Exhibit 99.1
Exhibit 99.1
EEI Financial Conference
October 2004
Safe Harbor Statement
The following 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. Projected cash flow, earnings, earnings growth, capital expenditures, 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 and POLR III, by our ability to negotiate appropriate terms with suitable generation suppliers, and by the performance of those suppliers. POLR customer retention may depend on market generation prices, as well as the marketing efforts of competing generation suppliers. Any debt reduction or refinancing will depend on the availability of cash flows and appropriate replacement or refinancing vehicles. The credit ratings received from the rating agencies could affect the cost of borrowing, the access to capital markets and liquidity. Customer energy demand, fuel costs and plant operations could affect Duquesne Energy Solutions’ 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 could depend on negotiations with the appropriate authorities) could affect financial position, earnings, and cash flows. 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
Bill Fields
VP and Treasurer
Susan Mullins
Controller
Quynh McGuire
Sr. Manager, Investor Relations
3
Agenda
Overview
PUC Update
Unregulated Businesses
Financing Review
Summary
4
OVERVIEW
Made Substantial Progress
Removed uncertainty and volatility
Resolved major legacy issues
Divested non-core businesses
Enhanced customer satisfaction at core utility
Produced solid financial & operational results
Strengthened balance sheet
No long-term debt maturities until 2008
Improved liquidity
6
Continuing To Deliver Value
Providing low risk, stable cash flow
Supports dividend, capex and debt service requirements
Focusing strategically on core traditional utility
Provides reliable earnings stream
Evaluating prudent growth initiatives
Reaffirming 2004 earnings guidance of $80M to $85M from continuing operations
$1.05 to $1.11 EPS
7
2005 Planning Process
Strategic Planning Process Oct / Nov
Complete small customer supply plan
Complete large customer supply plan
Finalize RFP process
Finalize EGS marketing & supply strategy
Evaluate growth plans for complementary businesses
Review Plan with Rating Agencies &
Financial Community Dec / Jan
8
PUC UPDATE
Electric Utility Operations
Duquesne Light Service Territory
Pittsburgh
Location: Southwestern Pennsylvania
Electric Utility Customers:
Approximately 588,000
Service Territory: 800 square miles
Transmission & Distribution Network:
592 circuit miles
9 transmission substations
556 distribution substations
10
POLR Regulatory Outcome
Proposed PUC Decision
Small Customers
2005–2010 Fixed Rates Approved 2005-2007 Fixed Rates
3-year Distribution Rate Freeze No Rate Freeze
Renewable Energy Portfolio Renewables Not Required
Large Customers
Fixed Price Default Service Fixed Price Service Approved through 5/31/06; Potential for additional 12 months
Hourly Price Service Approved as default POLR Service
Other
Join PJM RTO Approved
11
Termination Notice for Sunbury Purchase
Conditioned on reasonably satisfactory approval from PUC of Duquesne’s POLR plan
2005 – 2010 energy supply plan for residential & small commercial customers
Notified WPS of termination of sale agreement for Sunbury on 9/30
Disputing release of $4.4M escrow deposit
12
Average Residential POLR Rates $ per MWh
$54.50
$62.40
}14%
$50
$55
$60
$65
$70
2002
2003
2004
2005
2006
2007
13
Average Small Commercial POLR Rates $ per MWh
$58.20
$64.50
}11%
$50
$55
$60
$65
$70
2002
2003
2004
2005
2006
2007
14
POLR Retention Small Customers
73%
72%
73%
50%
60%
70%
80%
90%
100%
Q1 2002
Q2
Q3
Q4
Q1 2003
Q2
Q3
Q4
Q1 2004
Q2
Q3
15
Risk Mitigation Small Customers
Board-approved risk management policies
Energy risk management committee
Hedged approximately 70% of expected 2005-2007 load
Contracts for energy & capacity
Multiple investment-grade counterparties
Evaluating options for remaining 30%
May replace expected Sunbury plant output with additional contracts
16
2005 POLR Suppliers Small Customers
1000
900
800
700
600
500
400
300
200
100
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
5X16
7X24
7X24
Supplier 1
Contracts/Other
Assumes 71% customer retention
17
Large Customer Supply Options
Hourly price default service
Provided by Duquesne Light
Sourced from PJM market
Fixed price service
Provided by Duquesne Light
Approved 17-month initial period; potential for additional 12 months
Sourced by wholesale RFP
Competitive supplier (EGS)
Duquesne Light Energy
3rd party supplier
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Large Customer Supply Timeline
Executed contracts with 2 suppliers on Oct. 18, subject to PUC approval
Suppliers have investment grade credit ratings
Submitted summary of RFP process & proposed retail rates to PUC on Oct. 19
Will notify customers beginning Nov. 1 of rates and options
Will implement POLR III service on Jan. 1, 2005
Fixed price option must be selected by Jan. 31, 2005
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UNREGULATED BUSINESSES
DQE Financial
Landfill gas & alternative energy
Duquesne Energy Solutions
Operations & maintenance of synthetic fuel and other facilities
DQE Communications
High-speed, fiber optic based network
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Unregulated Businesses
Restructured businesses into one energy operation
Significant cost reductions
Lease investments provide low risk, predictable earnings and cash flows
Landfill gas investments
3 sites selling pipeline quality gas
Benefiting from high gas prices
Synthetic fuel investment
8.3% interest in limited partnership
Book balance = $0
Completed IRS audit with acceptance of placed in service dates and tax credits through 2001
Exploring 50% sale of investment
21
FINANCING REVIEW
Financing Activities
Reduced $215M of debt in 2003
Retired $21M of debt from Fresh Kills settlement in February 2004
Recapitalized balance sheet in 2004
Redeemed $150M of 8 3/8% MIPS during first-half of 2004
Issued $75M of 6.5% preferreds in April; $200M of 5.7% FMB in May
Retired DQE Capital’s $100M 8 3/8% PINES
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Debt Maturities ($ in Millions)
$300
$250
$200
$150
$100
$50
$0
No Debt Maturities Until 2008
$40
$48
$200
$50
$200
$14
$65
$223
$100
$18
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026-2030
2031
2032
2033+
DLC FMB
DLC Tax-Exempt
24
Current Ratings
Moody’s S&P Fitch
First Mortgage Bonds Baa1 BBB+ BBB
Holdings Senior Unsecured Baa3 BBB- BBB-
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SUMMARY
Summary
Focusing on operational excellence at core traditional utility
Strengthening balance sheet
Delivering value
Goal of providing top-tier total return
Expect to review strategic plan with financial community Dec/Jan
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