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A Challenging Year Lies Ahead:
The Economy and Its Impacts on Public Power
APPA 2009 Business and Financial Conference
September 14, 2009 - Savannah, GA
Richard J. Rudden
Senior Vice President
Black & Veatch
Enterprise Management Solutions
Credit Spreads (basis points above US Treasury yield)
Standard & Poor’s Composite Credit Spreads by Rating Category Since June 17, 2003
Data as of Aug 17, 2009. Sources: Standard & Poor’s Global Fixed Income Research.
‘AAA’, ‘CC’, and ‘C’ rating categories not displayed because of small sample size
© Standard & Poor’s 2009
Page - 2
Real GDP Growth and the Unemployment Rate
Annual percent change, 2000 dollars
Percent
Source: IHS Global Insights
Page - 3
Fiscal Stimulus Has Peak Impact in 2010
(Billions of dollars)
2009
2010
2011
Total Stimulus
252
309
129
Personal Tax Cuts
51
92
37
Income Assistance
54
44
30
Corporate Tax Cuts
58
31
-4
State & Local Govt.
Transfers
62
88
22
Infrastructure & Other
27
55
44
Source: IHS Global Insights
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Top Concerns of CFOs – Macro Economy
When will we get a little help from the consumer?
1. Consumer Demand
6.
Cost of fuel
2. Credit market/interest rates
7.
Currency risk
3. Federal-government policies
8.
Foreign competition
4. Housing-market fallout
9.
Environmental regulation
5. Cost of nonfuel commodities
10.
Trade policies and trade
agreements
Source: CFO Magazine, July/August 2009
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Top Concerns of CFOs – Their own companies
Forecasting is now the top internal worry as companies struggle to gauge demand
1. Ability to forecast results
6. Cost of health care
2. Working-capital management
7. Managing IT systems
3. Maintaining morale/productivity
during economic downturn
8. Supply-chain risk
4. Balance-sheet weakness
5. Attracting and retaining
qualified employees
9. Pension obligations
10. Protection of intellectual
property
Source: CFO Magazine, July/August 2009
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Negotiating Position is Improving…
Have you tried to renegotiate with your lenders or suppliers for terms
that are more favorable for your company?
Suppliers
Lenders
Yes, successfully renegotiated
Yes, but unsuccessfully
No, haven’t tried
Source: CFO Magazine, July/August 2009
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The Economy is Improving… Sooner or Later
When do you expect
the U.S. economy
to begin recovery?
Source: CFO Magazine, July/August 2009
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The “Top Ten” Challenges for 2010
1.
Declining or flat sales
2.
Constraints on capital expenditures
3.
Uncertainty over future carbon costs
4.
Unfunded pensions and “OPEBs”
5.
Customer rates
6.
Local taxes and transfers
7.
Rating agency surveillance
8.
Investor relations
9.
Renewables and Smart Grid
10. Potential monetization of assets
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A Challenging Year Lies Ahead:
The Economy and Its Impacts on Public Power
APPA 2009 Business and Financial Conference
September 14, 2009 - Savannah, GA
Richard J. Rudden
Senior Vice President
Black & Veatch
Enterprise Management Solutions
Page - 10