UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 12, 2003
| Exact name of registrant as specified | I.R.S. | |
| in its charter, state of incorporation, | Employer | |
| Commission | address of principal executive offices, | Identification |
| File Number | Telephone | Number |
| 1-16305 | PUGET ENERGY, INC. | 91-1969407 |
| A Washington Corporation. | ||
| 411 - 108th Avenue N.E. | ||
| Bellevue, Washington 98004-5515 | ||
| (425) 454-6363 |
| 1-4393 | PUGET SOUND ENERGY, INC. | 91-0374630 |
| A Washington Corporation | ||
| 411 - 108th Avenue N.E. | ||
| Bellevue, Washington 98004-5515. |
ITEM 5. Other Events
On February 12, 2003, the Company issued the following press release:
Puget Energy reports 2002 results of $1.24 per share
Bellevue, Wash. (Feb. 12, 2003) — Puget Energy (NYSE: PSD) today reported income for common stock of $110.1 million or $1.24 per share, for the year ended Dec. 31, 2002, compared with $98.4 million, or $1.14 per share, for the 12 months ended Dec. 31, 2001. These results represent a 9 percent year-over-year increase in earnings per share.
“In many respects, 2002 was a watershed year for Puget Energy,” said President and CEO Stephen P. Reynolds. “We took decisive actions, some of them painful, to deliver strong operating results and create a solid platform for building shareholder value.
“I am pleased that we have accomplished our objectives for 2002, including earnings at the higher end of our expectations,” added Reynolds. “Achieving regulatory settlements for electric and gas operations in 2002 was critical to improving the financial strength and results of the company. Our common stock sale of $115 million last November, together with $385 million of debt reduction in 2002, demonstrates our continued commitment to strengthening our balance sheet and improving financial flexibility. In addition, our liquidity was strengthened by the successful renewal of our $400 million short-term borrowing facilities in December 2002,” said Reynolds.
2002 Highlights
| • | Puget Energy’s electric and gas utility subsidiary, Puget Sound Energy (PSE), contributed $101.1 million, or $1.14 per share, compared with $96.0 million, or $1.11 per share, for the for the same period in 2001. |
| • | InfrastruX Group, Puget Energy’s construction services subsidiary, also met its annual 2002 earnings target of $9.5 million, or 10 cents per share, compared with $2.5 million, or 3 cents per share, in 2001. |
| • | Approval of the settlement agreement in PSE’s general electric rate case on June 20, 2002 granted PSE a 4.6 percent electric rate increase, intended to generate about $59 million annually, beginning July 1, 2002. |
| • | PSE’s electric-rate settlement agreement includes a power cost adjustment mechanism (PCA) which took effect for a four-year period starting July 1, 2002. The PCA allows PSE to recover power costs when the cost to provide electricity to its customers varies from levels stipulated in the rate settlement agreement. Variations are shared between PSE and its customers based on percentages applied to several levels of power costs. PSE’s PCA limits the company’s cumulative pre-tax earnings exposure for the four-year period ending June 30, 2006, due to power cost increases from the costs reflected in customer rates, to $40 million plus 1 percent of costs in excess of that amount. |
| • | PSE also obtained from its rate settlement an imputed capital structure with an equity component of 40 percent and an authorized 11 percent return on equity. |
| • | Approval of PSE’s natural gas settlement agreement on Aug. 28, 2002 granted PSE a 5.8 percent increase in natural gas revenues intended to generate $35.6 million annually, beginning on Sept. 1, 2002. |
| • | The number of gas customers in PSE’s service territory grew by 2.6 percent to approximately 622,000 and electric customers increased by 1.8 percent to approximately 958,000 customers for electric service. |
| • | Puget Energy sold a block of 5.75 million shares of common stock on Oct. 31, 2002. The net proceeds of $115 million were used to reduce PSE’s debt. PSE’s equity ratio increased to 36.1 percent at Dec. 1, 2002 from 30.3 percent at Dec. 31, 2001. PSE is well ahead of the requirement in its rate settlement to rebuild its common equity ratio to at least 39 percent over a 3½- year period, with milestones of 34 percent, 36 percent and 39 percent at the end of 2003, 2004 and 2005 respectively. |
| • | On Dec. 23, 2002, PSE replaced its $375 million line of credit, which was scheduled to expire in Feb. 13, 2003. PSE’s new $400 million of short term liquidity facilities consist of a 364-day, $250 million unsecured credit agreement with eight banks and a three-year $150 million accounts receivable securitization program. PSE’s short-term debt outstanding at year-end 2002 was $30.3 million, compared with $338.2 million at the end of 2001. |
Fourth-Quarter 2002 Results
Puget Energy’s fourth-quarter 2002 income for common stock was $49.6 million, or 55 cents per share, compared with income of $6.2 million, or 7 cents per share for the same period one year ago. The fourth quarter of 2001 was impacted by the under recovery of net power costs. This impact continued through the first quarter of 2002. PSE’s fourth quarter earnings in 2002 were $47.8 million or 53 cents per share compared with $6.7 million or 8 cents per share in the fourth quarter of 2001. InfrastruX Group’s income in the fourth quarter of 2002 was $2.0 million, or 2 cents per share, compared with a loss of $0.5 million or 1 cent per share for the same period in 2001.
PSE’s retail electric and gas sales in the fourth quarter of 2002 were adversely impacted by warmer than normal temperatures in the Pacific Northwest as compared to near normal temperatures in the same period in 2001. The negative impact warm temperatures had on PSE’s retail sales was partially offset by a one-time federal income tax refund that benefited Puget Energy’s earnings by approximately 3 cents per share.
2003 Outlook
PSE’s hydroelectric production and related power costs in 2003 are expected to be impacted negatively by drought conditions in the Pacific Northwest region associated with El Nino weather conditions. The Northwest Rivers Forecast Center on Feb. 6, 2003 predicted that streamflows in the Columbia River Basin above Grand Coulee Dam would be only 76 percent of normal. In a normal water year, PSE obtains about 38 percent of its energy supply from low cost hydroelectric facilities, primarily from dams below Grand Coulee on the Columbia River. If the forecasted streamflow reductions occur, the company will need to replace that low-cost hydropower with more expensive thermally-generated and purchased power. On Jan. 15, 2003, the company revised its previous 2003 earning estimate downward by 25 cents, taking into account the projected increase in power costs and the Purchased Cost Adjustment recovery mechanism in its electric retail rates.
“We expect utility earnings to rebound in 2004,” said Reynolds. “The biggest single factor impacting our company’s outlook for 2003 is the impact of persisting drought conditions in the Pacific Northwest. Given that we expect to reach the cumulative cap allowed under the PCA mechanism by the end of 2003, Puget Energy will be insulated from increases in power costs stemming from abnormal hydrological conditions or other factors in 2004 and for the balance of the period that the PCA is in effect. Additionally, based on our current power-cost forecasts for 2003, we do not expect any increases to our customers’ electric rates this year,” added Reynolds.
“With our earnings largely driven by stable utility operations and our small non-regulated business that is closely aligned with our core company strengths, we believe that Puget Energy is well-positioned to achieve our revised 2003 earnings target of $1.50-$1.60 per share,” said Reynolds. Of this amount, PSE is estimated to contribute $1.35 — $1.45 per share and InfrastruX is estimated to contribute 15 cents per share. “In 2003, InfrastruX will be focused on organic growth of its existing group of companies, rather than growth through acquisitions,” added Reynolds.
“In light of the energy industry’s shift away from deregulation, we’ve strengthened Puget Sound Energy’s focus on the fundamentals of a regulated natural gas and electricity utility business,” added Reynolds. “We’re positioning the company to meet our customer’s energy requirements by working with state regulators and others in the Pacific Northwest to find low-cost energy resources. We are looking to add new energy resources as a regulated part of the business to serve our customers.”
2002 Earnings Teleconference
Puget Energy management will discuss the fourth quarter and 2002 results and the outlook for future performance at 10 a.m. EST (7 a.m. PST) on Thursday, Feb. 13, 2003. The call will be broadcast live through a webcast at www.pse.com by accessing the Investors section of the website. The webcast will be archived and available for replay following the live call.
_________________
Cautionary Statement: Certain statements contained in this news release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, among which include statements regarding estimates of earnings per share. In some cases, you can identify forward-looking statements by terminology such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will likely result,” “will continue” or similar expressions. Forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward- looking statements. Factors that could affect actual results include, among others, governmental policies and regulatory actions, including those of the FERC and the WUTC, with respect to financings, industry and rate structures, acquisition and disposal of assets and facilities, operation and construction of plant facilities, recovery of purchased energy and other capital investments, and present or prospective wholesale and retail competition; weather, which can have a serious impact on retail energy sales and on PSE’s ability to procure adequate supplies of gas, fuel or purchased power to serve its customers and on the cost of procuring such supplies; hydroelectric conditions, which can have a serious impact on electric capacity and PSE’s ability to generate electricity; wholesale energy prices; industrial, commercial and residential growth and demographic patterns in the service territories of PSE; and the ability of Puget Energy and PSE to access the capital markets to support requirements for working capital, construction costs and the repayment of maturing debt. More information about these and other factors that potentially could affect Puget Energy’s financial results is included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, Quarterly Report on Form 10-Q for the third quarter of 2002 and in their other public filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance upon these forward-looking statements that speak only as to the date of this release. Except as required by law, Puget Energy and PSE undertake no obligation to update any forward-looking statements.
PUGET ENERGY -- SUMMARY INCOME STATEMENT (In thousands, except per-share amounts) Unaudited Three months ended 12/31(1) Twelve months ended 12/31(1) --------------------------------- ------------------------------------- 2002 2001(2) 2002 2001(2) --------------- --------------- ----------------- ------------------ Operating revenues Electric $ 387,071 $ 367,664 $ 1,365,885 $ 1,865,227 Gas 172,492 256,010 697,155 815,071 Other 94,404 49,390 329,282 206,262 --------------- --------------- ----------------- ------------------ Total operating revenues 653,967 673,064 2,392,322 2,886,560 --------------- --------------- ----------------- ------------------ Operating expenses Purchased electricity 202,640 193,493 645,371 918,676 Purchased gas 80,572 165,662 405,016 537,431 Electric generation fuel 16,822 47,938 113,538 281,405 Residential exchange (49,832) (29,548) (149,970) (75,864) FAS-133 unrealized (gain)/loss 472 3,311 (11,612) (11,182) Utility operations & maintenance 77,715 74,982 286,220 265,789 Other operations & maintenance 80,132 37,239 273,157 156,731 Depreciation & amortization 58,248 57,282 228,743 217,540 Conservation amortization 7,516 1,848 17,501 6,493 Taxes other than income taxes 55,586 59,533 215,429 212,582 Income taxes 24,928 6,570 59,260 79,838 --------------- --------------- ----------------- ------------------ Total operating expenses 554,799 618,310 2,082,653 2,589,439 --------------- --------------- ----------------- ------------------ Operating income 99,168 54,754 309,669 297,121 Other income (net of tax) 1,403 3,123 5,458 14,526 --------------- --------------- ----------------- ------------------ Income before interest charges & minority interest 100,571 57,877 315,127 311,647 Interest charges 48,858 49,611 196,377 190,059 Minority interest 188 --- 867 --- --------------- --------------- ----------------- ------------------ Net income before cumulative effect of accounting change 51,525 8,266 117,883 121,588 FAS-133 transition adjustment loss (net of tax) --- --- --- 14,749 --------------- --------------- ----------------- ------------------ Net Income 51,525 8,266 117,883 106,839 Less preferred stock dividend accruals 1,940 2,085 7,831 8,413 --------------- --------------- ----------------- ------------------ Income for common stock $ 49,585 $ 6,181 $ 110,052 $ 98,426 =============== --------------- ================= ================== Common shares outstanding 90,664 86,863 88,372 86,445 Diluted shares outstanding 91,069 87,124 88,777 86,703 --------------- --------------- ----------------- ------------------ Basic and diluted earnings per common share before $ 0.55 $ 0.07 $ 1.24 $ 1.31 cumulative effect of accounting change Cumulative effect of accounting change --- --- --- (0.17) --------------- --------------- ----------------- ------------------ Basic and diluted earnings per common share(3) $ 0.55 $ 0.07 $ 1.24 $ 1.14 =============== =============== ================= ================== 1. Partial-year results may not accurately predict full-year performance, as earnings are significantly affected by weather. 2. Certain amounts previously reported have been reclassified to conform with current year presentations with no effect on net income. 3. Diluted earnings per common share include the dilutive effect of securities related to employee compensation plans. PUGET SOUND ENERGY(1) -- UTILITY OPERATING DATA Unaudited Three months ended 12/31 Twelve months ended 12/31 --------------------------------- ------------------------------------ 2002 2001 2002 2001 --------------------------------- ------------------------------------ Energy sales revenues ($ in thousands) Electricity Residential $ 154,430 $ 153,700 $ 622,499 $ 599,606 Commercial 140,940 127,631 540,885 520,702 Industrial 23,836 26,726 91,920 284,604 Other retail sales(2) 21,374 31,825 5,567 (38,631) --------------- ---------------- --------------- ---------------- Subtotal, retail sales 340,580 339,882 1,260,871 1,366,281 Transportation(2) 2,678 2,201 15,551 2,537 Sales to other utilities & 37,405 42,881 88,288 533,945 marketers(3) Other(4) 6,408 (17,300) 1,175 (37,536) --------------- ---------------- --------------- ---------------- Total electricity sales 387,071 367,664 1,365,885 1,865,227 Gas Residential 112,899 163,861 428,569 486,761 Commercial 45,804 73,307 209,516 256,859 Industrial 6,738 12,881 35,119 49,453 --------------- ---------------- --------------- ---------------- Subtotal, retail sales 165,441 250,049 673,204 793,073 Transportation 3,828 3,226 12,851 11,780 Other 3,223 2,735 11,100 10,218 --------------- ---------------- --------------- ---------------- Total gas sales 172,492 256,010 697,155 815,071 --------------- ---------------- --------------- ---------------- Total energy sales revenues $ 559,563 $ 623,674 $ 2,063,040 $ 2,680,298 - ----------------------------------------------------------------------------- ------------------------------------ Energy sales volumes (Unaudited) Electricity (in mWh) Residential 2,505,035 2,433,324 9,845,527 9,555,264 Commercial 2,033,143 1,952,848 8,012,538 7,953,165 Industrial 353,441 489,796 1,416,106 2,540,722 Other(2) 307,072 400,383 (11,970) (123,643) --------------- ---------------- --------------- ---------------- Subtotal, retail sales 5,198,691 5,276,351 19,262,201 19,925,508 Transportation(2) 505,366 247,791 2,307,081 363,826 Sales to other utilities & 1,087,401 1,036,832 3,466,571 4,982,342 marketers(3) --------------- ---------------- --------------- ---------------- --------------- ---------------- --------------- ---------------- Total mWh 6,791,458 6,560,974 25,035,853 25,271,676 Gas (in 000's of therms) Residential 162,779 177,112 500,672 494,648 Commercial 80,526 88,929 288,220 297,756 Industrial 12,690 15,993 50,683 57,977 Transportation 56,320 49,952 207,852 188,196 --------------- ---------------- --------------- ---------------- Total gas volumes 312,315 331,986 1,047,427 1,038,577 - ----------------------------------------------------------------------------- ------------------------------------ Customers served(5) (Unaudited) Electricity Residential 845,158 834,196 839,878 826,187 Commercial 106,852 100,574 104,273 100,015 Industrial 3,946 3,966 3,953 4,012 Other 2,010 1,844 1,932 1,758 Transportation 16 13 5 16 --------------- ---------------- --------------- ---------------- Total electricity customers 957,982 940,593 950,052 931,977 Gas Residential 572,290 555,990 565,003 548,497 Commercial 46,807 47,082 46,523 46,783 Industrial 2,736 2,797 2,770 2,837 Transportation 134 112 122 112 --------------- ---------------- --------------- ---------------- Total gas customers 621,967 605,981 614,418 598,229 - ----------------------------------------------------------------------------- ------------------------------------ Weather (Unaudited) Actual heating degree days 1,622 1,700 4,946 4,993 Normal heating degree days 1,729 1,729 4,908 4,908 1. Puget Sound Energy is the electric and natural gas utility subsidiary of Puget Energy. 2. Includes change in unbilled revenues. 3. Includes optimization transactions reported net in the income statement as required by EITF 02-03, effective after June 30, 2002. Prior periods have been reclassified to conform with the presentation. 4. Includes Conservation Trust collection and sales of non-core gas suppliers. 5. Quarterly data represents average served during December; Twelve months ended data represents average for the 12 months ended. PUGET ENERGY -- SEGMENT RESULTS (In thousands) Puget Sound Puget Energy Three months ended 12/31/02 (Unaudited) Energy InfrastruX Other(1) Total - ---------------------------------------------------------------------------------------------------------------------- Revenues $ 559,563 $ 90,273 $ 4,131 $ 653,967 Depreciation and amortization 54,073 4,118 57 58,248 Income taxes 23,632 189 1,107 24,928 Operating income 93,489 3,561 2,117 99,167 Interest charges, net of AFUDC -- 47,301 1,557 48,858 Net income 47,428 1,979 2,117 51,524 Goodwill, net -- -- 125,555 125,555 Total assets 5,657,491 5,208,487 319,248 129,756 - ---------------------------------------------------------------------------------------------------------------------- Three months ended 12/31/01 (Unaudited) - ---------------------------------------------------------------------------------------------------------------------- Revenues $ 623,673 $ 47,006 $ 2,384 $ 673,063 Depreciation and amortization 53,653 3,625 4 57,282 Income taxes 4,634 1,062 874 6,570 Operating income 53,485 380 889 54,754 Interest charges, net of AFUDC 48,467 1,144 - 49,611 Net income 7,968 (480) 778 8,266 - ---------------------------------------------------------------------------------------------------------------------- Twelve months ended 12/31/02 - ---------------------------------------------------------------------------------------------------------------------- Revenues $ 2,063,041 $ 319,528 $ 9,753 $2,392,322 Depreciation and amortization 228,743 215,097 13,426 220 Income taxes 50,600 6,703 1,957 59,260 Operating income 309,669 289,511 15,595 4,563 Interest charges, net of AFUDC -- 196,377 190,861 5,516 Net income 117,883 104,044 9,455 4,384 - ---------------------------------------------------------------------------------------------------------------------- Twelve months ended 12/31/01 Revenues $ 2,680,298 $ 173,786 $ 32,476 $2,886,560 Depreciation and amortization 217,540 208,705 8,820 15 Income taxes 68,005 2,956 8,877 79,838 Operating income 297,121 273,751 8,702 14,668 Interest charges, net of AFUDC 190,059 186,129 3,656 274 Net income 106,839 80,137 2,518 24,184 - ---------------------------------------------------------------------------------------------------------------------- Goodwill at 12/31/01 -- -- 102,151 102,151 Total assets at 12/31/01 5,546,977 5,178,601 229,125 139,251 - ---------------------------------------------------------------------------------------------------------------------- 1 Includes the non-regulated subsidiaries of Puget Sound Energy and miscellaneous holding company expenses. The principal non-regulated subsidiary of PSE is a real estate development company. PSE sold the assets of its software development subsidiary, ConneXt, Inc., in the third quarter of 2001. PUGET SOUND ENERGY - CAPITALIZATION (In thousands) At December 31 2002 2001 - ---------------------------------------------------------------------------------------------------------------------- Amount % Amount % - ---------------------------------------------------------------------------------------------------------------------- Short-term debt $ 30,340 0.7% $ 338,168 8.1% Long-term debt, including current maturities 53.0% 2,170,815 51.8% 2,093,832 Preferred Stock 2.6% 2.6% 103,162 110,662 Corporation obligated, mandatorily redeemable 7.6% 7.2% 300,000 300,000 securities of subsidiary trust holding solely junior subordinated debentures of the corporation Common Stock 36.1% 1,267,654 30.3% 1,426,121 - ---------------------------------------------------------------------------------------------------------------------- Total capitalization including short-term debt $ 3,953,455 100.0% $ 4,187,299 100.0% - ----------------------------------------------------------------------------------------------------------------------
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.
| PUGET ENERGY, INC. |
| PUGET SOUND ENERGY, INC. |
| /s/ James W. Eldredge |
| James W. Eldredge |
| Corporate Secretary and Chief Accounting Officer |