Exhibit 99.1
Northeast Seminar Boston
March 23, 2004
Safe Harbor Statement
This presentation contains forward-looking statements, the results of which may materially differ from those implied due to known and unknown risks and uncertainties, some of which are discussed below. Cash flow, earnings, earnings growth, capitalization and dividends (as well as earnings per share and total shareholder return goals) will depend on the performance of Holdings’ subsidiaries, and board policy. Demand for and pricing of electricity and landfill gas, changing market conditions and weather conditions could affect earnings levels. Duquesne Light’s earnings will be affected by the number of customers who choose to receive electric generation through POLR II, by final PUC approval of POLR III and by the continued performance of the generation supplier. POLR II customer retention will depend on market generation prices. The ultimate structure of POLR III will be subject to PUC review and approval, and may depend on the ability to negotiate appropriate terms with suitable generation suppliers. Any debt reduction or refinancing will depend on the availability of cash flows and appropriate replacement or refinancing vehicles. The amount and timing of any security issuance under Duquesne Light’s shelf registration statement will depend on financial market performance. Purchase price adjustments related to the sale of AquaSource, and the resolution and disposition of the retained liabilities and indemnities, may affect earnings and cash flows. The outcome of the current IRS audit may affect any refunds owed to us. Maintaining costs at 2003 levels will depend on our ability to operate with reduced administrative resources and to further streamline functions to eliminate remaining redundancies. Customer energy demand, fuel costs and plant operations could affect DQE Energy Services’ earnings. The outcome of the shareholder litigation initiated against Holdings may affect performance. Earnings with respect to synthetic fuel operations, landfill gas and affordable housing investments will depend, in part, on the continued viability of, and compliance with the requirements for, applicable federal tax credits. The final resolution of proposed adjustments regarding state income tax liabilities (which will depend on negotiations with the appropriate tax authorities) could affect financial position, earnings, and cash flows. The credit ratings received from the rating agencies could affect the cost of borrowing, the access to capital markets and liquidity. Overall performance by Holdings and its affiliates could be affected by economic, competitive, regulatory, governmental and technological factors affecting operations, markets, products, services and prices , as well as the factors discussed in Duquesne Light Holdings’ SEC filings made to date.
2
Company Representatives
Steve Schott
Sr. VP and Chief Financial Officer
Jim Wilson
Sr. VP and Chief Strategic Officer
Bill Fields
VP and Treasurer
Quynh McGuire
Sr. Manager, Investor Relations
3
Agenda
Strategic Overview
Operational Update
Earnings Outlook
Financial Review
POLR Opportunity
Summary
4
STRATEGIC OVERVIEW
Meeting our Commitments… Building our Future
Low risk; stable cash flow
Supports dividend
Sustainable and recurring earnings
Solid traditional utility
Building on successes at core electric utility
6
Results Achieved
Met financial goals in 2003
Removed uncertainty and volatility
IRS settlement
3-year union contract
AquaSource sale
ProAm sale (2002)
Energy-technology securities sale
Strengthened balance sheet
Retired $75M of MIPS in 2004
$468M debt retired during 2002-2003
No long-term debt maturities until 2008
7
Investment Opportunity
Top tier total shareholder return investment
Sustainable dividend with attractive yield
Strong balance sheet
Simple financials
Focus on core utility business
8
OPERATIONAL
UPDATE
DUQUESNE LIGHT
Electric Utility Operations
Duquesne Light Service Territory
Location: Southwestern Pennsylvania
Electric Utility Customers: Approximately 588,000
Largest concentration of customers in Pennsylvania without generation fleet
Service Territory: 800 square miles
Transmission & Distribution Network:
592 circuit miles
9 transmission substations
556 distribution substations
11
Operational Excellence
Delivering outstanding customer service
Meeting or exceeding reliability expectations
Customers
Regulators
Providing useful outage information
More than 90%
Managing costs aggressively
12
Overall Satisfaction
Cumulative measure of customer service and reliability is Overall Customer Satisfaction Performance at all-time best zBenchmarks favorably to other electric utilities
Overall Customer Satisfaction
5.85 5.2 2000
5.97 5.3 2001
6.03 5.4 2002
6.12 5.5 2003
13
Operational Goals
Continue improving customer service and operations
Maintaining good regulatory relationships
Reducing costs while improving customer satisfaction
14
UNREGULATED
BUSINESSES
DQE Energy Services
DQE Communications
DQE Financial
15
Unregulated Businesses
Key Accomplishments
Exceeded income targets
Increased margins
Resolved Fresh Kills successfully
IRS audit of synthetic fuel investment completed
16
Unregulated Businesses
2004 Plan
Restructure businesses into one operating energy company
Separate active from passive investments
May monetize certain investments
Assess future growth opportunities
Section 29 tax credit period expires end of 2007
Earnings improvement from cost reductions and efficiencies
17
EARNINGS OUTLOOK
2004 Earnings Outlook
$ in Millions
DLC T&D $ 43 — $ 46
DLC POLR (including Sunbury) $ 21 — $ 22
DQE Energy Services $ 23 — $ 24
DQE Financial $ 14 — $ 17
DQE Communications $ 1 — $ 2
Parent/CapCorp/Elims. ($ 22) — ($ 26)
Total $ 80 — $ 85
19
FINANCIAL
REVIEW
Liquidity
Cash balance of $34M at Dec. 31, 2003
$290M of revolving credit facilities with term-out option
$180M at Duquesne Light
$110M at Duquesne Light Holdings
No ratings triggers zRenewal September 2004
Oversubscribed in 2003
No debt maturities until 2008
21
Debt Maturity Schedule
($ in millions)
DLC FMB
DLC Tax-Exempt
DLC MIPS
Holdings Debt
22
Year End Capitalization
(In Accordance with GAAP)
Historical
2002 2003
Debt 60.9% 60.2%
Preferred 13.7% 4.4%
Common 25.4% 35.4%
23
2004 Financing Plan
Realign debt and equity with MIPS retirement
Fresh Kills resolution eliminated $22M of debt
Continue dividend reinvestment plan
Adds $14M of equity annually
Consider other opportunities including refinancing of 8.38% PINES
24
Projected Sources & Uses of Cash
($ in millions)
Beginning Cash $34
Cash Sources
Projected Earnings 82
Deprec. & Amort. 87
Debt Issuance 165
Pfd Stock Issuance (MIPS) 75
IRS Refund 32
DRIP 14
Total Sources $455
Cash Uses
IRS Payment ($48)
Dividends (76)
Capital Expenditures (83)
8.375% MIPS Retirement (150)
Sunbury Purchase (127)
Total Uses ($484)
Ending Cash $5
25
POLR OPPORTUNITY
POLR II Customer Retention History
Time
27
POLR III Proposal
Six-year fixed prices for small customers
2005 through 2010
Annual market-based prices for large customers
Join PJM effective Jan. 1, 2005
28
POLR III Proposal
Residential Customer Average Monthly Costs
3/02 1/1/05 1/1/08
1996
Start of 10%
Competition 15%
20% 12/31/2010
Generation Increase 12% Overall Increase 7%
Generation Increase 9% Overall Increase 5.9%
29
POLR III Proposal
Average Small Customer Rates
$MWh
‘04 ‘05-’07 ‘08-’10
Residential $ 54.50 $ 61.70 $ 67.90
Small Commercial $ 58.20 $ 63.80 $ 69.00
30
POLR III Proposal
Supply Portfolio Concept
Peaking
Load Shape
5X16
7X24
Sunbury Plant
31
POLR III Proposal
Large Customer Options
Two POLR options
Fluctuating hourly price service
17-month fixed price service
On-peak vs. Off-peak
$5/MWh adder
Recover costs
Compensate for risks
Encourage retail competition
32
POLR III Proposal
Competitive Auction Process
Suppliers bid for slice of POLR requirement
Descending clock auction for capacity charge for hourly service
Second auction for wholesale energy price
Translated to retail on-peak and off-peak
33
Total 2003 Customer Load
Small customer load (100%) 7,060 MWh
Large customer load (100%) 6,303 MWh
Note: Duquesne Light’s overall customer retention (i.e., POLR) level was 72% at December 31, 2003.
34
POLR III Proposal
Intervenor Groups
Customer advocates
Office of Consumer Advocate
Office of Small Business Advocate
Duquesne Industrial Intervenors
Retail energy marketers z Wholesale energy suppliers z Regional utilities z PJM
35
POLR III Proposal
Petition Schedule
Intervenor Direct Testimony February 25
Rebuttal Testimony for All Parties March 17
Last Date to Serve Discovery March 19
Last Date to Answer Discovery March 25
Surrebuttal Outline for All Parties March 26
Hearings (Pittsburgh) March 29 – April 1
Main Briefs April 16
Reply Briefs April 26
ALJ Recommended Decision Week of May 24
Exceptions/Reply Exceptions June 18
PUC Final Order July 8
(PUC Docket # P-00032071)
36
SUMMARY
Meeting our Commitments… Building our Future
Low risk; stable cash flow
Supports dividend
Sustainable and recurring earnings zSolid traditional utility
Building on successes at core electric utility
38
Q&A
