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Snohomish County Public Utility District

October 2017

Snohomish County PUD | 2017 Investor Presentation | October 2017

Disclaimer2

The information within this presentation is limited in scope. The presentation does not constitute an offer to sell or a solicitation of an offer to buy Snohomish County PUD’s bonds. The presentation is dated October 4, 2017, and speaks only to information known as of that date. As a result, the documents may not contain all information material to investors and may contain material misstatements or omissions because of the passage of time or the occurrence of subsequent events. The PUD does not undertake to update, and expressly disclaims any duty to update, the recipient of this presentation.

If and when included in these documents, the words “plan,” “expect,” “forecast,” “estimate,” “budget,” “project,” “intends,” “anticipates” and similar words are intended to identify forward-looking statements, and any such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others, general economic and business conditions, changes in political, social and economic conditions, regulatory initiatives and compliance with governmental regulations, litigation and various other events, conditionsand circumstances, many of which are beyond the control of the PUD. Any forward-looking statements speak only as of the date they were prepared.


Presentation Team3

Glenn McPhersonAssistant General Manager, Finance and Treasurer

[email protected]

Mr. McPherson has served Snohomish County PUD for 26 years and was appointed Assistant General Manager, Finance and Treasurer in 1997. His responsibilities at the PUD include accounting and financial reporting, cash and debt management, riskmanagement, budget and financial planning and procurement and materials management. Before joining the PUD, Glenn spent nearly eight years serving public and private companies as a senior manager with KPMG Peat Marwick. Glenn holds a bachelor of science degree in business administration with an emphasis in accounting from California State University at LongBeach. He is a certified public accountant.

Tom DeBoerAssistant General Manager, Generation, Power, Rates & Transmission Mgmt.

[email protected]

Mr. DeBoer joined Snohomish County PUD in May 2016, bringing over 18 years of experience in the electric and natural gas utility industry in the Pacific Northwest. Tom’s areas of responsibility include power scheduling, short-term and long-term resource planning, resource development, power and transmission contracts, rates, energy risk management, load forecasting, and federal energy compliance activities. Before joining the PUD, Tom was employed at Puget Sound Energy for 12 years where he led various departments, including power and natural gas supply, federal and state rates and regulation, and compliance. Tom also previously worked as an attorney in private practice on a variety of utility issues. Tom holds a juris doctorate degree, from Gonzaga University School of Law as well as a Bachelor of Arts degree in geology from the University of Montana and a Master of Science degree in geology from Western Washington University.

Jessica MatlockDirector, Government & External Affairs

[email protected]

Ms. Matlock joined Snohomish County PUD in August 2006 as the Director of Government & External Affairs. Jessica also leads the PUD’s efforts to develop and operate solar energy, electrification of transportation, and demand response programs. She previously worked as an energy and natural resources fellow for U.S. Senator Larry E. Craig (Idaho). Prior to that, she held a number of positions with the Bonneville Power Administration, including that of power marketing specialist (in Washington, DC), constituent account executive for the State of Idaho, and fish and wildlife project manager. Jessica servesand has served on various boards/Councils related to hydropower, energy efficiency/conservation, cybersecurity, and fish and wildlife. Jessica holds an MPA from Portland State University and a bachelor's of science degree in chemical oceanography from the University of Washington. She also served in the United States Coast Guard.


Snohomish PUD Overview4

□ Snohomish PUD is a municipal corporation of the State of Washington established in 1936, independent of Snohomish County

□ It is organized through three systems: Electric, Generation, and Water. Each system is separately financed with separate books and records

□ It is the second largest publicly owned utility in the Pacific Northwest and the 12th largest in the nation in terms of customers served

□ Snohomish County is part of the expanded Puget Sound economy, just north of Seattle

Electric System

□ Consists of Snohomish PUD’s transmission lines, substations, distribution lines, transformers, meters, and general plant

□ Obligated to purchase the power produced by the Generation System on a take-or-pay basis. Generation System debt service treated as an Electric System operating expense

Generation System

□ Generation System includes the Jackson Hydroelectric Project, YoungsCreek Hydroelectric Project, and the Woods Creek Hydroelectric Project

□ Two additional low-impact hydroelectric projects – Hancock Creek and Calligan Creek – are anticipated to be commissioned and in service in early 2018

Electric Generation

Outstanding Revenue Bonds ($ 000’s) $ 346,590 $ 159,625

Credit Ratings

Fitch AA-, Stable AA-, Stable

Moody's AA-, Stable AA-, Stable

S&P Aa3, Stable Aa3, Stable


Snohomish County Economy5

Rank Customer NamePercentage of Retail

kWh Sales

1 The Boeing Company 5.79%

2 Fred Meyer Inc. (QFC/Kroger) .77%

3 Providence Medical Center .77%

4 Tulalip Tribes .73%

5 Safeway Stores .70%

6 U.S. Navy .69%

7 City of Everett .67%

8 King County .59%

9 Snohomish County .51%

10 State of Washington .50%

Top Ten Largest Customers (2016)

Population Growth

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

2013 2014 2015 2016

Snohomish County

Washington

United States

Sources: Washington State Department of Employment Security, US Department of Commerce, US Bureau of Economic Analysis and Census, Snohomish PUD

Median Household Income

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2012 2013 2014 2015

Snohomish County Washington United States$

Unemployment

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2012 2013 2014 2015 2016 2017

Snohomish County

Washington

United States


Customer Consumption & Growth6

1.2%

1.4%

.6%.6%

.7%

1.0%

1.4%

□ The average number of customers has increased steadily; new service connections totaled 4,510 in 2016

□ Snohomish PUD has experienced a minor amount of load decline over the past several years as growth in number of customers has been offset by lower power consumption per customer

300,000

305,000

310,000

315,000

320,000

325,000

330,000

335,000

340,000

345,000

2010 2011 2012 2013 2014 2015 2016

Average Number of Customers

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2010 2011 2012 2013 2014 2015 2016 12 mos- Jun17

Customer Consumption (MWh)

Residential Commercial Industrial Other


Rate Setting Process7

The PUD’s electric rates and charges are controlled locally by the PUD’s three member Board of Commissioners and not subject to any other jurisdiction or oversight

The Board of Commissioners implements rate increases as follows:

The Board adopts general rate increases to offset the effects of growth, inflation, infrastructure needs and legislative mandates

The Board has a policy that requires a review of its rates whenever wholesale energy rates charged by the Bonneville Power Administration are adjusted, resulting in a BPA pass-through increase

0.9%2.9%

2.7%

General Rate Increase

BPA Pass-Through Increase

4.6%1.6%

3.5%2.9%

2.3%

1.9%

2.9%

7.00

8.00

9.00

10.00

11.00

12.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Residential Rates (cents per kWh)


Overview of Local Service Areas

Monthly Electric Bills - Average8

Puget Sound Energy

City of Seattle

SnoPUD

City of Tacoma

Tacoma

2015 EIA Rates Report (1)

Average Price (cents/kWh)

Snohomish County PUD 8.73

Washington State Average 7.48

Large Utilities Average(2) 8.93

Major I-5 Corridor Utilities Average(3) 9.19

(1) http://www.eia.gov/electricity/data.cfm#sales(2) 100,000 customers or more(3) City of Seattle, City of Tacoma, Clark PUD, Portland General Electric, Puget Sound

Energy, Snohomish County PUD

$81 $82 $85 $88 $92 $94

$98

$111

$-

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

Avista Cowlitz CountyPUD

Clark PublicUtilities

Tacoma Power Snohomish CountyPUD

Puget SoundEnergy

Seattle City Light Portland GeneralElectric

Residential Typical Bill Comparison (900 kWh)

http://www.eia.gov/electricity/data.cfm#sales


Power Resources9

□ The graph at left illustrates 2016 generation and power resource costs

□ Snohomish PUD IRP details how the utility will meet future load growth under a variety of scenarios. Energy Efficiency Programs are the resource of choice for meeting load growth. For any load growth not met by Energy Efficiency, Snohomish PUD will pursue cost-effective, low carbon resources

□ Snohomish PUD has a long-term contract with BPA for the Block and Slice products. The Block product provides a specified amount of power for all hours in each month, while the Slice product provides the utility with a varying amount of energy produced from the Federal Columbia River Power System based on hydro conditions

□ Snohomish PUD has virtually no carbon footprint


Electric System Operating Results10

Retail energy sales have steadily improved as a result of a series of modest rate increases

Wholesale energy sales represent the sale of surplus power and vary based on regional hydro conditions and wholesale power prices

Purchased power expenses increased by $27 million in 2016, reflecting a sizable increase in BPA wholesale power and transmission costs in October 2015

Electric debt service coverage has remained strong and has averaged 2.8x over the last 5 years

2012 2013 2014 2015 2016

Operating Revenues

Retail Energy Sales 521,032$ 538,573$ 544,762$ 549,343$ 574,455$

Wholesale Energy Sales 49,178 48,758 59,257 36,770 37,076

Other Operating Revenues 20,800 21,672 24,563 21,186 28,100

Total Operating Revenues 591,010 609,003 628,582 607,299 639,631

Operating Expenses

Purchased Power and Generation(1) 317,301$ 323,572$ 332,375$ 320,515$ 347,494$

Operations and Maintenance 176,840 182,955 198,716 207,676 208,695

Depreciation 43,854 45,968 48,336 49,042 51,460

Taxes 31,517 32,582 33,149 35,417 35,448

Total Operating Expenses 569,512 585,077 612,576 612,650 643,097

Net Operating Income (Loss) 21,498$ 23,926$ 16,006$ (5,351)$ (3,466)$

Interest and Other Income and Expense

Other Income and Expense 17,251 10,269 2,313 17,833 12,825

Interest Charges, net (17,111) (15,507) (14,191) (13,553) (14,154)

Capital Contributions 11,434 14,424 18,287 16,512 20,094

Net Income 33,072$ 33,112$ 22,415$ 15,441$ 15,299$

Balance available for Debt Service Coverage(2) 92,326 92,446 87,941 75,308 76,156

Electric System Debt Service 32,850 30,667 30,643 29,550 26,855

Electric Debt Service Coverage 2.8x 3.0x 2.9x 2.5x 2.8x

Electric & Generation Bonds Outstanding 556,448$ 521,465$ 484,670$ 538,910$ 506,215$

(1) Includes Generation Sy stem debt serv ice.

(2) Balance Av ailable For Electric Sy stem Debt Serv ice Cov erage assumes debt serv ice on Generation Sy stem Bonds is paid as an Electric Sy stem Operating Ex pense.

Electric System Historic Revenues, Expense and Debt Service Coverage ($000's)


Reserve Policy11

The Board of Commissioners financial reserve policy includes:

An Electric System operating reserve equal to 90 days of non-power budgeted expenses

A $171 million power market volatility reserve, which includes a $115 million rate stabilization fund

Self-insurance reserve to address retention and deductibles on the PUD’s property and liability insurance

A resource reinvestment reserve utilized to fund capital investments in replacement or new assets

As of December 31, 2016 Snohomish PUD had 238 days cash in non-designated reserves

Snohomish PUD Cash Reserves

Electric Generation Total

Ongoing, Long-Term Reserves

Operating 100$ 15$ 115$

Power Market Volatility/Rate Stabilization 171 171

Self-Insurance 13 13

Project Specific Reserves

Resource Reinvestment 44 44

Jackson License 9 9

Designated Reserves

Series 2015 Bond Proceeds 77 16 93

Bond Reserves 26 15 41

OPEB 21 21

Other 4 3 7

Total Cash Reserves 456$ 58$ 514$

2016 Reserve Balances ($ Millions)


Summary12

Stable Service Area

□ Snohomish PUD’s service area is diverse with above average economic indicators• Population growth is above state and national averages• Median Income was 31% higher than the national average in 2015• Unemployment is substantially lower than state and national averages at 3.8%

Experienced Management

□ Knowledgeable, experienced, and strategic-thinking Board and senior management team

Carbon Free Power Supply

□ BPA contract provides low-cost virtually carbon free power for 85% of power resources• Average power supply cost of $36/MWh with almost no carbon

□ Existing and committed resources are expected to meet forecasted load for several years

Effective Rate Setting

□ Consistently implemented periodic general rate increases and BPA rate adjustment pass-through rate increases based on utility needs

□ Rates are competitive with other Northwest utilities, and below those of other large utilities in the region

Stable Finances and Robust Liquidity

□ Aa3/AA-/AA- ratings

□ Solid, consistent operating results and debt service coverage

• Electric system debt service coverage (5-year average): 2.8x

□ Formal, Board-approved reserve policies and strong reserve levels

• Days cash on hand (2016): 238 days


Where to Find New Information13

Snohomish PUD’s Finance

and Investor Relations

webpage has access to

the latest financials,

budget reports and

investor presentations

SNOPUD.COM/INVESTORS

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