Pepco Holdings Reports Third-Quarter 2005 Earnings; Conference Call Scheduled |
Pepco Holdings, Inc. (NYSE: POM) today reported third quarter 2005 consolidated earnings of $170.1 million, or 90 cents per share, compared to $111.0 million, or 64 cents per share, in the third quarter of 2004. Excluding special items (as described below), earnings for the third quarter of 2005 would have been $137.7 million, or 73 cents per share, compared to $118.7 million, or 68 cents per share, in the third quarter of 2004. The weighted average shares outstanding for the third quarter of 2005 were 189.2 million compared to 175.2 million for the third quarter of 2004, which resulted in 7 cents per share of dilution in earnings for the current period. |
The earnings increase, excluding special items, for the third quarter of 2005 as compared to the 2004 quarter was driven primarily by higher power delivery sales resulting from warmer weather, higher earnings at Conectiv Energy and Pepco Energy Services driven by higher generation output, and lower interest expense. Partially offsetting these increases were lower Standard Offer Service margins due to increased customer migration. |
"Our third quarter results reflect the benefit of warmer weather impacting both the utility and competitive energy businesses. Each of our utilities set a record for peak electric usage as a result of the warmer weather. Our transmission and distribution systems handled the increase in load well, demonstrating our focus on reliability and PHI's commitment to invest in our core business," said Dennis R. Wraase, Chairman, President and Chief Executive Officer. "We continue to make significant progress towards our debt reduction goal. So far this year we have paid down about $245 million of debt, which brings our net debt reduction since 2003 to approximately $975 million. We are very pleased with the progress we have made to strengthen the balance sheet." |
For the nine months ended Sept. 30, 2005, consolidated earnings were $289.6 million, or $1.53 per share, compared to $252.6 million, or $1.46 per share, for the same period in the prior year. Excluding special items, earnings for the nine months ended Sept. 30, 2005 would have been $252.1 million, or $1.33 per share, compared to $239.2 |
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million, or $1.38 per share, for the first nine months of 2004. The weighted average shares outstanding for the nine months ended Sept. 30, 2005 were 188.8 million compared to 173.1 million for the same period in the prior year, which resulted in 14 cents per share of dilution in earnings for the current period. |
The increase in earnings, excluding special items, for the nine months ended Sept. 30, 2005 compared to the same period in the prior year was driven primarily by higher power delivery sales resulting from warmer weather, higher earnings at Pepco Energy Services driven by higher retail sales and generation output, and lower interest expense. Partially offsetting these increases were changes in estimated unbilled revenue recorded by Delmarva Power and Atlantic City Electric in the second quarter of 2005, lower Standard Offer Service margins due to increased customer migration, and lower earnings at Conectiv Energy primarily due to lower Full Requirements Load Service earnings. |
Highlights |
Operations |
· | Power Delivery electric sales were 15,358 gigawatt hours (Gwhs) in the third quarter of 2005 compared to 14,028 Gwhs for the same period last year. Cooling degree days increased by 33.9% for the three months ended Sept. 30, 2005 as compared to the same period in 2004. |
· | Conectiv Energy's total generating output was 2,382 Gwhs in the third quarter of 2005 compared to 1,220 Gwhs in the third quarter of 2004. The increase resulted primarily from warmer weather and load growth. |
· | Conectiv Energy's gross margin (defined as revenue less cost of goods sold) on merchant generation was $100.0 million in the third quarter of 2005, compared to $64.2 million in the third quarter of 2004. The increase resulted primarily from increased generating output. |
· | Conectiv Energy's gross margin on Full Requirements Load Service was $(11.1) million in the third quarter of 2005, compared to $16.5 million in the third quarter of 2004. The decrease was driven by higher energy costs used to supply the load. |
· | Pepco Energy Services had retail electricity sales of 3,743 Gwh in the third quarter of 2005, up from retail sales of 2,562 Gwh in the third quarter of 2004. This increase primarily reflects the acquisition of additional commercial and industrial customer loads. |
· | After-tax earnings of $13.2 million, or 7 cents per share, related to the impact of changes in local tax regulations that were retroactive to 2001; |
· | After-tax earnings of $8.6 million, or 5 cents per share, related to a gain on the condemnation settlement associated with the transfer of Vineland distribution assets; |
· | After-tax earnings of $6.6 million, or 4 cents per share, related to the disposition of a joint venture associated with the Vineland co-generation facility; and |
· | After-tax charges of $7.3 million, or 4 cents per share, related to the impairment of the Starpower investment. |
Reconciliation of GAAP Earnings to Earnings Excluding Special Items | | |
Net Earnings - Dollars in Millions | Three Months Ended Sept. 30, | | Nine Months Ended Sept. 30, |
| 2005 | 2004 | | 2005 | 2004 |
Reported (GAAP) Net Earnings | $170.1 | $ 111.0 | | $ 289.6 | $ 252.6 |
Special Items: | | | | | |
Accrual related to potential impact of IRS Revenue Ruling 2005-53 | 8.3 | - | | 8.3 | - |
Conectiv Bethlehem term loan buy down | - | 7.7 | | - | 7.7 |
Starpower investment impairment | - | - | | - | 7.3 |
Gain on sale of Vineland co-generation facility | - | - | | - | (6.6) |
Gain on sale of Vineland distribution assets | - | - | | - | (8.6) |
Local tax benefit - retroactive change in regulations | - | - | | - | (13.2) |
New Jersey base rate case settlement | - | - | | (5.1) | - |
Gain on sale of Buzzard Point non-utility land | (40.7) | - | | (40.7) | - |
| | | | | |
Net Earnings, Excluding Special Items | $137.7 | $ 118.7 | | $ 252.1 | $ 239.2 |
Earnings per Share | Three Months Ended Sept. 30, | | Nine Months Ended Sept. 30, |
| 2005 | 2004 | | 2005 | 2004 |
Reported (GAAP) Earnings per Share | $ 0.90 | $ 0.64 | | $ 1.53 | $ 1.46 |
Special Items: | | | | | |
Accrual related to potential impact of IRS Revenue Ruling 2005-53 | 0.05 | - | | 0.05 | - |
Conectiv Bethlehem term loan buy down | - | 0.04 | | - | 0.04 |
Starpower investment impairment | - | - | | - | 0.04 |
Gain on sale of Vineland co-generation facility | - | - | | - | (0.04) |
Gain on sale of Vineland distribution assets | - | - | | - | (0.05) |
Local tax benefit - retroactive change in regulations | - | - | | - | (0.07) |
New Jersey base rate case settlement | - | - | | (0.03) | - |
Gain on sale of Buzzard Point non-utility land | (0.22) | - | | (0.22) | - |
| | | | | |
Earnings per Share, Excluding Special Items | $ 0.73 | $ 0.68 | | $ 1.33 | $ 1.38 |
CONFERENCE CALL FOR INVESTORS Pepco Holdings Inc. will host a conference call to discuss third quarter results on Friday, Nov. 4th at 10:00 a.m. E.S.T. Investors, members of the media and other interested persons may access the conference call on the Internet athttp://www.pepcoholdings.com/investors or by calling 1-800-798-2801 before 9:55 a.m. The pass code for the call is 80275357. International callers may access the call by dialing 1-617-614-6205, using the same pass code, 80275357. An on-demand replay will be available for seven days following the call. To hear the replay, dial 1-888-286-8010 and enter pass code 88221069. International callers may access the replay by dialing 1-617-801-6888 and entering the same pass code 88221069. An audio archive will be available at PHI's Web site,http://www.pepcoholdings.com/investors/index_financialrelease.html. |
Note: If any non-GAAP financial information (as defined by the Securities and Exchange Commission in Regulation G) is used during the quarterly earnings conference call, a presentation of the most directly comparable GAAP measure and a reconciliation of the differences will be available athttp://www.pepcoholdings.com/investors/index_financialrelease.html. |
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About PHI: Pepco Holdings, Inc., headquartered in Washington, D.C., delivers electricity and natural gas to about 1.8 million customers in Delaware, the District of Columbia, Maryland, New Jersey and Virginia, through its subsidiaries Pepco, Delmarva Power and Atlantic City Electric. PHI also provides competitive wholesale generation services through Conectiv Energy and retail energy products and services through Pepco Energy Services. |
Forward-Looking Statements:Except for historical statements and discussions, the statements in this news release constitute "forward-looking statements" within the meaning of federal securities law. These statements contain management's beliefs based on information currently available to management and on various assumptions concerning future events. Forward-looking statements are not a guarantee of future performance or events. They are subject to a number of uncertainties and other factors, many of which are outside the company's control. Factors that could cause actual results to differ materially from those in the forward-looking statements herein include general economic, business and financing conditions; availability and cost of capital; changes in laws, regulations or regulatory policies; weather conditions; competition; governmental actions; and other presently unknown or unforeseen factors. These uncertainties and factors could cause actual results to differ materially from such statements. PHI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This information is presented solely to provide additional information to further understand the results and prospects of PHI. |
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SELECTED FINANCIAL INFORMATION
|
Pepco Holdings, Inc. Earnings Per Share Variance 2005 / 2004 |
| 3rd Quarter |
| | Competitive Energy | | | |
| Power Delivery | Conectiv Energy | Pepco Energy Services | Other Non Regulated | Corporate & Other | Total PHI |
2004 Net Income/(Loss) (GAAP) 1/ | $ 0.55 | $ 0.11 | $ 0.01 | $ 0.05 | $ (0.08) | $ 0.64 |
| | | | | | |
2004 Special Items 2/ | | | | | | |
· CBI Term Loan Buydown | - | 0.04 | - | - | - | 0.04 |
2004 Net Income/(Loss), excluding Special Items | 0.55 | 0.15 | 0.01 | 0.05 | (0.08) | 0.68 |
| | | | | | |
Change from 2004 Net Income/(Loss), excluding Special Items | | | | | | |
Regulated Operations | | | | | | |
· Revenue | - Customer Mix, net | 0.02 | - | - | - | - | 0.02 |
| - Weather (estimate) 3/ | 0.10 | - | - | - | - | 0.10 |
| - Standard Offer Service Margin | (0.04) | - | - | - | - | (0.04) |
· Operation & Maintenance | (0.02) | - | - | - | - | (0.02) |
· Gain on sale of property in 2005 | 0.01 | - | - | - | - | 0.01 |
· Other, net | 0.01 | - | - | - | - | 0.01 |
Conectiv Energy | | | | | | |
· Margins (operating revenue less cost of goods sold) | | | | | | |
| - Merchant Generation | - | 0.12 | - | - | - | 0.12 |
| - Full Requirements Load Service | - | (0.09) | - | - | - | (0.09) |
· Operating costs, net | - | (0.02) | - | - | - | (0.02) |
Pepco Energy Services | | | | | | |
· Margins - primarily higher power plant output | - | - | 0.03 | - | - | 0.03 |
Other Non-Regulated | | | | | | |
· 2004 gain on sale of aircraft leases | - | - | - | (0.01) | - | (0.01) |
· Other, net - primarily 2004 financial investing activities | - | - | - | (0.01) | - | (0.01) |
Corporate & Other | - | - | - | - | (0.02) | (0.02) |
Capital Costs | - | - | - | 0.01 | 0.03 | 0.04 |
Dilution | (0.06) | (0.01) | - | - | - | (0.07) |
2005 Net Income/(Loss), excluding Special Items | 0.57 | 0.15 | 0.04 | 0.04 | (0.07) | 0.73 |
| | | | | | |
2005 Special Items 2/ | | | | | | |
· Gain on sale of Buzzard Point land | 0.22 | - | - | - | - | 0.22 |
· IRS Revenue Ruling 2005-53 (Mixed Service Costs) | (0.05) | - | - | - | - | (0.05) |
| | | | | | |
2005 Net Income/(Loss) (GAAP) 4/ | $ 0.74 | $ 0.15 | $ 0.04 | $ 0.04 | $ (0.07) | $ 0.90 |
SELECTED FINANCIAL INFORMATION
|
Pepco Holdings, Inc. Earnings Per Share Variance 2005 / 2004 |
| Year-to-Date September |
| | Competitive Energy | | | |
| Power Delivery | Conectiv Energy | Pepco Energy Services | Other Non Regulated | Corporate & Other | Total PHI |
2004 Net Income/(Loss) (GAAP) 1/ | $ 1.21 | $ 0.28 | $ 0.04 | $ 0.21 | $ (0.28) | $ 1.46 |
| | | | | | |
2004 Special Items 2/ | | | | | | |
· Local Tax Benefit | - | - | (0.01) | (0.05) | (0.01) | (0.07) |
· Gain on Vineland distribution assets | (0.05) | - | - | - | - | (0.05) |
· Gain on disposition associated with Vineland co-generation facility | - | (0.04) | - | - | - | (0.04) |
· Starpower Impairment | - | - | - | 0.04 | - | 0.04 |
· CBI Term Loan Buydown | - | 0.04 | - | - | - | 0.04 |
2004 Net Income/(Loss), excluding Special Items | 1.16 | 0.28 | 0.03 | 0.20 | (0.29) | 1.38 |
| | | | | | |
Change from 2004 Net Income/(Loss), excluding Special Items | | | | | | |
Regulated Operations | | | | | | |
· Revenue - | - Delmarva Power/Atlantic City Electric Unbilled Revenue change in estimation process | (0.04) | - | - | - | - | (0.04) |
| - Customer Mix, Transmission, net | 0.05 | - | - | - | - | 0.05 |
| - Weather (estimate) 3/ | 0.06 | - | - | - | - | 0.06 |
| - Standard Offer Service Margin | (0.04) | - | - | - | - | (0.04) |
· Gain on sale of property in 2005 | 0.02 | - | - | - | - | 0.02 |
· Gain on sale of property in 2004 | (0.02) | - | - | - | - | (0.02) |
· Operation & Maintenance | (0.02) | - | - | - | - | (0.02) |
· Other, net | (0.01) | - | - | - | - | (0.01) |
Conectiv Energy | | | | | | |
· Margins (operating revenue less cost of goods sold) | | | | | | |
| - Merchant Generation | - | 0.12 | - | - | - | 0.12 |
| - Full Requirements Load Service | - | (0.11) | - | - | - | (0.11) |
| - Other Power, Oil & Gas Marketing (including 2004 mark-to-market gain) | - | (0.03) | - | - | - | (0.03) |
Pepco Energy Services | | | | | | |
· Margins | - Primarily retail electric commodity business | - | - | 0.05 | - | - | 0.05 |
| - Primarily higher power plant margins | - | - | 0.02 | - | - | 0.02 |
· Other, net | - | - | 0.01 | - | - | 0.01 |
Other Non-Regulated | | | | | | |
· Gain on sale of 2004 aircraft leases | - | - | - | (0.03) | - | (0.03) |
· Financing and investing, primarily related to 2004 activity | - | - | - | (0.03) | - | (0.03) |
· Primarily sale of energy investment | - | - | - | 0.03 | - | 0.03 |
Corporate & Other | - | - | - | - | (0.03) | (0.03) |
Capital Costs | 0.02 | - | - | - | 0.07 | 0.09 |
Dilution | (0.11) | (0.02) | (0.01) | (0.01) | 0.01 | (0.14) |
2005 Net Income/(Loss), excluding Special Items | 1.07 | 0.24 | 0.10 | 0.16 | (0.24) | 1.33 |
| | | | | | |
2005 Special Items 2/ | | | | | | |
· ACE - New Jersey Base Rate Case Settlement | 0.03 | - | - | - | - | 0.03 |
· Gain on sale of Buzzard Point land | 0.22 | - | - | - | - | 0.22 |
· IRS Revenue Ruling 2005-53 (Mixed Service Costs) | (0.05) | - | - | - | - | (0.05) |
| | | | | | |
2005 Net Income/(Loss) (GAAP) 4/ | $ 1.27 | $ 0.24 | $ 0.10 | $ 0.16 | $ (0.24) | $ 1.53 |
(a) | Includes inter-segment eliminations and unallocated Pepco Holdings' (parent company) capital costs, such as acquisition financing costs, and the depreciation and amortization related to purchase accounting adjustments for the fair value of non-regulated Conectiv assets and liabilities as of August 1, 2002. The "total assets" line of this column includes Pepco Holdings' goodwill balance. |
(b) | Power Delivery purchased electric energy, electric capacity and natural gas from Conectiv Energy in the amount of $440.9 million for the nine months ended September 30, 2005. |
(c) | Includes $8.3 million in income tax expense related to IRS Revenue Ruling 2005-53. |
(d) | Relates to ACE's electric distribution rate case settlement that was accounted for in the first quarter of 2005. This resulted in ACE's reversal of $9.0 million in after-tax accruals related to certain deferred costs that are now deemed recoverable. This amount is classified as extraordinary since the original accrual was part of an extraordinary charge in conjunction with the accounting for competitive restructuring in 1999. |
(e) | Includes after-tax gain of $40.7 million from sale of non-utility land owned by Pepco at Buzzard Point. |
(a) | Includes inter-segment eliminations and unallocated Pepco Holdings' (parent company) capital costs, such as acquisition financing costs, and the depreciation and amortization related to purchase accounting adjustments for the fair value of non-regulated Conectiv assets and liabilities as of August 1, 2002. The "total assets" line of this column includes Pepco Holdings' goodwill balance. |
(b) | Power Delivery purchased electric energy, electric capacity and natural gas from Conectiv Energy in the amount of $456.0 million for the nine months ended September 30, 2004. |
(c) | In February 2004, a local jurisdiction issued final consolidated tax return regulations, which were retroactive to 2001. Under these regulations, Pepco Holdings (parent company) and other affiliated companies doing business in this location now have the necessary guidance to file a consolidated income tax return. This allows Pepco Holdings' subsidiaries with taxable losses to utilize those losses against tax liabilities of Pepco Holdings' companies with taxable income. During the first quarter of 2004, Pepco Holdings and its subsidiaries recorded the impact of the new regulations of $13.2 million for 2001 through 2003. |
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PEPCO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) |
| Three Months Ended September 30, | Nine Months Ended September 30, | |
| | 2005 | | | 2004 | | | 2005 | | | 2004 | | |
| | (Millions, except earnings per share) | |
| | | | | | | | | | | | | |
Operating Revenues | | | | | | | | | | | | | |
Power Delivery | $ | 1,503.4 | | $ | 1,314.0 | | $ | 3,582.3 | | $ | 3,426.7 | | |
Competitive Energy | | 967.9 | | | 710.9 | | | 2,364.7 | | | 2,007.3 | | |
Other | | 17.4 | | | 21.6 | | | 58.6 | | | 68.1 | | |
Total Operating Revenues | | 2,488.7 | | | 2,046.5 | | | 6,005.6 | | | 5,502.1 | | |
| | | | | | | | | | | | | |
Operating Expenses | | | | | | | | | | | | | |
Fuel and purchased energy | | 1,539.7 | | | 1,197.3 | | | 3,635.2 | | | 3,220.4 | | |
Other services cost of sales | | 169.7 | | | 155.6 | | | 522.8 | | | 483.8 | | |
Other operation and maintenance | | 207.4 | | | 192.5 | | | 586.7 | | | 575.2 | | |
Depreciation and amortization | | 109.1 | | | 113.7 | | | 316.6 | | | 335.9 | | |
Other taxes | | 98.2 | | | 91.3 | | | 256.3 | | | 227.5 | | |
Deferred electric service costs | | 63.1 | | | 18.7 | | | 63.9 | | | 27.7 | | |
Impairment loss | | 3.3 | | | - | | | 3.3 | | | - | | |
Gain on sale of assets | | (72.3) | | | (2.1) | | | (76.6) | | | (28.9) | | |
Total Operating Expenses | | 2,118.2 | | | 1,767.0 | | | 5,308.2 | | | 4,841.6 | | |
| | | | | | | | | | | | | |
Operating Income | | 370.5 | | | 279.5 | | | 697.4 | | | 660.5 | | |
| | | | | | | | | | | | | |
Other Income (Expenses) | | | | | | | | | | | | | |
Interest and dividend income | | 4.2 | | | 1.2 | | | 7.9 | | | 8.0 | | |
Interest expense | | (85.2) | | | (104.5) | | | (252.7) | | | (289.2) | | |
(Loss) income from equity investments | | (.2) | | | 1.6 | | | (3.2) | | | 14.4 | | |
Impairment loss on equity investments | | - | | | - | | | - | | | (11.2) | | |
Other income | | 11.5 | | | 6.8 | | | 40.9 | | | 17.2 | | |
Other expenses | | (1.9) | | | (1.4) | | | (5.3) | | | (3.3) | | |
Total Other Expenses, Net | | (71.6) | | | (96.3) | | | (212.4) | | | (264.1) | | |
| | | | | | | | | | | | | |
Preferred Stock Dividend Requirements of Subsidiaries | | .6 | | | .7 | | | 1.9 | | | 2.2 | | |
| | | | | | | | | | | | | |
Income Before Income Tax Expense | | 298.3 | | | 182.5 | | | 483.1 | | | 394.2 | | |
| | | | | | | | | | | | | |
Income Tax Expense | | 128.2 | | | 71.5 | | | 202.5 | | | 141.6 | | |
| | | | | | | | | | | | | |
Income Before Extraordinary Item | | 170.1 | | | 111.0 | | | 280.6 | | | 252.6 | | |
| | | | | | | | | | | | | |
Extraordinary Item (net of tax of $6.2 million) | | - | | | - | | | 9.0 | | | - | | |
| | | | | | | | | | | | | |
Net Income | | 170.1 | | | 111.0 | | | 289.6 | | | 252.6 | | |
| | | | | | | | | | | | | |
Retained Earnings at Beginning of Period | | 888.9 | | | 836.7 | | | 863.7 | | | 781.0 | | |
| | | | | | | | | | | | | |
Dividends on Common Stock | | (47.2) | | | (43.1) | | | (141.5) | | | (129.0) | | |
| | | | | | | | | | | | | |
Retained Earnings at End of Period | $ | 1,011.8 | | $ | 904.6 | | $ | 1,011.8 | | $ | 904.6 | | |
| | | | | | | | | | | | | |
Share Information | | | | | | | | | | | | | |
Basic weighted average shares outstanding | | 189.2 | | | 175.2 | | | 188.8 | | | 173.1 | | |
Diluted weighted average shares outstanding | | 189.3 | | | 175.2 | | | 188.9 | | | 173.1 | | |
Basic and Diluted earnings per share of common stock: | | | | | | | | | | | | | |
Before extraordinary item | $ | .90 | | $ | .64 | | $ | 1.48 | | $ | 1.46 | | |
Extraordinary item | | - | | | - | | | .05 | | | - | | |
Total | $ | .90 | | $ | .64 | | $ | 1.53 | | $ | 1.46 | | |
PEPCO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) |
| | September 30, | December 31, | |
ASSETS | | | 2005 | | | 2004 | | |
| | (Millions of Dollars) | |
CURRENT ASSETS | | | | | | | | |
Cash and cash equivalents | | $ | 249.7 | | $ | 29.6 | | |
Restricted cash | | | 30.6 | | | 42.0 | | |
Accounts receivable, less allowance for uncollectible accounts of $42.9 million and $43.7 million, respectively | | | 1,389.0 | | | 1,126.9 | | |
Fuel, materials and supplies - at average cost | | | 291.5 | | | 268.4 | | |
Unrealized gains - derivative contracts | | | 200.0 | | | 90.3 | | |
Prepaid expenses and other | | | 135.1 | | | 119.6 | | |
Total Current Assets | | | 2,295.9 | | | 1,676.8 | | |
| | | | | | | | |
INVESTMENTS AND OTHER ASSETS | | | | | | | | |
Goodwill | | | 1,428.0 | | | 1,430.5 | | |
Regulatory assets | | | 1,205.9 | | | 1,335.4 | | |
Investment in finance leases held in trust | | | 1,277.9 | | | 1,218.7 | | |
Prepaid pension expense | | | 153.1 | | | 165.7 | | |
Other | | | 579.9 | | | 466.1 | | |
Total Investments and Other Assets | | | 4,644.8 | | | 4,616.4 | | |
| | | | | | | | |
PROPERTY, PLANT AND EQUIPMENT | | | | | | | | |
Property, plant and equipment | | | 11,292.3 | | | 11,045.2 | | |
Accumulated depreciation | | | (4,009.8) | | | (3,957.2) | | |
Net Property, Plant and Equipment | | | 7,282.5 | | | 7,088.0 | | |
| | | | | | | | |
TOTAL ASSETS | | $ | 14,223.2 | | $ | 13,381.2 | | |
PEPCO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) |
| | September 30, | December 31, | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | 2005 | | | 2004 | | |
| (Millions of dollars, except shares) | |
| | | | | | | |
CURRENT LIABILITIES | | | | | | | |
Short-term debt | $ | 652.8 | | $ | 836.0 | | |
Accounts payable and accrued liabilities | | 950.6 | | | 663.5 | | |
Capital lease obligations due within one year | | 5.1 | | | 4.9 | | |
Taxes accrued | | 230.3 | | | 59.8 | | |
Interest accrued | | 66.1 | | | 90.1 | | |
Other | | 398.9 | | | 320.3 | | |
Total Current Liabilities | | 2,303.8 | | | 1,974.6 | | |
| | | | | | | |
DEFERRED CREDITS | | | | | | | |
Regulatory liabilities | | 533.1 | | | 391.9 | | |
Income taxes | | 2,053.0 | | | 1,981.8 | | |
Investment tax credits | | 52.2 | | | 55.7 | | |
Other post-retirement benefit obligation | | 287.6 | | | 279.5 | | |
Other | | 304.3 | | | 203.7 | | |
Total Deferred Credits | | 3,230.2 | | | 2,912.6 | | |
| | | | | | | |
LONG-TERM LIABILITIES | | | | | | | |
Long-term debt | | 4,322.9 | | | 4,362.1 | | |
Transition Bonds issued by ACE Funding | | 503.2 | | | 523.3 | | |
Long-term project funding | | 72.4 | | | 65.3 | | |
Capital lease obligations | | 119.2 | | | 122.1 | | |
Total Long-Term Liabilities | | 5,017.7 | | | 5,072.8 | | |
| | | | | | | |
COMMITMENTS AND CONTINGENCIES | | | | | | | |
| | | | | | | |
PREFERRED STOCK OF SUBSIDIARIES | | | | | | | |
Serial preferred stock | | 27.0 | | | 27.0 | | |
Redeemable serial preferred stock | | 27.9 | | | 27.9 | | |
Total Preferred Stock of Subsidiaries | | 54.9 | | | 54.9 | | |
| | | | | | | |
SHAREHOLDERS' EQUITY | | | | | | | |
Common stock, $.01 par value, authorized 400,000,000 shares, 189,512,259 shares and 188,327,510 shares outstanding, respectively | | 1.9 | | | 1.9 | | |
Premium on stock and other capital contributions | | 2,593.0 | | | 2,566.2 | | |
Capital stock expense | | (13.5) | | | (13.5) | | |
Accumulated other comprehensive income (loss) | | 23.4 | | | (52.0) | | |
Retained earnings | | 1,011.8 | | | 863.7 | | |
Total Shareholders' Equity | | 3,616.6 | | | 3,366.3 | | |
| | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 14,223.2 | | $ | 13,381.2 | | |
(a) | Consists of Serial Preferred Stock and Redeemable Serial Preferred Stock issued by subsidiaries of PHI. |
(b) | Consists of first mortgage bonds, medium term notes, other long-term debt, current maturities of long-term debt, and Variable Rate Demand Bonds. Excludes capital lease obligations, transition bonds issued by ACE Funding, and project funding of Pepco Energy Services secured by customer accounts receivable and the current portions of these obligations. |
(c) | Excludes current maturities of long-term debt, capital lease obligations due within one year, and Variable Rate Demand Bonds (VRDB). In accordance with GAAP, the VRDB are included in short-term debt on the Balance Sheet of PHI because they are due on demand by the bondholder. Bonds submitted for purchase are remarketed by a remarketing agent on a best efforts basis and the remarketing resets the interest rate at market rates. However, PHI views the VRDBs as long-term financing in effect because the maturity dates range from 2009 to 2031, and PHI expects the remarketing to be successful due to the creditworthiness of the issuers. |
POWER DELIVERY SALES AND REVENUES |
| Three Months Ended September 30, | Nine Months Ended September 30, | |
Power Delivery Sales (Gigawatt Hours) | | 2005 | | | 2004 | | | 2005 | | | 2004 | | |
| | | |
Regulated T&D Electric Sales | | | | | | | | | | | | | |
Residential | | 5,746 | | | 5,036 | | | 14,146 | | | 13,945 | | |
Commercial | | 8,401 | | | 7,795 | | | 21,877 | | | 21,595 | | |
Industrial | | 1,152 | | | 1,137 | | | 3,273 | | | 3,359 | | |
Other | | 59 | | | 60 | | | 186 | | | 190 | | |
Total Regulated T&D Electric Sales | | 15,358 | | | 14,028 | | | 39,482 | | | 39,089 | | |
| | | | | | | | | | | | | |
Default Electricity Supply Sales | | | | | | | | | | | | | |
Residential | | 5,602 | | | 4,776 | | | 13,699 | | | 13,152 | | |
Commercial | | 4,223 | | | 5,059 | | | 11,300 | | | 14,681 | | |
Industrial | | 556 | | | 558 | | | 1,536 | | | 1,761 | | |
Other | | 32 | | | 58 | | | 128 | | | 171 | | |
Total Default Electricity Supply Sales | | 10,413 | | | 10,451 | | | 26,663 | | | 29,765 | | |
| | | | | | | | | | | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, | |
Power Delivery Electric Revenue ($ in Millions) | | 2005 | | | 2004 | | | 2005 | | | 2004 | | |
| | | |
Regulated T&D Electric Revenue | | | | | | | | | | | | | |
Residential | $ | 207.2 | | | 186.3 | | | 486.9 | | | 477.9 | | |
Commercial | | 223.0 | | | 203.8 | | | 552.3 | | | 533.9 | | |
Industrial | | 9.8 | | | 9.7 | | | 28.1 | | | 28.0 | | |
Other (Includes PJM) | | 63.6 | | | 58.3 | | | 181.9 | | | 179.3 | | |
Total Regulated T&D Electric Revenue | $ | 503.6 | | | 458.1 | | | 1,249.2 | | | 1,219.1 | | |
| | | | | | | | | | | | | |
Default Supply Revenue | | | | | | | | | | | | | |
Residential | $ | 425.7 | | | 346.8 | | | 920.6 | | | 790.6 | | |
Commercial | | 317.1 | | | 348.7 | | | 738.9 | | | 834.1 | | |
Industrial | | 38.7 | | | 38.1 | | | 100.0 | | | 110.2 | | |
Other (Includes PJM) | | 163.7 | | | 81.1 | | | 329.6 | | | 248.3 | | |
Total Default Supply Revenue | $ | 945.2 | | | 814.7 | | | 2,089.1 | | | 1,983.2 | | |
| | | | | | | | | | | | | |
Other Electric Revenue | $ | 18.5 | | | 16.4 | | | 48.7 | | | 50.4 | | |
| | | | | | | | | | | | | |
Total Electric Operating Revenue | $ | 1,467.3 | | | 1,289.2 | | | 3,387.0 | | | 3,252.7 | | |
|
| Three Months Ended September 30, | Nine Months Ended September 30, | |
Power Delivery Gas Sales and Revenue ($ in Millions) | | 2005 | | | 2004 | | | 2005 | | | 2004 | | |
| | | |
Regulated Gas Sales (Bcf) | | | | | | | | | | | | | |
Residential | | .5 | | | .5 | | | 5.9 | | | 6.2 | | |
Commercial | | .5 | | | .5 | | | 3.9 | | | 3.9 | | |
Industrial | | .2 | | | .2 | | | .7 | | | .8 | | |
Transportation andOther | | 1.0 | | | 1.0 | | | 4.1 | | | 4.5 | | |
Total Regulated Gas Sales | | 2.2 | | | 2.2 | | | 14.6 | | | 15.4 | | |
| | | | | | | | | | | | | |
Regulated Gas Revenue | | | | | | | | | | | | | |
Residential | $ | 8.7 | | | 7.8 | | | 85.2 | | | 75.3 | | |
Commercial | | 6.4 | | | 5.5 | | | 49.8 | | | 42.2 | | |
Industrial | | 1.7 | | | 1.7 | | | 7.3 | | | 6.2 | | |
Transportation and Other | | 1.0 | | | 1.0 | | | 3.4 | | | 3.2 | | |
Total Regulated Gas Revenue | $ | 17.8 | | | 16.0 | | | 145.7 | | | 126.9 | | |
| | | | | | | | | | | | | |
Other Gas Revenue | $ | 18.3 | | | 8.8 | | | 49.6 | | | 47.1 | | |
| | | | | | | | | | | | | |
Total Gas Operating Revenue | $ | 36.1 | | | 24.8 | | | 195.3 | | | 174.0 | | |
| | | | | | | | | | | | | |
Total Power Delivery Operating Revenue | $ | 1,503.4 | | | 1,314.0 | | | 3,582.3 | | | 3,426.7 | | |
16 (more) ___________________________________________________________________________________________________________ |
CONECTIV ENERGY
|
| Three Months Ended |
| September 30, 2005 | June 30, 2005 | March 31, 2005 | December 31, 2004 | September 30, 2004 |
| | | | | |
Gigawatt Hour Supply (Gwh) | | | | | |
Merchant Generation output sold into market | 2,382 | 971 | 1,275 | 1,203 | 1,220 |
Full Requirements Load Service | 4,275 | 3,308 | 3,281 | 2,951 | 3,514 |
Total Sales | 6,657 | 4,279 | 4,556 | 4,154 | 4,734 |
| | | | | |
Around-the-clock Market Prices ($/Mwh) PJM - East (1) | $ 83.24 | $ 49.27 | $ 53.51 | $ 45.38 | $ 45.52 |
| | | | | |
On Peak Market Prices ($/Mwh) PJM - East (1) | $ 108.62 | $ 63.82 | $ 62.53 | $ 53.36 | $ 56.67 |
| | | | | |
Gas Price - M3 (Market Area) ($/Mmbtu) (1) | $ 10.43 | $ 7.44 | $ 7.83 | $ 6.84 | $ 5.84 |
| | | | | |
Merchant Generation Margin per Mwh | | | | | |
(Revenue Less Cost of Goods Sold $/Mwh) | $ 42.0 | $ 57.4 | $ 43.1 | $ 55.4 | $ 52.6 |
| | | | | |
Merchant Generation Margin Key Drivers: | | | | | |
(Percentage of Total) (2) | | | | | |
West to East Hub Congestion | 26% | 2% | 11% | 9% | 8% |
Power & Fuel Hedges | -64% | 8% | -5% | 18% | 23% |
Ancillary Services & Hourly Flexibility Premium | 10% | 27% | 30% | 17% | 17% |
Fuel Switching | 7% | 3% | 11% | 15% | 9% |
PJM Capacity (ICAP) | 8% | 9% | 9% | 7% | 12% |
Energy Spark Spreads | 113% | 51% | 44% | 34% | 31% |
| | | | | |
Note: (1) Daily average. (2) Estimate. | | | | | |
CONECTIV ENERGY - (continued) |
Operating Summary
($ in millions) | Three Months Ended September 30, | Nine Months Ended September 30, |
| 2005 | | 2004 | 2005 | | 2004 |
| | | | | | |
Gigawatt Hour Supply (Gwh) | | | | | | |
Merchant Generation output sold into market | 2,382 | (2) | 1,220 | 4,628 | (2) | 3,959 |
Full Requirements Load Service (1) | 4,275 | (3) | 3,514 | 10,864 | (3) | 12,292 |
Total Sales | 6,657 | | 4,734 | 15,492 | | 16,251 |
| | | | | | |
Operating Revenue: | | | | | | |
Merchant Generation | $ 267.8 | (2) | $ 229.2 | $ 511.3 | (2) | $ 461.0 |
Full Requirements Load Service (1) | 252.1 | (3) | 225.8 | 633.2 | (3) | 774.7 |
Other Power, Oil, and Gas Marketing | 300.1 | | 193.9 | 769.1 | | 566.4 |
Total | 820.0 | | 648.9 | 1,913.6 | | 1,802.1 |
| | | | | | |
Cost of Goods Sold: | | | | | | |
Merchant Generation | 167.8 | | 165.0 | 300.7 | | 286.7 |
Full Requirements Load Service (1) | 263.2 | | 209.3 | 643.1 | | 752.6 |
Other Power, Oil, and Gas Marketing | 300.8 | | 185.9 | 769.7 | | 554.2 |
Total | 731.8 | | 560.2 | 1,713.5 | | 1,593.5 |
| | | | | | |
Revenue Less Cost of Goods Sold Detail: | | | | | | |
Merchant Generation | 100.0 | (2) | 64.2 | 210.6 | (2) | 174.3 |
Full Requirements Load Service (1) | (11.1) | (3) | 16.5 | (9.9) | (3) | 22.1 |
Other Power, Oil, and Gas Marketing | (0.7) | (4) | 8.0 | (0.6) | (4) | 12.2 |
Total | 88.2 | | 88.7 | 200.1 | | 208.6 |
| | | | | | |
Operating and Maintenance Expenses | 28.7 | (5) | 25.0 | 74.3 | (5) | 72.1 |
Depreciation | 8.7 | (6) | 11.3 | 31.5 | (6) | 33.7 |
Taxes Other Than Income Taxes | 0.8 | | 0.3 | 2.1 | | 0.9 |
Other Operating Expenses | 38.2 | | 36.6 | 107.9 | | 106.7 |
| | | | | | |
Operating Income | $ 50.0 | | $ 52.1 | $ 92.2 | | $ 101.9 |
Notes: |
(1) | Since the second quarter 2005, Conectiv Energy has shown all of its Full Requirements Load contracts in the same activity line to better reflect how management views and manages this business. In previous quarters, the POLR load contract was shown separately and the other Full Requirement Load Contracts were included in the Other Power, Oil and Gas Marketing activity. All previous quarters have been updated to reflect this change. |
(2) | Substantially higher generation output due to warmer weather and load growth resulted in higher merchant generation margins. The higher margins were partially offset by negative hedge results during the quarter. For the nine-month period in 2005, higher June through September output and generation margins due to warmer weather and load growth were partially offset by lower output and margins in April and May caused by milder weather and higher fuel prices. |
(3) | Higher Full Requirements Load Service sales resulted from a net increase in load contracts and warmer weather during the third quarter of 2005. For the nine-month period in 2005, Full Requirements Load Service sales were down due to the termination of default service in Maryland in June 2004, partially offset by new SOS and municipal contracts. Lower Full Requirements Load Service margins resulted from higher fuel and energy prices. Full Requirements Load Service is hedged by both contract purchases with third parties and by Conectiv Energy Generation. Conectiv Energy Generation is transfer priced at the PJM price for each hour, multiplied by the Mwhs required by the Full Requirements Load (after reducing the load by the contract purchases). This transfer pricing mechanism subjects the Full Requirements Load Service to some energy price volatility but does provide a partial hedge for the Merchant Generation output. |
(4) | Other Power, Oil and Gas Marketing margins decreased primarily due to a substantial coal contract gain in 2004 and also due to lower wholesale oil marketing results. |
(5) | Higher operating expenses due to a $3.3 million goodwill adjustment related to a small oil marketing investment. |
(6) | Lower depreciation expense due to an adjustment to reflect the results of a recently completed asset life study which increased the estimated remaining life of the power plants. |
18 (more) ___________________________________________________________________________________________________________
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