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NEWS RELEASE | 701 Ninth Street NW Washington, DC 20068 www.pepcoholdings.com NYSE: POM |
FOR IMMEDIATE RELEASE October 29, 2010 | Media Contact: Robert Hainey 202-872-2680 Investor Contact: Donna Kinzel 302-429-3004 |
Pepco Holdings Reports Third-Quarter 2010 Financial Results;
Raises Full-Year 2010 Earnings Guidance
Pepco Holdings, Inc. (NYSE: POM) today reported third quarter 2010 earnings from continuing operations of $21 million, or 9 cents per share, compared to $104 million, or 47 cents per share, in the third quarter of 2009. Excluding special items (as described below under the heading “Special Items”), earnings from continuing operations for the third quarter of 2010, would have been $116 million, or 52 cents per share compared to $77 million, or 35 cents per share, for the third quarter of 2009. The weighted average number of basic shares outstanding for the third quarter of 2010 was 224 million compared to 221 million for the third quarter of 2009.
The increase in earnings from continuing operations in the third quarter of 2010, as compared to the 2009 quarter, excluding special items, was driven by higher distribution revenue (primarily due to higher sales caused by warmer weather as well as higher distribution rates in certain jurisdictions), higher transmission revenue (primarily due to higher transmission rates), lower interest expense (primarily due to the redemption of parent company debt with the proceeds from the sale of the Conectiv Energy wholesale generation business), and favorable income tax adjustments.
“Our earnings from continuing operations for the quarter reflect strong Power Delivery results driven by our infrastructure investments, regulatory outcomes, and the impact of hot summer weather on electric distribution sales. Lower interest expense also contributed to higher earnings,” said Joseph M. Rigby, Chairman, President and Chief Executive Officer. “The pay down of Pepco Holdings debt with the proceeds from the Conectiv Energy transaction lowered interest expense and strengthened our balance sheet.” Rigby added, “During the quarter, we reached key milestones for several significant projects. The PJM Board reaffirmed the need for our Mid-Atlantic Power Pathway transmission project with a new completion date of 2015, and P epco received approval from the Maryland Public Service Commission to proceed with the deployment of advanced metering infrastructure. We also initiated our enhanced reliability plan in our Pepco region, with our other regions soon to follow. Projects such as these are important components of our strategy to provide value to our customers and investors.”
For the nine months ended September 30, 2010, earnings from continuing operations were $125 million, or 56 cents per share, compared to $184 million, or 84 cents per share, for the same period in the prior year. Excluding special items (as described below under the heading “Special Items”), earnings from continuing operations for the nine months ended September 30, 2010, would have been $220 million, or 99 cents per share, compared to $149 million, or 68 cents per share, for the first nine months of 2009. The weighted average number of basic shares outstanding for the nine months ended September 30, 2010 was 223 million compared to 220 million for the same period in the prior year.
The increase in earnings from continuing operations for the nine months ended September 30, 2010, compared to earnings for the same period in the prior year, excluding special items, was driven by higher distribution revenue (primarily due to higher distribution rates in certain jurisdictions, growth in the number of customers, an increase in customer usage, and higher sales caused by warmer weather), higher transmission revenue (primarily due to higher transmission rates and the accrual of true-ups for the prior rate year), and favorable income tax adjustments.
Discontinued Operations
On April 20, 2010, the Board of Directors of Pepco Holdings approved a plan for the disposition of Conectiv Energy. The plan consists of the sale of the wholesale power generation business, which was completed on July 1, 2010, and the liquidation of all of Conectiv Energy’s remaining assets and businesses. As a result of the plan of disposition, Conectiv Energy’s results of operations for the 2010 and 2009 quarterly and year-to-date periods are reported as discontinued operations.
Year-to-date, Pepco Holdings has incurred an after-tax loss of $126 million from discontinued operations. Upon completion of the liquidation of Conectiv Energy’s remaining contracts and assets, Pepco Holdings currently expects the overall after-tax loss on the Conectiv Energy disposition will be in the range of $110 million to $125 million.
Earnings Guidance
Pepco Holdings is raising its 2010 earnings guidance range to $1.00 to $1.10 per share from $0.80 to $0.95 per share. The revised guidance range represents strong Power Delivery operating performance through the first nine months of 2010, including the impact of hot summer weather on electric distribution revenue in certain jurisdictions, partially offset by the effects of a much higher level of storm activity in 2010, compared to 2009. Pepco Holdings is also reaffirming its 2011 earnings outlook range of $1.10 to $1.30 per share. The guidance and outlook ranges exclude the results of discontinued operations and the impact of any special, unusual, or extraordinary items.
Recent Events
Power Delivery
| | · | On October 13, 2010, PJM Interconnection (PJM) reaffirmed the need for the Mid-Atlantic Power Pathway (MAPP) transmission project with a one-year delay in the in-service date. The PJM Board requested that efforts relating to MAPP continue, including permitting and state regulatory |
| | | proceedings, to meet an in-service date of June 1, 2015. The estimated total cost of the project remains $1.2 billion. |
| | · | In October 2010, Pepco began installing advanced meters in the District of Columbia. The 15-month meter exchange program is the first step in building a smart power grid in the District of Columbia that will help customers better manage their energy use and costs and improve customer service and reliability. As approved by the District of Columbia Public Service Commission, a regulatory asset has been established to assure recovery of, and a return on, advanced metering infrastructure (AMI) costs between rate cases. |
| | · | Power Delivery electric sales were 14,816 gigawatt hours (GWhs) in the third quarter of 2010 compared to 13,709 GWhs for the same period last year. Cooling degree days (electric service territory) increased by 36% for the three months ended September 30, 2010, compared to the same period in 2009. Weather-adjusted electric sales were 13,956 GWhs in the third quarter of 2010 compared to 13,782 GWhs for the same period last year, an increase of 1%. Due to the adoption of distribution revenue decoupling mechanisms in Maryland and the District of Columbia, approximately 66% of forecasted 2010 electric distribution revenue is not affected by weather. |
Regulatory Matters
| | · | On August 13, 2010, the Maryland Public Service Commission (MPSC) authorized Pepco to proceed with the deployment of its AMI proposal and with the development of a dynamic pricing mechanism. AMI deployment is subject to the implementation of an MPSC-approved customer education/communication plan. |
| | · | On August 6, 2010, the MPSC approved an $8 million annual increase in Pepco’s electric distribution base rates based on a 9.83% return on equity. The new rates were effective July 29, 2010. On September 2, 2010, Pepco filed with the MPSC a motion for reconsideration of the following issues: (1) denial of inclusion in rate base of certain reliability plant investments, which occurred subsequent to the test period but before the rate effective period; (2) denial of Pepco’s request to increase depreciation rates to reflect a corrected formula relating to the cost of removal expenses; and (3) imposition of imputed cost savings to partially offset the costs of Pepco’s enhanced vegetation management program. |
Pepco Energy Services
| | · | On September 2, 2010, Pepco Energy Services signed an energy savings and renewable energy performance contract with the Maryland Aviation Administration. The $21 million project includes the design and implementation of energy conservation measures that will improve the overall energy efficiency of more than 30 airport buildings, including the main terminal at the Baltimore/Washington International Thurgood Marshall Airport. Pepco Energy Services will also install more than one acre |
| | | of solar power generation equipment on the roof of the daily parking garage. Construction began in September 2010 and is scheduled to be completed in December 2011. |
| | · | On October 27, 2010, Pepco Holdings secured two 364-day credit facilities totaling $200 million to replace the $400 million 364-day credit facility that expired in October 2010 and the $50 million 18-month facility that expires in November 2010. The new facilities are $250 million less than the expiring facilities due to lower liquidity and collateral requirements as a result of the continued exit of the retail energy business and the disposal of the Conectiv Energy segment. |
| | · | On October 1, 2010, Pepco Holdings issued $250 million of 2.7% notes due October 1, 2015. A portion of the proceeds was used on October 13, 2010 to repurchase $40 million of Pepco Holdings 6.125% notes due 2017. The remaining proceeds will be used in November 2010 to redeem $200 million of Pepco Holdings 6.0% notes due 2019 and $10 million of Pepco Holdings 5.9% notes due 2016. |
| | · | On September 17, 2010, Pepco Holdings filed a shelf registration statement with the Securities and Exchange Commission to replace an exiting shelf registration statement that expired in August 2010. In the new filing, Pepco Holdings registered debt and equity securities and each of its utility subsidiaries registered debt securities. |
Further details regarding changes in consolidated earnings between 2010 and 2009 can be found in the following schedules. Additional information regarding financial results and recent regulatory events can be found in the Pepco Holdings, Inc. Form 10-Q for the quarter ended September 30, 2010 as filed with the Securities and Exchange Commission, which is available at www.pepcoholdings.com/investors.
Special Items
Management believes the special items shown below are not representative of the company’s ongoing business operations.
Reconciliation of GAAP Earnings to Earnings Excluding Special Items
| Net Earnings from Continuing Operations – Millions of dollars | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2010 | 2009 | | 2010 | 2009 |
| Reported (GAAP) Net Earnings from Continuing Operations | $21 | $104 | | $125 | $184 |
| Special Items: | | | | | |
| · | Debt extinguishment costs, including treasury lock hedge | 81 | - | | 81 | - |
| · | Restructuring charge | 8 | - | | 8 | - |
| · | Effects of Pepco divestiture-related claims | 6 | - | | 6 | - |
| · | Mirant bankruptcy settlement (net of customer sharing) | - | (16) | | - | (24) |
| · | Maryland income tax benefit, net of fees | - | (11) | | - | (11) |
| | | | | | |
| Net Earnings from Continuing Operations, Excluding Special Items | $116 | $77 | | $220 | $149 |
| Earnings per Share from Continuing Operations | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2010 | 2009 | | 2010 | 2009 |
| Reported (GAAP) Earnings per Share from Continuing Operations | $0.09 | $0.47 | | $0.56 | $0.84 |
| Special Items: | | | | | |
| · | Debt extinguishment costs, including treasury lock hedge | 0.36 | - | | 0.36 | - |
| · | Restructuring charge | 0.04 | - | | 0.04 | - |
| · | Effects of Pepco divestiture-related claims | 0.03 | - | | 0.03 | - |
| · | Mirant bankruptcy settlement (net of customer sharing) | - | (0.07) | | - | (0.11) |
| · | Maryland income tax benefit, net of fees | - | (0.05) | | - | (0.05) |
| | | | | | |
Earnings per Share from Continuing Operations, Excluding Special Items | $0.52 | $0.35 | | $0.99 | $0.68 |
Conference Call for Investors
Pepco Holdings Inc. will host a conference call to discuss third quarter results on Friday, Oct. 29 at 10 a.m. E.T. Investors, members of the media and other interested persons may access the conference call on the Internet at http://www.pepcoholdings.com/investors or by calling 1-888-396-2356 before 9:55 a.m. The pass code for the call is 87208435. International callers may access the call by dialing 1-617-847-8709, using the same pass code, 87208435. 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 32742742. International callers may access the replay by dialing 1-617-801-6888 and entering the same pass code 32742742. An audio archive will be available at PHI's Web site, http://www.pepcoholdings.com/investors.
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 at http://www.pepcoholdings.com/investors.
About PHI: Pepco Holdings, Inc. (NYSE: POM) is one of the largest energy delivery companies in the Mid-Atlantic region, serving about 1.9 million customers in Delaware, the District of Columbia, Maryland and New Jersey. PHI subsidiaries Pepco, Delmarva Power and Atlantic City Electric provide regulated electricity service; Delmarva Power also provides natural gas service. PHI also provides retail energy savings and renewable 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 cap ital; 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 understand further the results and prospects of PHI.
| Pepco Holdings, Inc. |
| |
| Earnings Per Share Variance |
| 2010 / 2009 |
| |
| | | | | | 3rd Quarter |
| | | | | | Power Delivery | | | Pepco Energy Services | | | Other Non- Regulated | | | Corporate and Other | | | Total PHI |
2009 Net Income/(Loss) (GAAP) – Continuing Operations 1/ | $ | 0.43 | | $ | 0.06 | | $ | 0.03 | | $ | (0.05) | | $ | 0.47 |
| | | | | | | | | | | | | | | | | | |
| 2009 Special Items 2/ | | | | | | | | | | | | | | |
| | · | Mirant Settlement, net of customer sharing – MD jurisdiction | | (0.07) | | | - | | | - | | | - | | | (0.07) |
| | · | Maryland Income Tax Benefit, net of fees | | (0.05) | | | - | | | - | | | - | | | (0.05) |
| | | | | | | | | | | | | | | | | |
| 2009 Net Income/(Loss) excluding Special Items | | 0.31 | | | 0.06 | | | 0.03 | | | (0.05) | | | 0.35 |
| | | | | | | | | | | | | | | | | |
| Change from 2009 Net Income/(Loss) excluding Special Items | | | | | | | | | | | | | | |
| | Regulated Operations | | | | | | | | | | | | | | |
| | · | Distribution Revenue | | | | | | | | | | | | | | |
| | | - | Weather (estimate)3/ | | 0.04 | | | - | | | - | | | - | | | 0.04 |
| | | - | Rate Increases (Pepco/DC, DPL/MD & DE and ACE) | | 0.04 | | | - | | | - | | | - | | | 0.04 |
| | | - | Other Distribution Revenue (primarily customer usage/customer growth) | | 0.01 | | | - | | | - | | | - | | | 0.01 |
| | · | Network Transmission Revenue | | 0.03 | | | - | | | - | | | - | | | 0.03 |
| | · | Standard Offer Service Margin | | 0.01 | | | - | | | - | | | - | | | 0.01 |
| | · | Operation & Maintenance | | (0.02) | | | - | | | - | | | - | | | (0.02) |
| | · | Depreciation | | (0.01) | | | - | | | - | | | - | | | (0.01) |
| | · | Other, net | | 0.01 | | | - | | | - | | | - | | | 0.01 |
| | Pepco Energy Services | | | | | | | | | | | | | | |
| | · | Retail Energy Supply | | - | | | (0.02) | | | - | | | - | | | (0.02) |
| | · | Energy Services | | - | | | (0.02) | | | - | | | - | | | (0.02) |
| | Other Non-Regulated | | | | | | | | | | | | | | |
| | · | Financial investment portfolio | | - | | | - | | | 0.01 | | | - | | | 0.01 |
| | Corporate and Other | | - | | | - | | | - | | | - | | | - |
| | Net Interest Expense | | - | | | 0.01 | | | - | | | 0.03 | | | 0.04 |
| | Income Tax Adjustments | | (0.01) | | | - | | | - | | | 0.06 | | | 0.05 |
| 2010 Net Income/(Loss) excluding Special Items – Continuing Operations | | 0.41 | | | 0.03 | | | 0.04 | | | 0.04 | | | 0.52 |
| | | | | | | | | | | | | | | | | | |
| 2010 Special Items 2/ | | | | | | | | | | | | | | |
| | · | Restructuring Charge | | (0.04) | | | - | | | - | | | - | | | (0.04) |
| | · | Effects of Pepco divestiture-related claims | | (0.03) | | | - | | | - | | | - | | | (0.03) |
| | · | Debt Extinguishment Costs | | - | | | - | | | - | | | (0.36) | | | (0.36) |
| | | | | | | | | | | | | | | | | | |
| 2010 Net Income/(Loss) (GAAP) – Continuing Operations 4/ | $ | 0.34 | | $ | 0.03 | | $ | 0.04 | | $ | (0.32) | | $ | 0.09 |
| | | | | | | | | | | | | | | | | | |
| Discontinued Operations: | | | | | | | | | | | | | | |
| | Conectiv Energy | | - | | | - | | | - | | | (0.01) | | | (0.01) |
| | | | | | | | | | | | | | | | | | |
| Total PHI 2010 Net Income | $ | 0.34 | | $ | 0.03 | | $ | 0.04 | | $ | (0.33) | | $ | 0.08 |
| 1/ | The 2009 weighted average number of basic shares outstanding was 221 million. |
| | |
| 2/ | Management believes the special items are not representative of the company's ongoing business operations. |
| | |
| 3/ | The impact of 20-year average weather on earnings would have been an increase in earnings of $.02 per share. |
| | |
| 4/ | The 2010 weighted average number of basic shares outstanding was 224 million. |
| Pepco Holdings, Inc. |
| |
| Earnings Per Share Variance |
| 2010 / 2009 |
| |
| | | | | | Year-to-Date |
| | | | | | Power Delivery | | | Pepco Energy Services | | | Other Non- Regulated | | | Corporate and Other | | | Total PHI |
2009 Net Income/(Loss) (GAAP) – Continuing Operations 1/ | $ | 0.76 | | $ | 0.15 | | $ | 0.10 | | $ | (0.17) | | $ | 0.84 |
| | | | | | | | | | | | | | | | | | |
| 2009 Special Items 2/ | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | · | Mirant Settlement, net of customer sharing | | (0.11) | | | - | | | - | | | - | | | (0.11) |
| | · | Maryland Income Tax Benefit, net of fees | | (0.05) | | | - | | | - | | | - | | | (0.05) |
| | | | | | | | | | | | | | | | | | |
| 2009 Net Income/(Loss) excluding Special Items | | 0.60 | | | 0.15 | | | 0.10 | | | (0.17) | | | 0.68 |
| | | | | | | | | | | | | | | | | | |
| Change from 2009 Net Income/(Loss) excluding Special Items | | | | | | | | | | | | | | |
| | Regulated Operations | | | | | | | | | | | | | | |
| | · | Distribution Revenue | | | | | | | | | | | | | | |
| | | - | Weather (estimate)3/ | | 0.05 | | | - | | | - | | | - | | | 0.05 |
| | | - | Rate Increases (Pepco/DC, DPL/MD & DE and ACE) | | 0.08 | | | - | | | - | | | - | | | 0.08 |
| | | - | Other Distribution Revenue (primarily customer usage/customer growth) | | 0.05 | | | - | | | - | | | - | | | 0.05 |
| | · | Network Transmission Revenue | | 0.07 | | | - | | | - | | | - | | | 0.07 |
| | · | ACE Basic Generation Service (primarily unbilled revenue) | | 0.04 | | | - | �� | | - | | | - | | | 0.04 |
| | · | Standard Offer Service Margin | | 0.01 | | | - | | | - | | | - | | | 0.01 |
| | · | Operation & Maintenance | | (0.04) | | | - | | | - | | | - | | | (0.04) |
| | · | Depreciation | | (0.03) | | | - | | | - | | | - | | | (0.03) |
| | · | Other, net | | 0.03 | | | - | | | - | | | - | | | 0.03 |
| | Pepco Energy Services | | | | | | | | | | | | | | |
| | · | Retail Energy Supply | | - | | | (0.01) | | | - | | | - | | | (0.01) |
| | · | Energy Services | | - | | | (0.02) | | | - | | | - | | | (0.02) |
| | Other Non-Regulated | | - | | | - | | | - | | | - | | | - |
| | Corporate and Other | | - | | | - | | | - | | | 0.01 | | | 0.01 |
| | Net Interest Expense | | 0.01 | | | 0.02 | | | - | | | - | | | 0.03 |
| | Income Tax Adjustments | | (0.07) | | | - | | | (0.01) | | | 0.12 | | | 0.04 |
| | Dilution | | | (0.01) | | | - | | | - | | | 0.01 | | | - |
| 2010 Net Income/(Loss) excluding Special Items – Continuing Operations | | 0.79 | | | 0.14 | | | 0.09 | | | (0.03) | | | 0.99 |
| | | | | | | | | | | | | | | | | | |
| 2010 Special Items 2/ | | | | | | | | | | | | | | |
| | · | Restructuring Charge | | (0.04) | | | - | | | - | | | - | | | (0.04) |
| | · | Effects of Pepco divestiture-related claims | | (0.03) | | | - | | | - | | | - | | | (0.03) |
| | · | Debt Extinguishment Costs | | - | | | - | | | - | | | (0.36) | | | (0.36) |
| | | | | | | | | | | | | | | | | | |
| 2010 Net Income/(Loss) (GAAP) – Continuing Operations 4/ | $ | 0.72 | | $ | 0.14 | | $ | 0.09 | | $ | (0.39) | | $ | 0.56 |
| | | | | | | | | | | | | | | | | | |
| Discontinued Operations: | | | | | | | | | | | | | | |
| | Conectiv Energy | | - | | | - | | | - | | | (0.56) | | | (0.56) |
| | | | | | | | | | | | | | | | | | |
| Total PHI 2010 Net Income | $ | 0.72 | | $ | 0.14 | | $ | 0.09 | | $ | (0.95) | | $ | - |
| 1/ | The 2009 weighted average number of basic shares outstanding was 220 million. |
| | |
| 2/ | Management believes the special items are not representative of the company's ongoing business operations. |
| | |
| 3/ | The impact of 20-year average weather on earnings would have been an increase in earnings of $.02 per share. |
| | |
| 4/ | The 2010 weighted average number of basic shares outstanding was 223 million. |
SEGMENT INFORMATION
| | Three Months Ended September 30, 2010 |
| | (millions of dollars) |
| | Power Delivery | Pepco Energy Services | Other Non- Regulated | Corporate and Other (a) | PHI Consolidated |
| Operating Revenue | $ | 1,600 | | $ | 457 | $ | 15 | $ | (5) | $ | 2,067 |
Operating Expenses (b) (c) | | 1,418 | (d) | | 442 | | - | | (5) | | 1,855 |
| Operating Income | | 182 | | | 15 | | 15 | | - | | 212 |
| Interest Income | | - | | | - | | - | | - | | - |
| Interest Expense | | 51 | | | 3 | | 2 | | 12 | | 68 |
Loss on Extinguishment of Debt | | - | | | - | | - | | 135 | | 135 |
| Other Income (Expense) | | 6 | | | - | | (1) | | 1 | | 6 |
| Preferred Stock Dividends | | - | | | - | | 1 | | (1) | | - |
| Income Tax Expense (Benefit) | | 61 | | | 4 | | 2 | | (73) | (e) | (6) |
Net Income (Loss) from Continuing Operations | | 76 | | | 8 | | 9 | | (72) | | 21 |
| Total Assets | | 10,569 | | | 617 | | 1,524 | | 1,325 | | 14,035 |
| Construction Expenditures | $ | 178 | | $ | 2 | $ | - | $ | 4 | $ | 184 |
| (a) | Total Assets line item in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, substantially all of which is allocated to the Power Delivery segment for purposes of assessing impairment. Additionally, Corporate and Other includes intercompany amounts of $(5) million for Operating Revenue, $(2) million for Operating Expense, $(6) million for Interest Income, $(5) million for Interest Expense, and $(1) million for Preferred Stock Dividends. |
| | |
| (b) | Includes depreciation and amortization of $104 million, consisting of $97 million for Power Delivery, $5 million for Pepco Energy Services and $2 million for Corporate and Other. |
| | |
| (c) | Includes restructuring charge of $14 million, consisting of $13 million for Power Delivery and $1 million for Corporate and Other. |
| | |
| (d) | Includes $9 million expense related to effects of Pepco divestiture-related claims. |
| | |
| (e) | Includes current state tax benefits resulting from the restructuring of certain PHI subsidiaries which have subjected PHI to state income taxes in new jurisdictions. |
| | Three Months Ended September 30, 2009 |
| | (millions of dollars) |
| | Power Delivery | Pepco Energy Services | Other Non- Regulated | Corporate and Other (a) | PHI Consolidated |
| Operating Revenue | $ | 1,428 | | $ | 611 | $ | 13 | $ | (2) | $ | 2,050 |
Operating Expenses (b) | | 1,235 | (c) | | 584 | | - | | (4) | | 1,815 |
| Operating Income | | 193 | | | 27 | | 13 | | 2 | | 235 |
| Interest Income | | - | | | - | | 1 | | (1) | | - |
| Interest Expense | | 53 | | | 6 | | 4 | | 22 | | 85 |
| Other Income | | 3 | | | - | | 1 | | 1 | | 5 |
| Preferred Stock Dividends | | - | | | - | | 1 | | (1) | | - |
| Income Tax Expense (Benefit) | | 49 | | | 7 | | 3 | | (8) | | 51 |
Net Income (Loss) from Continuing Operations | | 94 | (d) | | 14 | | 7 | | (11) | | 104 |
| Total Assets | | 10,181 | | | 699 | | 1,562 | | 1,427 | | 13,869 |
| Construction Expenditures | $ | 138 | | $ | 2 | $ | - | $ | 9 | $ | 149 |
| (a) | Total Assets line item in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, substantially all of which is allocated to the Power Delivery segment for purposes of assessing impairment. Additionally, Corporate and Other includes intercompany amounts of $(2) million for Operating Revenue, $(1) million for Operating Expense, $(17) million for Interest Income, $(16) million for Interest Expense, and $(1) million for Preferred Stock Dividends. |
| | |
| (b) | Includes depreciation and amortization of $93 million, consisting of $84 million for Power Delivery, $4 million for Pepco Energy Services, and $5 million for Corporate and Other. |
| | |
| (c) | Includes $26 million gain related to effects of Pepco divestiture-related claims. |
| | |
| (d) | Includes $11 million after-tax state income tax benefit, net of fees, related to a change in the tax reporting for the disposition of certain assets in prior years. |
| | Nine Months Ended September 30, 2010 |
| | (millions of dollars) |
| | Power Delivery | Pepco Energy Services | Other Non- Regulated | Corporate and Other (a) | PHI Consolidated |
| Operating Revenue | $ | 4,011 | | $ | 1,480 | $ | 41 | $ | (10) | | $ | 5,522 |
Operating Expenses (b) (c) | | 3,583 | (d) | | 1,417 | | 3 | | (17) | | | 4,986 |
| Operating Income | | 428 | | | 63 | | 38 | | 7 | | | 536 |
| Interest Income | | 1 | | | - | | 2 | | (3) | | | - |
| Interest Expense | | 155 | | | 13 | | 9 | | 63 | | | 240 |
| Other Income (Expense) | | 15 | | | 1 | | (2) | | 2 | | | 16 |
Loss on Extinguishment of Debt | | - | | | - | | - | | 135 | | | 135 |
| Preferred Stock Dividends | | - | | | - | | 2 | | (2) | | | - |
| Income Tax Expense (Benefit) | | 128 | (e) | | 20 | | 8 | | (104) | (f) | | 52 |
Net Income (Loss) from Continuing Operations | | 161 | | | 31 | | 19 | | (86) | | | 125 |
| Total Assets | | 10,569 | | | 617 | | 1,524 | | 1,325 | | | 14,035 |
| Construction Expenditures | $ | 523 | | $ | 3 | $ | - | $ | 22 | | $ | 548 |
| (a) | Total Assets line item in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, substantially all of which is allocated to the Power Delivery segment for purposes of assessing impairment. Additionally, Corporate and Other includes intercompany amounts of $(10) million for Operating Revenue, $(7) million for Operating Expense, $(31) million for Interest Income, $(30) million for Interest Expense, and $(2) million for Preferred Stock Dividends. |
| | |
| (b) | Includes depreciation and amortization of $286 million, consisting of $264 million for Power Delivery, $14 million for Pepco Energy Services, $1 million for Other Non-Regulated and $7 million for Corporate and Other. |
| | |
| (c) | Includes restructuring charge of $14 million, consisting of $13 million for Power Delivery and $1 million for Corporate and Other. |
| | |
| (d) | Includes $11 million expense related to effects of Pepco divestiture-related claims. |
| | |
| (e) | Includes $8 million reversal of accrued interest income on uncertain and effectively settled state income tax positions. |
| | |
| (f) | Includes $14 million of state tax benefits resulting from the restructuring of certain PHI subsidiaries, partially offset by a charge of $4 million to write off a deferred tax asset related to the Medicare Part D subsidy. |
| | |
| | Nine Months Ended September 30, 2009 |
| | (millions of dollars) |
| | Power Delivery | Pepco Energy Services | Other Non- Regulated | Corporate and Other (a) | PHI Consolidated |
| Operating Revenue | $ | 3,895 | | $ | 1,828 | $ | 40 | $ | (10) | $ | 5,753 |
Operating Expenses (b) | | 3,488 | (c) | | 1,757 | | 2 | | (14) | | 5,233 |
| Operating Income | | 407 | | | 71 | | 38 | | 4 | | 520 |
| Interest Income | | 2 | | | 1 | | 3 | | (4) | | 2 |
| Interest Expense | | 159 | | | 22 | | 11 | | 62 | | 254 |
| Other Income | | 9 | | | 1 | | 2 | | 1 | | 13 |
| Preferred Stock Dividends | | - | | | - | | 2 | | (2) | | - |
| Income Tax Expense (Benefit) | | 92 | | | 19 | | 8 | | (22) | | 97 |
Net Income (Loss) from Continuing Operations | | 167 | (d) | | 32 | | 22 | | (37) | | 184 |
| Total Assets | | 10,181 | | | 699 | | 1,562 | | 1,427 | | 13,869 |
| Construction Expenditures | $ | 419 | | $ | 8 | $ | - | $ | 19 | $ | 446 |
| (a) | Total Assets line item in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, substantially all of which is allocated to the Power Delivery segment for purposes of assessing impairment. Additionally, Corporate and Other includes intercompany amounts of $(10) million for Operating Revenue, $(8) million for Operating Expense, $(61) million for Interest Income, $(60) million for Interest Expense, and $(2) million for Preferred Stock Dividends. |
| | |
| (b) | Includes depreciation and amortization of $265 million, consisting of $242 million for Power Delivery, $13 million for Pepco Energy Services, $1 million for Other Non-Regulated and $9 million for Corporate and Other. |
| | |
| (c) | Includes $40 million gain related to effects of Pepco divestiture-related claims. |
| | |
| (d) | Includes $11 million after-tax state income tax benefit, net of fees, related to a change in the tax reporting for the disposition of certain assets in prior years. |
| PEPCO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited) |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | 2009 |
| | (millions of dollars, except per share data) | |
| Operating Revenue | | | | | | | | | | |
| Power Delivery | $ $ | 1,600 | $ $ | 1,428 | | $ $ | 4,011 | $ | 3,895 | |
| Pepco Energy Services | | 457 | | 611 | | | 1,480 | | 1,828 | |
| Other | | 10 | | 11 | | | 31 | | 30 | |
| | | | | | | | | | | |
| Total Operating Revenue | | 2,067 | | 2,050 | | | 5,522 | | 5,753 | |
| | | | | | | | | | | |
| Operating Expenses | | | | | | | | | | |
| Fuel and purchased energy | | 1,319 | | 1,442 | | | 3,696 | | 4,167 | |
| Other services cost of sales | | 38 | | 25 | | | 85 | | 60 | |
| Other operation and maintenance | | 228 | | 213 | | | 636 | | 618 | |
| Restructuring charge | | 14 | | - | | | 14 | | - | |
| Depreciation and amortization | | 104 | | 93 | | | 286 | | 265 | |
| Other taxes | | 130 | | 100 | | | 327 | | 279 | |
| Deferred electric service costs | | 13 | | (32) | | | (69) | | (116) | |
| Effects of Pepco divestiture-related claims | | 9 | | (26) | | | 11 | | (40) | |
| | | | | | | | | | | |
| Total Operating Expenses | | 1,855 | | 1,815 | | | 4,986 | | 5,233 | |
| | | | | | | | | | | |
| Operating Income | | 212 | | 235 | | | 536 | | 520 | |
| | | | | | | | | | | |
| Other Income (Expenses) | | | | | | | | | | |
| Interest and dividend income | | - | | - | | | - | | 2 | |
| Interest expense | | (68) | | (85) | | | (240) | | (254) | |
| Gain (loss) from equity investments | | - | | 1 | | | (1) | | 2 | |
| Loss on extinguishment of debt | | (135) | | - | | | (135) | | - | |
| Other income | | 6 | | 4 | | | 17 | | 12 | |
| Other expenses | | - | | - | | | - | | (1) | |
| | | | | | | | | | | |
| Total Other Expenses | | (197) | | (80) | | | (359) | | (239) | |
| Income from Continuing Operations Before Income Tax Expense | | 15 | | 155 | | | 177 | | 281 | |
| Income Tax (Benefit) Expense related to Continuing Operations | | (6) | | 51 | | | 52 | | 97 | |
| | | | | | | | | | | |
| Net Income from Continuing Operations | | 21 | | 104 | | | 125 | | 184 | |
| (Loss) Income from Discontinued Operations, net of Income Taxes | | (4) | | 20 | | | (126) | | 10 | |
| Net Income (Loss) | | 17 | | 124 | | | (1) | | 194 | |
| Retained Earnings at Beginning of Period | | 1,130 | | 1,222 | | | 1,268 | | 1,271 | |
| Dividends paid on common stock | | (61) | | (59) | | | (181) | | (178) | |
| | | | | | | | | | | |
| Retained Earnings at End of Period | $ | 1,086 | $ | 1,287 | | $ $ | 1,086 | $ | 1,287 | |
| | | | | | | | | | | |
| Basic and Diluted Share Information | | | | | | | | | | |
| Weighted average shares outstanding (millions) | | 224 | | 221 | | | 223 | | 220 | |
| | | | | | | | | | | |
| Earnings per share of common stock from Continuing Operations | $ | .09 | $ | .47 | | $ | .56 | $ | .84 | |
| (Loss) Earnings per share of common stock from Discontinued Operations | | (.01) | | .09 | | | (.56) | | .04 | |
| | | | | | | | | | | |
| Basic and diluted earnings (loss) per share | $ | .08 | $ | .56 | | $ | - | $ | .88 | |
| PEPCO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) |
| | September 30, 2010 | December 31, 2009 |
| | (millions of dollars) |
| ASSETS | | |
| | | |
| CURRENT ASSETS | | |
Cash and cash equivalents | $ | 28 | $ | 44 |
Restricted cash equivalents | 14 | 11 |
| Accounts receivable, less allowance for uncollectible accounts of $57 million and $44 million, respectively | 1,058 | 1,019 |
Inventories | 140 | 124 |
Derivative assets | 38 | 22 |
Prepayments of income taxes | 183 | 167 |
Deferred income tax assets, net | 43 | 126 |
Prepaid expenses and other | 65 | 67 |
Conectiv Energy assets held for sale | 169 | 346 |
| | | |
Total Current Assets | 1,738 | 1,926 |
| | | |
| | | |
| INVESTMENTS AND OTHER ASSETS | | |
Goodwill | 1,407 | 1,407 |
Regulatory assets | 1,786 | 1,801 |
Investment in finance leases held in trust | 1,411 | 1,386 |
Income taxes receivable | 119 | 141 |
Restricted cash equivalents | 2 | 4 |
Assets and accrued interest related to uncertain tax positions | 13 | 12 |
Derivative assets | 7 | 16 |
Other | 192 | 194 |
Conectiv Energy assets held for sale | 7 | 29 |
| | | |
Total Investments and Other Assets | 4,944 | 4,990 |
| | | |
| | | |
| PROPERTY, PLANT AND EQUIPMENT | | |
Property, plant and equipment | 11,918 | 11,431 |
Accumulated depreciation | (4,389) | (4,190) |
| | | |
Net Property, Plant and Equipment | 7,529 | 7,241 |
| | | |
Conectiv Energy assets held for sale | - | 1,622 |
| | | |
| Total Property, Plant and Equipment | 7,529 | 8,863 |
| | | |
| | | |
TOTAL ASSETS | $ | 14,211 | $ | 15,779 |
| | | |
PEPCO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | September 30, 2010 | | December 31, 2009 |
| | (millions of dollars, except shares) |
| LIABILITIES AND EQUITY | | | | | |
| | | | | | |
| CURRENT LIABILITIES | | | | | |
Short-term debt | $ | 540 | | $ | 530 |
Current portion of long-term debt and project funding | | 75 | | | 536 |
Accounts payable and accrued liabilities | | 547 | | | 574 |
Capital lease obligations due within one year | | 7 | | | 7 |
Taxes accrued | | 116 | | | 47 |
Interest accrued | | 80 | | | 68 |
Derivative liabilities | | 77 | | | 67 |
Other | | 307 | | | 282 |
Liabilities associated with Conectiv Energy assets held for sale | | 84 | | | 191 |
Total Current Liabilities | | 1,833 | | | 2,302 |
| | | | | | |
| DEFERRED CREDITS | | | | | |
Regulatory liabilities | | 568 | | | 613 |
Deferred income taxes, net | | 2,553 | | | 2,600 |
Investment tax credits | | 27 | | | 35 |
Pension benefit obligation | | 217 | | | 290 |
Other postretirement benefit obligations | | 414 | | | 409 |
| Income taxes payable 18 | | 8 | | | 5 |
Liabilities and accrued interest related to uncertain tax positions | | 133 | | | 96 |
Derivative liabilities | | 35 | | | 54 |
Other | | 153 | | | 147 |
Liabilities associated with Conectiv Energy assets held for sale | | 16 | | | 19 |
Total Deferred Credits | | 4,124 | | | 4,268 |
| | | | | | |
| LONG-TERM LIABILITIES | | | | | |
Long-term debt | | 3,598 | | | 4,470 |
Transition bonds issued by ACE Funding | | 343 | | | 368 |
Long-term project funding | | 15 | | | 17 |
Capital lease obligations | | 89 | | | 92 |
Total Long-Term Liabilities | | 4,045 | | | 4,947 |
| | | | | | |
| COMMITMENTS AND CONTINGENCIES | | | | | |
| | | | | | |
| EQUITY | | | | | |
| Common stock, $.01 par value – authorized 400,000,000 shares, 224,500,318 and 222,269,895 shares outstanding, respectively | | 2 | | | 2 |
Premium on stock and other capital contributions | | 3,263 | | | 3,227 |
Accumulated other comprehensive loss | | (148) | | | (241) |
Retained earnings | | 1,086 | | | 1,268 |
| | | | | | |
Total Shareholders’ Equity | | 4,203 | | | 4,256 |
Non-controlling interest | | 6 | | | 6 |
Total Equity | | 4,209 | | | 4,262 |
| | | | | | |
TOTAL LIABILITIES AND EQUITY | $ | 14,211 | | $ | 15,779 |
| POWER DELIVERY SALES AND REVENUES |
| | Three Months Ended September 30, | Nine Months Ended September 30, | |
| Power Delivery Sales (Gigawatt Hours) | | 2010 | | | 2009 | | | 2010 | | | 2009 | | |
| Regulated T&D Electric Sales | | | | | | | | | | | | | |
| Residential | | 5,871 | | | 4,997 | | | 14,521 | | | 13,219 | | |
| Commercial and industrial | | 8,887 | | | 8,653 | | | 24,315 | | | 23,965 | | |
| Other | | 58 | | | 59 | | | 182 | | | 185 | | |
| Total Regulated T&D Electric Sales | | 14,816 | | | 13,709 | | | 39,018 | | | 37,369 | | |
| | | | | | | | | | | | | | |
| Default Electricity Supply Sales | | | | | | | | | | | | | |
| Residential | | 5,553 | | | 4,804 | | | 13,819 | | | 12,770 | | |
| Commercial and industrial | | 1,988 | | | 2,144 | | | 5,492 | | | 6,764 | | |
| Other | | 20 | | | 23 | | | 68 | | | 71 | | |
| Total Default Electricity Supply Sales | | 7,561 | | | 6,971 | | | 19,379 | | | 19,605 | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, | Nine Months Ended September 30, | |
| Power Delivery Electric Revenue (Millions of dollars) | | 2010 | | | 2009 | | | 2010 | | | 2009 | | |
| Regulated T&D Electric Revenue | | | | | | | | | | | | | |
| Residential | $ | 231 | | $ | 190 | | $ | 529 | | $ | 464 | | |
| Commercial and industrial | | 261 | | | 229 | | | 668 | | | 611 | | |
| Other | | 75 | | | 63 | | | 216 | | | 188 | | |
| Total Regulated T&D Electric Revenue | $ | 567 | | $ | 482 | | $ | 1,413 | | $ | 1,263 | | |
| | | | | | | | | | | | | | |
| Default Electricity Supply Revenue | | | | | | | | | | | | | |
| Residential | $ | 705 | | $ | 619 | | $ | 1,644 | | $ | 1,519 | | |
| Commercial and industrial | | 214 | | | 247 | | | 581 | | | 739 | | |
| Other | | 60 | | | 35 | | | 155 | | | 121 | | |
| Total Default Electricity Supply Revenue | $ | 979 | | $ | 901 | | $ | 2,380 | | $ | 2,379 | | |
| | | | | | | | | | | | | | |
| Other Electric Revenue | $ | 19 | | $ | 17 | | $ | 52 | | $ | 54 | | |
| | | | | | | | | | | | | | |
| Total Electric Operating Revenue | $ | 1,565 | | $ | 1,400 | | $ | 3,845 | | $ | 3,696 | | |
| | Three Months Ended September 30, | Nine Months Ended September 30, | |
| Power Delivery Gas Sales and Revenue | | 2010 | | | 2009 | | | 2010 | | | 2009 | | |
| Regulated Gas Sales (Bcf) | | | | | | | | | | | | | |
| Residential | | - | | | 1 | | | 5 | | | 6 | | |
| Commercial and industrial | | - | | | 1 | | | 3 | | | 4 | | |
| Transportation and other | | 2 | | | 1 | | | 5 | | | 4 | | |
| Total Regulated Gas Sales | | 2 | | | 3 | | | 13 | | | 14 | | |
| | | | | | | | | | | | | | |
| Regulated Gas Revenue (Millions of dollars) | | | | | | | | | | | | | |
| Residential | $ | 9 | | $ | 11 | | $ | 78 | | $ | 103 | | |
| Commercial and industrial | | 6 | | | 7 | | | 44 | | | 60 | | |
| Transportation and other | | 1 | | | 2 | | | 5 | | | 6 | | |
| Total Regulated Gas Revenue | $ | 16 | | $ | 20 | | $ | 127 | | $ | 169 | | |
| Other Gas Revenue | $ | 19 | | $ | 8 | | $ | 39 | | $ | 30 | | |
| | | | | | | | | | | | | | |
| Total Gas Operating Revenue | $ | 35 | | $ | 28 | | $ | 166 | | $ | 199 | | |
| | | | | | | | | | | | | | |
| Total Power Delivery Operating Revenue | $ | 1,600 | | $ | 1,428 | | $ | 4,011 | | $ | 3,895 | | |
| POWER DELIVERY – CUSTOMERS | | |
| | September 30, 2010 | | September 30, 2009 |
| | | | |
| Regulated T&D Electric Customers (in thousands) | | | |
| Residential | 1,631 | | 1,614 |
| Commercial and industrial | 198 | | 197 |
| Other | 2 | | 2 |
| Total Regulated T&D Electric Customers | 1,831 | | 1,813 |
| | | | |
| | | | |
| Regulated Gas Customers (in thousands) | | | |
| Residential | 113 | | 113 |
| Commercial and industrial | 10 | | 9 |
| Transportation and other | - | | - |
| Total Regulated Gas Customers | 123 | | 122 |
| WEATHER DATA - CONSOLIDATED ELECTRIC SERVICE TERRITORY |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2010 | | 2009 | | 2010 | | 2009 |
| | | | | | | | |
| Heating Degree Days | 3 | | 20 | | 2,596 | | 2,866 |
| 20 Year Average | 31 | | 33 | | 2,729 | | 2,728 |
| Percentage Difference from Average | -90% | | -39% | | -5% | | 5% |
| Percentage Difference from Prior Year | -85% | | | | -9% | | |
| | | | | | | | |
| Cooling Degree Days | 1,217 | | 894 | | 1,828 | | 1,240 |
| 20 Year Average | 928 | | 922 | | 1,281 | | 1,278 |
| Percentage Difference from Average | 31% | | -3% | | 43% | | -3% |
| Percentage Difference from Prior Year | 36% | | | | 47% | | |
PEPCO ENERGY SERVICES | | | | | | |
Operating Summary (Millions of dollars) | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | | | | | | | | | | |
| Retail Electric Sales (GWh) | | 2,840 | (3) | | 4,619 | | | 9,256 | (3) | | 14,007 | |
| | | | | | | | | | | | | |
Retail Energy Supply (1) | | | | | | | | | | | | |
Operating Revenue (2) | $ | 409 | | $ | 573 | | $ | 1,360 | | $ | 1,729 | |
Cost of Goods Sold (2) | | 374 | | | 531 | | | 1,252 | | | 1,616 | |
| Gross Margin | | 35 | (4) | | 42 | | | 108 | (4) | | 113 | |
| | | | | | | | | | | | | |
| Operation and Maintenance Expenses | | 12 | | | 12 | | | 38 | | | 42 | |
| Depreciation | | 3 | | | 3 | | | 9 | | | 7 | |
| Operating Expense | | 15 | | | 15 | | | 47 | | | 49 | |
| | | | | | | | | | | | | |
| Operating Income | | 20 | | | 27 | | | 61 | | | 64 | |
| | | | | | | | | | | | | |
| Energy Services | | | | | | | | | | | | |
Operating Revenue (2) | $ | 51 | | $ | 42 | | $ | 136 | | $ | 114 | |
Cost of Goods Sold (2) | | 39 | | | 28 | | | 97 | | | 73 | |
| Gross Margin | | 12 | | | 14 | | | 39 | | | 41 | |
| | | | | | | | | | | | | |
| Operation and Maintenance Expenses | | 11 | (5) | | 8 | | | 27 | (5) | | 22 | |
| Depreciation | | 2 | | | 2 | | | 5 | | | 6 | |
| Operating Expense | | 13 | | | 10 | | | 32 | | | 28 | |
| | | | | | | | | | | | | |
| Operating Income | | -1 | | | 4 | | | 7 | | | 13 | |
| | | | | | | | | | | | | |
| Unallocated Overhead Cost | | 4 | | | 4 | | | 5 | | | 6 | |
| | | | | | | | | | | | | |
| Operating Income | $ | 15 | | $ | 27 | | $ | 63 | | $ | 71 | |
Notes:
| (1) | Includes power generation. |
| (2) | Certain transactions among Pepco Energy Service businesses are not eliminated. |
| (3) | Retail electric sales decreased due to the continuing expiration of existing contracts in connection with the wind down of the retail supply business. |
| (4) | Retail Energy Supply gross margin decreased due to the continuing expiration of existing retail electric supply contracts, mark-to-market losses in the retail natural gas supply business and the sale of excess natural gas at lower prices; partially offset by higher generation output from warmer than normal weather. |
| (5) | Higher operating and maintenance expense in Energy Services due to cost to repair a distribution system pipe leak for its thermal services business. |
