Committee.

E. Michel Kruse has been a Director since 2002. He is the former Chairman and Senior Advisor of the Financial Institutions Group of UBS Warburg. He is also a Former Vice Chairman & Chief Financial Officer of The Chase Manhattan Corporation. Mr. Kruse is the Chair of the Strategy & Finance Committee and a member of the Audit Committee.

Edward T. Tokar has been a Director since 2009. He is a Senior Managing Director of Investments at Beacon Trust Co. and a trustee of Gabelli Dividend and Income Trust as well as the Gabelli Global Deal Fund. He is the former Vice President of Investments at Honeywell International and former CEO of Allied Capital Managements, LLC. Mr. Tokar serves on the Compensation and the Strategy and Finance Committees.

Jeffrey D. Tranen has been a Director since 2004. He is Senior Vice President of Compass Lexecon; a consulting firm, the former President of New England Power Company and the former President and Chief Executive Officer of the California Independent System Operator, which operates the Electric Transmission System in California. He also served as the President and Chief Operating Officer of Sithe Northeast Inc. Mr. Tranen is the member of both the Governance and Nominating and the Strategy & Finance Committees.

Ernest R. Verebelyi has been a Director since 2006. He is the Non-Executive Chairman of the Columbus McKinnon Corp; and he is the former President, Americas, Terex Corporation. He is the former Executive Vice President of both General Signal Corp and the Emerson Electric Co. Mr. Verebelyi is a member of the Governance and Nominating Committee and Compensation Committee.

I, Steven V. Lant and Chairman of the Board, President and Chief Executive Officer of CH Energy Group. I’ve been a Director since 2002. I would appreciate you joining me and now recognizing the members of CH Energy Group’s Board of Directors.

I would now like to introduce the individuals who together with John, Denise and myself are the officers of CH Energy Group and its subsidiary companies including the corporation’s regulated utility, Central Hudson Gas & Electric Corporation and the holding company for our competitive businesses, Central Hudson Enterprises Corporation, which we call CHEC or CHEC. They’re seated in the front rows, and I would like each to stand for a moment when introduced. I would ask that you withhold your recognition until all officers have been introduced.

From CH Energy Group, we have Jim Laurito, Executive Vice President of CH Energy Group and the President of Central Hudson; Chris Capone, Executive Vice President and Chief Financial Officer of CH Energy Group, and President and Chief Financial Officer of CHEC; Kim Wright, Vice President, Accounting and Controller; Stacey Renner, Treasurer; and Joe Koczko of Thompson Hine, Assistant Secretary.

From Central Hudson Gas & Electric Corporation, we have Charlie Freni, Senior Vice President, Customer Services; Tom Brocks, Vice President, Human Resources, Environmental, Health & Safety; Anthony Campagiorni, Vice President, Business Development and Governmental Affairs; Paul Colbert, Associate General Counsel, Regulatory Affairs; Paul Haering, Vice President, Engineering & System Operations; Tom Jansen, Chief Information Officer; Mike Mosher, Vice President-Regulatory Affairs; and from CHEC, we have Randy Groft, Executive Vice President and President and Chief Operating Officer of CHEC’s; fuel oil distribution subsidiary Griffith Energy Services Incorporated; and Mark Wagus, Chief Financial Officer & Treasurer of Griffith. We thank you for your continued confidence in the management and the Board of Directors of CH Energy Group and its subsidiaries. I will now appreciate your recognition of the officers of our corporation.

We will now proceed with the business of the meeting. In accordance with the provisions of the bylaws, the Board of Directors fixed March 1, 2012 as the date on which shareholders entitled to notice of and to vote at this meeting should be determined. Will the secretary please present a copy of the notice of meeting and related papers?

Denise D. VanBuren

I present a copy of the notice of meeting together with proof of due and proper service by mail upon each shareholder of record entitled to notice of and to vote at this meeting pursuant to a loss and to the bylaws of the corporation. The notice and form of proxy statement together with the form of proxy and a copy of the Annual Report were either mailed in prepaid envelopes addressed to each shareholders of record entitled to the notice or sent via electronic notification as for the shareholder’s preference.

Steven V. Lant

The papers referred to by the secretary will be preserved in the corporation’s records. Computershare is the transfer agent and registrar for CH Energy Group’s common stock and has the responsibility for keeping the record of shareholders. Corporate Election Services is responsible for telling the voting results of this meeting. To sign proxies for this meeting we return to Corporate Election Services for (inaudible) and I hear by appoint, the Corporate Election Services represented here today as Inspector of Election for this meeting. The appointed Inspectors verification on the voting will be attached in a minute of this meeting. Will the secretary, please report on a representation at this meeting.

Denise D. VanBuren

At the close of business on March the 1, 2012, the record date they were issued an outstanding 14,909,358 shares of common stock of CH Energy Group, the only stock entitled to vote at this meeting. At this meeting, more than a majority of the total number of shares of common stock outstanding is represented either in person or by proxy and there is a form for the transaction of all business to come before this meeting.

Steven V. Lant

As I noted earlier, there are three matters to be voted upon at this meeting. Each of the matters will be presented and then a call for a vote and the matters will be made. The first matter to be voted upon is the election of nine directors to serve for one-year terms to expire at the annual meeting of shareholders to be held in 2013 or until a successor is elected and qualified.

I’ll now as the secretary to place into nomination, the candidates who have been proposed by the Board of Directors and whose names are set forth in the corporation’s proxy statement.

Denise D. VanBuren

On behalf of the Board of Directors, I hereby nominate the following persons for elections as Directors to serve one-year terms to expire at the annual meeting of shareholders to be held in 2013 or until the successor is elected and qualified. Margarita K. Dilley, Steven M. Fetter, Stanley J. Grubel, Manuel J. Iraola, E. Michel Kruse, Steven V. Lant, Edward T. Tokar, Jeffrey D. Tranen, and Ernest R. Verebelyi. No other nominations were received from any CH Energy Group’s shareholder of record in accordance with the procedure set forth in the corporation’s bylaw. As noted in the corporation’s proxy statement the Board of Directors recommends a vote in favor of Ms. Dilley, Mr. Fetter, Mr. Grubel, Mr. Iraola, Mr. Kruse, Mr. Lant, Mr. Tokar, Mr. Tranen, and Mr. Verebelyi.

The second item is the approval of the non-binding advisory vote on the compensation of the named Executive Officers as disclosed in the 2012 proxy statement. The Board as was noted in the proxy statement recommends that the shareholders of the corporation vote in favor of this proposal.

And finally, the third matter on the agenda for today’s meeting is the ratification of the appointment of PricewaterhouseCoopers LLP as the corporation’s Independent Public Accounting Firm for 2012. As noted in the proxy statement, the Board recommends that the shareholders of the corporation vote in favor of this ratification.

Steven V. Lant

We shall now proceed to the voting on the items before the meeting with each shareholder casting one vote by ballot or by a proxy for each share of common stock, standing in his or her name on the books of CH Energy Group at the record date. At this time, the ballot relating to the election of the nominees and to the other items as executed by the corporate proxy’s designated for the meeting is being submitted to the Inspector of Election.

If you have already send in your proxy or voted by telephone or by using the Internet, it is not necessary to vote by ballot at this meeting unless you wish to do so. If you wish to vote by ballot, please hold up your hand, so that one can be given to you. I know that by signing the ballot at this meeting, you will revoke the proxy you may have previously submitted. I see two hands. We will wait just for a few moments until all of the submissions are completed. I see that all ballots have been submitted. The polls for voting at this annual meeting are now closed. I’ll now ask the Inspector of Election to tally the ballots submitted in connection with the matters voted upon at this meeting. I would now like to take the opportunity to summarize our 2011 results and our plans for the future.

Good morning and once again welcome, everyone. Let me begin by reminding everyone of the (inaudible) caution about our reliance on forward-looking statement and I need to point out to you that the remarks I’m going to make regarding Fortis are not a proxy solicitation and that you will be receiving a proxy shortly, which will have detailed information about on the transaction and you should read that carefully and rely upon that document to make a decision on how to vote.

So now let me proceed with a presentation that really is somewhat different than has been in the past that has two topics. First, a review of a very eventful and exciting year in 2011, but also I want to talk about the Fortis transaction. This meeting is not the meeting, which will be voting on that transaction as you heard earlier; there will be a special meeting in a couple of month’s time. But this is an idle opportunity for me to review the highlights of that transaction and to answer some questions that you may have about it. So I will do that in the second half of my presentation.

2011 was a very eventful and memorable year and there were really four major reasons for that, which I’ll cover one at a time. The first was the work we did to complete the strategic shift that we had announced in 2010. We also had an excellent year from the standpoint of our earnings and the trend in our core earnings. We achieved a number of important milestones that I wanted to review with you and we had the most exceptional year in our 110-year history from the standpoint of storm response, and I want to review those accomplishments with you.

So starting with the strategic shift, in October 2010 we announced that we are intending to change our strategy to become a more focused organization, focused exclusively on energy delivery through our primary subsidiary Central Hudson and Griffith. In order to bring that about, we would divest our renewable energy portfolio, use the cash that those divestitures created to retire our stock, repurchase a portion of our stock, which would have the effect of causing our earnings per share to rise, and to retire debt that we had issued, that funds the renewable energy portfolio. With a result that we would be a more focused organization going forward and that we would concentrate on investing in our delivery system at Central Hudson and in growing the customer base at Griffith and making investments that would allow us to increase our customer satisfaction and the quality of our service at both Griffith and Central Hudson.

I’m very pleased to report that under the able leadership of Chris Capone, we were able to complete that strategic shift and the divestiture of the elements of the renewable portfolio one plant or one project at a time. There were a variety of projects and each had a separate market niche that the potential market resided in and so these divestitures occurred one at a time throughout the year. But by the end of the year we had completed the project as we had set forth.

And as planned, we used the proceed to repurchase stock throughout the year, but we had an accelerated repurchase with the largest proceeds from the Shirley divestiture in August. The cumulative result of all the share repurchases from late 2010 through the middle of 2011 was to increase our earnings per share buyback 6%. W repurchased about 6% of the then out then in share and that has the effect of lifting our earnings per share by an equivalent 6% or about $0.20 per share, and that effect was realized partly in 2011, the rest is annualizing into 2012, but that is a permanent uplift in the earnings per share of the company. And we also repaid about $20 million of debt that was outstanding against the Shirley Wind project.

Now partly as a result of the accretion from the share buyback, but more due to the strong performance of Central Hudson, we saw a very good increase in our earnings per share in 2011, 22% from 2.44 to 2.97. More importantly that continued a strong trend in our core earnings and let me just define for a moment what I mean by core earnings. These are the earnings of the company, as it currently exist going forward. Central Hudson and Griffith with the renewable energy stripped out of the history, as well as unusual items and timing differences normalized out of the years prior to 2011. For those of you who are interested in seeing a reconciliation between our GAAP earnings and what we’re portraying here as core earnings a slide will be available on our website, on the website version of this talk showing that reconciliation.

But clearly you can see a strong trend of increase in core earnings especially over the last two years.

So, the culmination of our strategic shift was very positive for shareholders, a strong trend in our core earnings growth, lower volatility going forward. Frankly, the renewable energy portfolio have been a source of volatility and a reduction in our dividend payout ratio on core earnings into what we felt was our financial comfort zone of less than 70%. So therefore, we felt comfortable increasing the dividend and our board authorized an increase effective November 1 of last year of about 3% from $0.54 to $0.555 and that annualizes to $2.22 per year.

Now as a result of this excellent performance by our company, our stock price and our total return had performed very well. So let me just review this chart with you. This is showing the five year cumulative total return of CH Energy Group in blue, our peer group, the Edison Electric Institute, the electric utilities in the country in yellow, and the S&P 500 in red. The S&P 500 is the broad market index that represents about 85% of the market capitalization of stocks traded in the U.S.

So what this chart is showing is if you invested a hypothetical $100 five years ago, at the end of 2006, how much money would you have five years later, if you had reinvested all of the dividends that you receive during the period and benefited from the appreciation of the stock that you owned. And what you can see here is that the S&P 500 was strongly down during the financial crisis and recession, strongly recovered, but effectively at $99 was the same as $100 that you started with. So, no net return from the broad market stock index over that five years.

DI index also had a pattern of up and down and back up with a total return that was positive of about 23%. But CH Energy Group had a much stronger performance increasing by about 41% over that five year, so a very strong performance both against the broad market and against our peer group.

Now let me turn the topic to some of the major milestones and accomplishments during the year of which we’re very proud. In March of 2011, we received the Edison Electric Institute Recovery Award for the Twin Peaks storm, which we recounted in detail at last years meeting. And we have displayed the EEI Award over here on the pedestal and that’s a quite a handsome trophy for the company.

In April we reached the five year labor agreement with our labor union Local 320 of IBEW, which put in place an even greater framework of co-operative effort between ourselves and our labor union. One of the reasons why we’ve been so successful and have responsive service and affordable rates is the excellent relationship we have with our labor union. And then in May, the PSC released the management audit that we’ve been working on for sometime. The PSC has in placed a policy under which all of the major utilities in the state are reviewed on a cyclical basis and they chose a company named Northstar to conduct that review of Central Hudson, and we work collaboratively with Northstar and 20 recommendations came out which we hardly endorsed and set to work on implementing and eight have been completed so far, the remaining 12 we’re working on and they’re on schedule. So we look forward to all of these recommendations making us a better company.

Then came the major storms of the year. Tropical Storm Irene in August and just two months later, the snowfall storm.

You may recall at last year’s annual meeting, we talked about our culture of continuous improvement and the efforts we are making to accelerate that culture by implementing what we called our Bridge to Excellence program, which was really modeled after the walkway over the Hudson, a very great landmark here in the Hudson Valley, to demonstrate how we are going to transform our company from great to greater, and we trained our employees in Lean Six Sigma techniques to bring that above. And I must say the enthusiasm and the creativity of our employees has been on display, and we’ve been able to identify dozens and even hundreds of potential ways to improve our business. And we’ve implemented over the course of 2011 84 projects that have realized $4 million in total benefits to us and that’s just in the first full year that the program has been in place.

Another thing that we focus a lot of our time on is achieving the quality measures that the Public Service Commission is putting in place for gas and electric service, and there are at least a couple of dozen of these service quality measures that we focus on and its very important that we achieve them. They’re important in their own way, because they represent the aspects of service that our customers care about, but they are also financial penalties to us on their rate plan like we fail to achieve the threshold. And I’m pleased to say that we achieved every single one of this service quality metrics and for most, we achieved a strong trend of improvement the year-over-year which is what we want to see that’s what continuous improvement is all about.

Our Griffith Energy Services, our fuel distribution company had a more difficult year in 2011. Griffith faced a tough external environment starting with oil prices, which rose 30% during the year and a warm winter, as well as an economy that was improving, but still not strong. But despite these headwinds because of a lot of various effective cost management by the Griffith management team we were able to bring in earnings that were just slightly down from the prior year $0.10 versus $0.11. And we were able to make attractive tuck-in acquisitions that set us up earnings growth in future years.

Now I want to talk about storm response, which was really the operational story of the year, and what this chart is displaying, is the restoration expenses that we’ve incurred over the past decade or so. So if we look at this history of a decade of the 2000 you can see that our storm restoration cost, which is a good measure of the amount of storms we had in the effort we took for this service vary between $2 million on the low end to about $10 million on the high end averaging about $5 million over this decade, and that level is our long-term average and that’s the level that’s built into our rate plan.

Now in 2010, we had the Twin Peaks storm, which drove our storm expense to over five times the historical level. And at the end of 2010 we all thought that we have seen the worst year we’ve ever would, because that’s truly been anomaly, but 2011 was even more stormy by far and we incurred over $35 million the storm expense and that seven times the long-term average. So very, very stormy here indeed and started really right at the beginning of the year with icy condition in the first quarter of the year. We had two icing conditions on our gas system that caused interruption. One in Kingston caused us to bring in mutual [aid], which is really quite unusual for a gas emergency. Then in, March we had a significant ice storm in the Northeastern quadrant of our service territory that affected only a quarter of our territory yet, the ice filled up was quite thick. this kind of picture is something that we dread to see and there was a $2.5 million restoration for that ice storm. But really, Mother Nature was just getting started with us, and then came that really big storm.

starting with Irene, I’m sure you all recall Irene. It was a very big storm that was predicted on all of the news stations a good week in advance and I must say that storm did pick shape and follow the path almost exactly as predicted with a weeks noted, which is really highly unusual. when it hit New York, it had just been downgraded from a hurricane to a tropical storm, but nevertheless impact quite a lot and the extremely windy conditions caused interruptions to about 60% of our customers, 180,000 customers in total, and that made it the second worst storm we had ever experienced less than year and a half after Twin Peaks, the worst storm we had ever experienced. and what made this storm different was – not only it was an electric emergency, but a gas emergency as well due to flooding.

There was so much rain that we had a number of road washouts, bridge washouts, but also gas pipeline washouts. and that really created another set of challenges for us. Then less than two weeks – excuse me, two months later came this very unusual October snowstorm. We had a very mild, wet and warm fall and as a result, the leaves were late in changing and falling off the trees. And so we have this combination that we also hate to see green leaves in heavy snow and that created a lot of damage. we had the third worst interruption in our history, 52% of our customers interrupted by snowfall.

So let me just describe what we do when we’re faced with this kind of an emergency. Typically, what this curve is showing is the number of customers who are without service at various points in time during the storm; we call it a restoration curve. So you can see here that when the storm hit, it usually hits very abruptly and very hard and the restoration curve goes straight up. And within a few hours, all of the damages done, and then the storm moves on, and then we go into damage assessment mode. We then prioritize the repairs, mobilize our resources and get the repairs done. and what we’re trying to achieve with that is to bring is to have this curve fall as quickly as possibly. That means we’re restoring as many customers as quickly as we can.

If we were to do all of the repairs without prioritization, the curve would look more or like that. so we’re trying to make it on that as possible. Here, we did an especially good job. you can see that within two workdays, the 30 and 31, 50% of our customers have been restored, within four workdays 90%. This curve compares very favorably with neighboring utilities that were hit by the same storm and that’s what we’re trying to achieve.

This chart is showing the restoration curve for the three big storms we have experienced in 2010 and ‘11. Starting with the blue line, Twin Peaks and you can see why we call that Twin Peaks is that as two peaks, very creative with our names. Here, we had a snowstorm. we were 50% restored when we are hit by a second worst snowstorm and the peak level of outages occurred, and then a very good steep restoration curve from there.

Irene is shown in red. Here, you can see the rough peak and then the restoration; the gold color is snowfall, more outages and a quicker restoration than Irene. now every storm is different and the damage is different, fairly a tropical storm and a snowstorm are very different storms. But those were the only reasons why we’re able to restore service a little bit faster with snowfall than Irene.

In the case of the Irene that was a huge storm that affected the entire East Coast from Florida to Maine, more than 6 million customers were without service in that slot, and so mutual aid was spread very thin across the entire country. We wished we could have got more help. We were very grateful for the help we did get.

We also had the flooding, the bridge washouts, the road washouts, it made a very difficult to get around to do damage assessment and repairs for the first two to three days and I know it was a nightmare for the municipal officials who were trying to perform their emergency responsibilities as well. Then in the case of snowfall because it affected a smaller swap of territory and we’re able to have more mutual aid and we had less problems getting around and that was really probably the best restoration we ever have had.

And as a result of that, we’re once again recognized by EEI this last March last month. We had the honor again of receiving the Emergency Recovery Award for the second year in a row and for a company our size we recognized nationally two years in a row is really extraordinary and it really goes to the great effort from top to bottom of this organization starting with Jim Laurito and Charlie Freni who led the effort and every single employee and all the mutual aid crews that we had.

And thanks to all this practice that we had with this severe weather we have been experiencing. I think we really have this (inaudible) when it comes to emergency response. There are really multiple aspects (inaudible) to response that all have to be done well that have to (inaudible) together otherwise that just isn’t the best effort that our customers deserve. It starts with planning when we see the forecast we try to anticipate where and when this storm will strike, what damage we can expect.

Logistics, getting people and material staged in the right places, so that prioritize work plan and go smoothly. Productivity, keeping our crews working those long 16 hour days, but very acceptably on the right project as quickly as possible, especially our mutual aid crews were really working in foreign territory.

And then communication, communicating with our customers elected officials, regulators, but before the storm had during the restoration pace, telling them what’s going on, when they can expect their service to be restored. And most importantly safety, we have to keep our customers, our employees and our mutual aid responders safe throughout these restoration and we’ve done an outstanding job of all aspect of emergency response.

So now let me change the topic to the Fortis transaction. As I indicated, this meeting is not the meeting at which we’ll ask our shareholders to vote, but it is a great opportunity to discuss the transaction while the award feels of this compelling opportunity and to give you some sense of the process that will be followed.

So on February 21, we announced that we would be acquired by Fortis Incorporated subject to shareholder and regulatory approval. A proxy statement will be sent to you in approximately three weeks time, which will detailed the deliberations and rationale that went into the Board’s decision to enter into that transaction, and a special meeting will be held in about two months time. So today I will give you a high level overview, but again I must ask you to carefully read the proxy statement, they will receive in about three weeks.

So first question you may have in your mind having heard the announcement was who is Fortis? Fortis is not a household name in the United States, because they’re Canadian company. But they are an excellent utility. They are the largest publicly traded utility in Canada. They serve about 2 million customers, which is about six times as many as CH Energy Group serves. Fortis is a utility company, a regulated utility company submitted to that business and even excellent and long track record in serving their customers and their shareholders very well.

This is a map showing where Fortis operates. This is the Southern part of Canada here. They’re headquartered in St. John’s, Newfoundland. They’ve got operating utilities in Newfoundland, Prince Edward Island, Ontario, Alberta and British Columbia. They owned a small amount of hydro generation in state of New York work and they have small distribution utilities in the Caribbean. They are centered most vast majority of their customers are there in Canada.

One of the more unique aspects of the way Fortis is organized as they employee what they call a federation model, under which each of their utility company’s under the Fortis umbrella operate with substantial autonomy. They believe and we certainly agree that success in the utility business depends on local relationships with customers, regulators and elected officials, local knowledge about the economy, the culture and the traditions of each jurisdiction and therefore local decision-making by people who are steeped with knowledge of those things. And Fortis truly believes as the way that is the formula for success in the regulated utility business.

They’re also conservative company with a strong balance sheet and in a credit rating because they understand as we do that a capital intensive business like a utility business has to have a very strong bond rating and strong financial. And Fortis is a company that is committed to the regulated utility business that wants to invest in utility infrastructure and grow in the regulated utility industry just like CH Energy Group.

So why did our Board decide that this was a good transaction for shareholders and agreed to support this transaction and unanimously recommended to you for approval. The consideration that Fortis offered is $65 in cash, and $65 is a number and most numbers need to be compared to other numbers to provide some context, so they can be evaluated to determine just how compelling they are. So I’m going to try to give you a few of those metrics that our Board looked at, but again more details will come to you in the proxy statement.

Let’s start with the multiple of our most recent years earnings. I mentioned a few slides ago that our earnings were $2.97 in 2011, while this offering price $65 is nearly 22 times our most recent years earnings and that multiple 22 or 21.9 is near the top of the range of comparable transaction. We looked at 26 transactions in our industry dating back to 1999. That was the universal comparable transactions we looked at and it is a really full universe to look at. In addition to it being a high multiple of our trailing earnings, it was a 9.5% premium to our all-time peak trading price. And that represent a premium that is also very near the top of the range of those 26 comparable transactions.

Two other very important metrics that we considered, when a company acquires another what they’re really buying is not a historical income and cash flow stream, but the future earnings and cash flow stream. So what this comparison is showing is the one year forward multiples of earnings and cash flow. So if this deal goes forward, the first year that we will be part of Fortis would be 2013. So we’re looking at projections for 2013.

Now in the comparable transaction, the earnings per share multiple range was 11.9 to 19.8, $65 of share represents a multiple of about 19.3 very near the top of the range. If we look at cash flow, cash flow is most often measured by a metric called EBITDA, earnings before interest taxes depreciation and amortization. The range for this 26 comparable transaction is 6.3 to 9.2. The Fortis offer is 9.1 times projected EBITDA right at the very top of the range.

So, in addition to the compelling multiples that the $65 offer represented, there were another set of consideration that the Board considered and that was looking at the potential risks to our share price going forward and the ability to lock in a premium value now and in so doing avoid exposure to those downside risks. So what are some of those downside risks that we’re potential concerned, really three major ones, interest rates, dividend tax rates, and market preference cycle.

Let’s start with interest rate. I think most of you are CD investors and you’re probably painfully aware that interest rates are very near historical lows. They are truly very, very low. Now utility stocks are highly correlated with interest rates and as interest rates fall, utility starts tend to rise because the dividends they pay became more and more attractive against, comparables like bond yields and CD rates. So in the Board’s view, interest rates were more or likely to rise over the future than they were to fall. Frankly, they don’t have much further to fall.

We also looked at dividend tax rate. The dividend tax rate was reduced about 10 years ago and it had a positive effect on utility evaluation. But I think we’re all aware that the federal budget deficit is quite a problem and that there are serious proposals on the table to raise many different tax rates including dividend tax rate and if that were to occur, that would have a downward influence on utility evaluation.

And then market preference cycle, you saw in one of my early charts that the utility index had outperformed the broad market index very significantly over the last five years. During recession, investors like stability. They don’t like volatility. They become defensive and utility stocks are preferred. But as the economy improves and we all hope that well, there may well be a reversion to a greater focus on growth, and there maybe a swing in that preference cycle away from utilities and toward the broad market index.

We also considered our other constituencies, obviously the impact on shareholders of this deal was extremely important, and as again we thought that it was compelling, but we also – we’re concerned about our customers, our employees and the communities we served and how would this transaction affect them.

So we are very pleased to see as we did more and more research about Fortis that they have a very strong track record of corporate stewardship, taking good care of their constituency, the communities they serve, the employees that they have and their customers. They are committed to public and employees safety just like us. They are committed to satisfying customers just like us. They care about developing employees and giving them good careers just like us, and they’re committed who being part of the communities they serve and supporting the community with charitable contributions and volunteer help by their employee just like us. So this is really an excellent cultural fit between two companies.

Now I want to now outline with you what the next steps would be in terms of the timeline and the actions that need to be taken to bring this opportunity to closure. The first step will be sending to all of our shareholders of record a proxy statement that will be devoted to this subject only and that is going to be mailed on or about May 11.

And then a special meeting of shareholders five weeks later, which the vote will be counted. So we will have a pretty intense proxy solicitation period and it’s very, very important that all of our shareholders respond. Every vote count and we certainly want to hear from all of our shareholders. But in addition to shareholder approval, there are other regulatory approvals required before we can close, starting with the Federal Energy Regulatory Commission.

We made our filing with the Federal Energy Regulatory Commission yesterday. We expect it to be fairly routine and we expect to get approval in about two months time. There are two other filings, we’ve yet to make or which will make over the course of the spring and summer with the Federal Trade Commission and with the Committee on Foreign Investment, in both cases we expect those filings and those approvals to be routine because this transaction does not really raise the concerns that these organizations typically review.

The largest proceeding from a standpoint of both time and effort and timeline is very likely to be that with the New York Public Service Commission. The New York Public Service Commission is our primary regulator and under the Public Service Law in New York State, they have jurisdiction over the transfer of utility assets. And they have a standard under which they have to review that those proposed transfers and the standard is that they need to be in the public interest, and that is a positive standard. So the public interest needs to be advanced by the transaction that is the standard that we need to demonstrate. So they will have a proceeding, which I’ve just initiated that will probably take several months for them to make their determination as to whether or not this transaction is in the public interest.

Now last Friday, Fortis and Central Hudson jointly filed an application, which we feel makes a strong case that the transaction is in the public interest. We identified quantifiable, benefits to our customers of $20 million over the first five years that this transaction will create, and we feel that that is a very good demonstration up public benefit, but there are a whole list of other less quantifiable benefits as well including enhanced access to capital by a bigger corporation and our shared best practices will be one of half a dozen operating utilities under one family that can share a best practices over time.

And once all of the approvals are in place, shareholder approval and regulatory approval and again we expect the last of those approvals to be received to be that of the New York Public Service Commission, we will be in a position to close the transaction. We are projecting that that will occur in the first quarter of 2013. It could be a little earlier than that perhaps the fourth quarter of this year, but it also could slip into the second quarter of 2013. So this is the best estimate at this time and it will depend on the New York Public Service Commission proceedings.

So now let me summarize what was really a memorable year leading to a memorable first quarter of 2012 for CH Energy Group? We set forth some great challenges for ourselves going into the year, the strategic shift that I mentioned. And we executed very effectively and made very good strategic progress. We also had some very serious unforeseen problems or unforeseen challenges in the form of the storm (inaudible) in our history and we rose to the occasion, did an outstanding job and received industry-wide recognition for our efforts.

The net results of our investments, our strategic shift and the efforts of all our employees is that earnings were strongly up, our risk profile was down, our dividend was higher, our share price had performed very, very well both in absolute terms and compared to our peer group and the broad market. So a very, very successful year for us, put us in the position even though was not our intent to be in line to receive a compelling acquisition offer from Fortis, which again has occurred and which we think is a great opportunity for our shareholders. It gives us the opportunity to lock-in a premium value at very attractive multiples.

So the next step again is a special meeting, which will be held within the next couple of months to prove the transaction. The Board unanimously recommends that you do so, but again please carefully read the proxy statement that you will receive shortly and please be sure to vote. It’s very important that every share will be represented and every voice be heart. I truly appreciate your attention and I’m looking forward in a moments to answering your questions. Thank you very much.

Question-and-Answer Session

Unidentified Company Representative

I now invite any questions, which we wish to ask concerning if there is of CH Energy Group. If you have a question, please come to one of the three stationary microphones, both sides in the middle of the room. Before you ask your question, please identify yourself. In the interest of every ones time and in order to give everyone in opportunity to speak, we request that each shareholder ask no more than two questions and we will limit the time for each shareholders to ask questions to three minutes.

We would like to ask the first question.

Unidentified Analyst

Peter (inaudible); first of all, I want to thank you personally for the restoration you did on our service, and it was very great. And secondly, I want to thank you for the use of this to our prostate cancer support meetings we have (inaudible) of it, so great day. For the customer of Central Hudson have had two (inaudible), you would fairly are the electric utility are trying to get your customers to use less electricity. You tell there was everybody, but you were selling less electricity. You go to the Public Service Commission for a rated increase space or lesser using, would you get the customer ends up paying more or less?

Second, you frequently said, you noticed with the graph that customer is using too much electricity at least we get it quickly. You show a curve of usage if that customer has electric heat, usage will go up with cold weather. You then showed hereby customer how to use the electric heat. Those said to us have a flat curve for the entire year for those (inaudible), if any of you believe that a customer electric heat has flat usage all your long history before the termination of this meeting? Thank you.

Unidentified Company Representative

Let me address the first question first. Yes, we do promote energy efficiency and we think that something our customers want us to do and when a customer uses less, they save money. We have in our delivery rates, a mechanism called a revenue de-coupling mechanism, which effectively makes us whole or the reduced usage. But the customer is still saving the energy or supply charge. So less fuel is being burned and less cost is being incurred and that savings is a permanent savings for the customer, their bill is lower for ever. There is no claw back that makes the customer worse off for having conserved energy and I’m sorry, there is a misconception about that, but that is just not the case. The supply amount is saved and it’s a permanent savings.

Now relative to your letter you sent, there is a company called Opower that we are using as part of our energy efficiency promotion and the Opower letter, it compares your usage against your neighbors. And in your case we apparently have a coding problem where we are not comparing to other people of electric heat. I apologize for that. Sometimes we do have customers who are not coded correctly and we try to rectify that when we find out about it. Where w So whenever our representative speak to you we’ll make sure we will get you coded correctly and we try to rectify that when we find out about it. So, we’ll have one way of representative speak to you, we’ll make sure we get you coded properly. SO I apologize for that. Is there another question?

Unidentified Analyst

My name is Ruth (inaudible) and I live at 29th (inaudible). You were talking about cost efficiency I’m kind of curious to know when you are going to market gas and its fracing your community as [Hagan] school has it so as the high school and many people with whom I’ve spoken would like it. In fact 20 some years ago when I came to you Mr. (inaudible) was the head of this group I asked for gas and here we are now and we still don’t have it and we’ve asked again and again. I know its cost efficient, but I assure for medical reasons and I really needed it I need it again, that’s question one.

When you market it appears to me that there is something lacking in the marketing tier. You have to give to get and when businesses like Home Depot or McDonald's go out; they put a business out there. They don’t come to you and say well, sell my hamburgers for me or sell my appliances in store they go out and they do it. You are asking us to market for you when you tell us we have to have so many homes before you’ll come to us with the gas line. Now I checked with my neighbors, four people last year wanted gas, they went to oil and another neighbor also same way. Now this is just this last year. We’ve had 20 some years to do this project, which I’ve asked again and again about even did an efficiency I’ve done everything I can within my power and yet, I’ve been turn down, and I really needed it medically, and I needed again medically. So I’m a little concerned about your strategies regarding marketing gas in the community. Thank you.

Steven V. Lant

Thank you for the question. And it’s a very timely question and let me explain why. If you look at our customer account you will see that we have four times as many electric customers as we have gas customers, and we serve effectively the same territory. So, only one in four of our electric customers are gas customers as well and that’s largely because we have not historically been able to bring gas means throughout our service territory on a cost effective basis and that’s due to two things, the rocky terrain and the low density of the population. The numbers we have looked at them time and time again have not worked to have us really build up a gas system throughout the entire service territory we serve. Having said that, something has changed, which I think may enable us to bring gas to more people and that is that the price of natural gas versus the price of oil has changed very much in favor of natural gas. So there is an opportunity we think to be a little more aggressive in extending our mains.

Now I don’t want to raise your personal expectations, because I’m not exactly sure where you live and whether we’ll be able to do it. But directionally we are looking and Anthony Campagiorni is leading the effort at trying to extend our gas lines more than we have in the past, because of this price differential that is beneficial to our customers and certainly, we share your desire to bring gas to more customers, but we have to do it in a way that makes the economic senses both for the company and our other customers. We can put them in a position of effectively subsidizing customers that are just truly not economic to serve. So it’s a balancing that we are always trying to get right and but I think it’s a rebalancing we need to do based on the fact that gas has come down in price. Can you go to the microphone please, so all can hear.

Unidentified Analyst

You did go Hagen, which is not really far from us actually and you did go to the high school, and we are in that development fairway on the golf course. We are not that for actually. And when I first came to you about it 20 some years ago you said, sure pay for the pipeline and I said, I cant afford that you’ve only moved forward maybe one or two houses and our people I surveyed them, and I went around house to house to furnish that’s already to turn over and I would checked into efficiency, I had my friends turn over, I had neighbors that wanted, but I was told to try in the next months or whatever, and there – it seemed to me there were some kind of problem here. There were people that wanted it and I just talked to my neighbors yesterday too badly and we have four people on our street, four houses to our houses that wanted it. But they’ve been turned down. So I just don’t understand how you can market that way, may I ask market I don’t know that seems to me a no brainier, and gas is more efficient and gas also is going to be more economical due to Marcellus situation. It seems to me that it seems (inaudible) that marketing could be done more strategically in that area. Now, we’ve lost all these people. So I don’t know what the answer is. I realize there is rock, but there isn’t that rock in the roadway, which you could have gone, and Hagen is not that far from us. It runs down to (inaudible) and fairway. So I hope you’ll re-consider you’re thinking regarding…

Steven V. Lant

We certainly will. Your situation is one that we do need to re-evaluate and again, given the positive turn in natural gas prices I think we will have more opportunities to extend our mains and attach more customers. We’re looking forward to doing that and I hope you’re one of them. Any other question?

Unidentified Analyst

Good morning. My name is Ray (inaudible). I live in Newport. Last year at this meeting, I asked Central Hudson’s change of the standard operating procedure in turning or retaining order at the Dashville Dam in Rossendale. Central Hudson did by deflating a bladder on top of the dam and lowering the water level earlier when predictions call for excessive rainfall and flooding, flooding became less frequent. This response proves Central Hudson Gas and Electric can be a good neighbor.

Needed to go further, a gauge should be installed at the rail trail bridge in Newport. This would indicate rising water earlier. You also need to dredge of the (inaudible) kill river behind the dam. Many dams across the U.S. have experienced filling their reservoirs. One example is the Hoover dam in Lake Mead. As the reservoir in this case, river become shallow the hydraulic pressure on the turbines decreases resulting in less productivity. If the river channel is dredged more electric could be generated with increased hydraulic pressure without raising the water level and further reducing floods. Please consider these suggestions. Thank you.

Steven V. Lant

Well, thank you for the suggestions and again, I invite you to speak to our engineering group who can evaluate the suggestions you are making and I appreciate the credit you gave us for our operating procedures, but in some sense I think you are giving us credit for the recent drought that we probably don’t deserve, but nevertheless we will look at what you’re suggesting and see if we can help in some regard.

Unidentified Analyst

The credit wasn’t based on the drought, it was based on observations of heavy rainfall including hurricane Irene, the river level was dropped considerably, but with that amount of rain flooding was eminent. Thank you.

Steven V. Lant

Thank you. Are there any other questions? We are hearing no further questions. I thank you for your interest in our company. I’m sorry. We now will turn to the final item on the agenda, the report of the preliminary results of voting. The Inspector of Election has submitted the certificate that includes the preliminary voting results for the three items before this meeting including the election of the directors. Will the secretary please report on the results of the voting?

Denise Doring VanBuren

As to the first item on today’s agenda, subject to a final tally of review of the role of the shareholders shows that the holders have 9,253,419 shares of common stock have voted personally or by proxy in favor regarding the election of the nominees as follows. Ms. Dilley 97%, Mr. Fetter 96%, Mr. Grubel 94%, Mr. Iraola 95%, Mr. Kruse 96%, Mr. Lant 96%, Mr. Tokar 95%, Mr. Tranen 97% and Mr. Verebelyi 95%. The results represent a priority of the shares voted at the meeting and accordingly each Director has been elected to serve a one-year term to end in 2013.

Steven V. Lant

As to the election of the directors Ms. Dilley, Mr. Fetter, Mr. Grubel, Mr. Iraola, Mr. Kruse, Mr. Tokar, Mr. Tranen and Mr. Verebelyi and myself each of whom has been elected by you will serve as Directors for a one-year term ending at the annual meeting of shareholders to be held in 2013 or until the successor is elected and qualified. On behalf of the entire Board of Directors I thank you for your continued confidence and support.

Denise Doring VanBuren

As to the second matter on today’s agenda subject to a final tally of review of the role of shareholders shows that the holders have 9,13,897 shares of common stock have voted personally of a proxy in connection to the approval of the non-binding advisory votes on the compensation of the named executive officers as disclosed in the 2012 proxy with 8,224,73 shares or 91% of the total number of share count voting for the proposal. The vote represents the majority of the shares voted at the meeting and accordingly the proposal has been approved.

The third item on today’s agenda is the ratification of the appointment of PricewaterhouseCoopers LLP, as CH Energy Group’s independent accounts for 2012 with 11,996,161 shares or 98% of the total number of votes cast voting for ratification. The vote represents the majority of the shares voted at the meeting and accordingly, the appointment has been ratified.

Steven V. Lant

Thank you, Denise, and thank you to our shareholders for your support of our efforts. I know that each shareholder received the copy of the annual report to shareholders for the year 2011 including my letter to shareholders and review of CH Energy Group’s operations and financial statements and the opinion of price PricewaterhouseCoopers LLP for 2011. Please note that copies of our annual report, which includes the Form 10-K has filed with the Securities Exchange Commission, are available on the table in the back of the room, the document looks like that. You are welcome to take copies and to visit our website at chenergygroup.com to review online additions of publications including our annual report and other items related to our operations. Is there a motion to adjourn?

Unidentified Company Representative

(Inaudible)

Steven V. Lant

Is there a second? All those in favor of vote, I and you post (inaudible). The motion is carried, the meeting is adjourned. Thank you very much.

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