1
EXHIBIT 99(d)
_____________________________________________________________________________
PACIFICORP NEWS RELEASE
_____________________________________________________________________________
Scott Hibbs: (503) 731-2123
May 5, 1998
PACIFICORP REPORTS FIRST QUARTER 1998 FINANCIAL RESULTS; RESULTS OF WORK
FORCE REDUCTION
PORTLAND, Oregon - PacifiCorp (NYSE: PPW) today reported first quarter
1998 earnings on common stock of $104 million, or $0.35 per share, excluding a
charge of $70 million, or $0.24 per share, associated with the Company's U.S.
work force reduction, and a charge of $54 million, or $0.18 per share,
associated with the Company's terminated bid for The Energy Group, PLC
("TEG"). Including these charges, the Company reported a loss on common stock
of $20 million, or $0.07 per share.
In the first quarter of 1997, the Company reported earnings on common
stock of $115 million, or $0.39 per share, which included $18 million, or
$0.06 per share, from the Company's telecommunications operations that were
sold in December of 1997.
The earnings contribution from the Company's Domestic Electric
Operations totaled $76 million in the quarter, excluding the cost of the work
force reduction. The first quarter 1997 earnings contribution from Domestic
Electric Operations was $75 million. Higher sales to commercial and
industrial customers contributed to the increase in earnings. The combined
rate of growth in non-fuel operations and maintenance and general and
administrative costs was reduced to one percent in the quarter.
On January 12, 1998, the Company announced a series of initiatives aimed
at reducing costs in its U.S. electric business, including the elimination of
an estimated 600 jobs through a combination of voluntary early retirement and
special severance in its operations and general administrative groups. Over
950 employees accepted the early retirement program and after limited
refilling of certain positions, the Company expects a net reduction of
approximately 700 positions. A majority of the employees accepting early
retirement left the Company in April 1998.
The Company recorded a pretax charge of $113 million in the first
quarter relating to the workforce reduction program. PacifiCorp expects to
realize approximately $50 million of annual pretax cost savings starting in
the second quarter of 1998 as a result of the program.
Earnings from the Company's Australian Electric Operations were $14
million in the first quarter of 1998, compared to $21 million in the same
quarter last year. Earnings in the quarter were reduced by $2 million as the
result of unfavorable fluctuations in the currency exchange
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rate. Earnings in the first quarter of 1997 were benefited by adjustments
totaling $7 million associated with the renegotiation of certain industrial
customer contracts. Unfavorable fluctuations in currency exchange rates
partially offset the benefit of higher sales to commercial and industrial
customers in the quarter.
"We are pleased with the sales growth in both our U.S. and Australian
electric businesses," said Fred Buckman, PacifiCorp president and chief
executive officer. "We are also encouraged that the rate of growth in
non-fuel operating costs and general and administrative expenses has slowed.
We are continuing our efforts to further reduce these costs and improve
earnings in our U.S. business."
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FIRST QUARTER 1998 EARNINGS ANALYSIS
DOMESTIC ELECTRIC OPERATIONS
EARNINGS CONTRIBUTION
Domestic Electric Operations earnings contribution was $76 million, or $0.25
per share, excluding the $70 million charge related to the work force
reduction, as compared to $75 million, or $0.25 per share, in the first
quarter of 1997. Higher commercial and industrial energy sales contributed to
the increase in earnings.
The significant increase in wholesale sales added only modestly to earnings,
as margins on new wholesale sales remain thin.
Including the work force reduction charge, Domestic Electric Operations'
earnings contribution in the first quarter of 1998 was $6 million, or $0.02
per share.
REVENUES
Total Domestic Electric Operations revenues increased $284 million, or 36
percent, from the first quarter of 1997 to $1.1 billion. This increase was
primarily attributable to a $269 million increase in wholesale revenues.
Residential revenues were down $1 million to $232 million. Energy sales
volumes decreased 2 percent. Growth in the average number of residential
customers of 3 percent added $6 million to revenues. This increase was more
than offset by volume decreases due to warmer weather and other usage changes,
which lowered revenues by $6 million, and lower Utah rates that decreased
revenues by $1 million.
Commercial revenues were up $11 million, or 7 percent, to $161 million.
Energy sales volumes increased 7 percent over the prior year. Increased usage
by existing commercial customers added $8 million to revenues and a 2 percent
increase in commercial customers added $5 million. Warmer weather in 1998
decreased revenues by $2 million and lower Utah rates decreased revenues by
$1 million.
Industrial revenues increased $8 million, or 5 percent, to $163 million. A 3
percent increase in energy sales volumes drove a $4 million increase in
revenues. Revenues in 1997 were reduced by billing adjustments of $6 million
for certain industrial customers.
Wholesale volumes continued to expand with the active markets. The
$269 million increase in revenues was driven by energy volumes that more than
doubled in 1998 to a total of 22.4 million mWh. Higher short-term and spot
market wholesale energy volumes increased revenues by $239 million. Related
energy prices averaged $20 per mWh in the quarter, a 25 percent increase over
the prior year. The higher prices for these sales added $21 million to
revenues in the quarter. Higher long-term volumes and prices added $9 million
to revenues.
4
As previously reported, the Company is reviewing the Utah Public Service
Commission (PSC) order that changes the method for allocating costs among its
seven state service territory. This order indicates that Utah prices could be
reduced by approximately $50 million to $60 million per year once fully phased
in on January 1, 2001. However, the Company and the PSC are continuing to
discuss this new allocation order and agreed that the impact on prices must be
determined in a general rate case expected later in 1998.
OPERATING EXPENSES
Total operating expenses increased $385 million, or 64 percent, to
$981 million in the quarter. This increase was primarily attributable to
increased purchased power expense to serve the expanding wholesale market and
the cost for the work force reduction.
Purchased power expense increased $255 million, to $459 million. The higher
expense was primarily due to a 10.7 million mWh increase in short term firm
and spot market energy purchases, more than double the amount of purchases in
the same period of 1997 which increased purchased power expense $233 million.
Short-term firm and spot market purchase prices averaged $20 per mWh in the
quarter versus $14 per mWh in 1997, a 36 percent increase. The increase in
purchase prices added $13 million to costs. Higher volumes and prices
relating to long-term firm purchased power contracts added $4 million and $3
million, respectively, to purchased power costs.
Fuel expense was up $6 million, or 5 percent, to $123 million. Thermal
generation was up 12 percent to 13.4 million mWh, resulting in a decrease of
6 percent in the average cost per mWh to $9.73. Hydroelectric generation
decreased 7 percent compared to the first quarter of last year due to less
favorable water conditions.
Net power costs in the quarter were $7.12 per mWh, compared to $7.98 per mWh
in the first quarter of 1997, an 11 percent decrease. Net power cost
represents the net cost to serve the Company's domestic retail customers on a
mWh basis. This is measured by the sum of fuel, purchased power and wheeling
expense, less wholesale power and wheeling revenues. The decrease in net
power cost was attributable to increased sales through the wholesale markets
of 1.1 million mWh of the Company's generation that was in excess of its
retail load requirements.
Depreciation and amortization expense increased $9 million, or 10 percent, to
$98 million. Higher depreciation rates that were implemented in the fourth
quarter 1997 added $4 million to expense and increased plant in service added
$5 million.
Other operations and maintenance expense decreased $3 million, or 3 percent,
to $111 million. Steam plant maintenance expense decreased $2 million due to
overhaul timing differences. Distribution plant maintenance expense decreased
$1 million due to recognition of storm damage expense in 1997.
Administrative and general expenses increased $5 million, or 7 percent, to $78
million primarily due to timing of employee related costs, partially offset by
lower outside service expense.
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OTHER INCOME/EXPENSE
Domestic Electric Operations interest expense was up $6 million to $80 million
as a result of higher debt balances. The higher interest was due to capital
contributions made to PacifiCorp Group Holdings Company (Holdings) relating to
the acquisition of TPC Corporation (TPC) in April 1997. Income tax expense
declined $41 million, to $8 million, due to the decline in pretax income.
AUSTRALIAN ELECTRIC OPERATIONS
AUSTRALIAN ELECTRIC OPERATIONS FIRST QUARTER RESULTS (In millions):
____________________________________________________
Change Change
Due to Due to
1998 1997 Currency Operations
____ ____ ________ __________
Australian Electric Operations:
______________________________
Revenues $162 $183 $(27) $6
Purchased power (58) (69) 10 1
Depreciation and amortization (15) (18) 2 1
Other operating expenses (48) (41) 8 (15)
___ ___ _ ___
Income from operations 41 55 (7) (7)
Equity in losses of Hazelwood (3) (3) 1 (1)
Interest expense (16) (18) 2 -
___ ___ _ _
Income before income taxes 22 34 (4) (8)
Income taxes (8) (13) 2 3
__ ___ _ _
Earnings contribution $14 $21 $(2) $(5)
=== === === ===
EARNINGS CONTRIBUTION
The Company's Australian Electric Operations contributed earnings of
$14 million, or $0.05 per share, in the first quarter of 1998, compared to
$21 million, or $0.07 per share in 1997. The first quarter 1997 earnings
included adjustments associated with renegotiating certain Tariff H
industrial customer contracts that added $7 million, or $0.02 per share, to
earnings. Excluding the impact of currency exchange rate fluctuations and the
1997 Tariff H adjustment, the Company's Australian Electric Operations
reported $2 million of increased earnings contribution over 1997.
The currency exchange rate for converting Australian dollars to U. S. dollars
was 0.67 in the first quarter of 1998 as compared to 0.78 in 1997, a 14
percent decrease in the quarter. The effect of this change in exchange rates
lowered revenues by $27 million and costs by $25 million in the first quarter
of 1998.
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The following discussion excludes the effects of the lower currency exchange
rate in 1998.
REVENUE
Australia's revenues increased $6 million, or 3 percent, to $162 million.
Excluding $11 million of revenue in 1997 relating to Tariff H contracts,
revenues would have increased $17 million, or 10 percent due to a .6 million
mWh, or 23 percent, increase in energy sales, which added $21 million to
revenues. Declining prices reduced revenues by $3 million.
Energy volumes sold to contestable customers outside Powercor's franchise area
were up .6 million mWh and added $22 million to revenues due to customer gains
in New South Wales and $4 million due to customer gains in Victoria. Lower
prices for these sales reduced revenues by $3 million in 1998. Inside
Powercor's franchise area, revenues decreased $5 million due to a 64 million
kWh decrease in energy sold.
Other revenues decreased $12 million, to $5 million, largely as a result of
$11 million associated with Tariff H contracts.
OPERATING EXPENSES
Purchased power expense decreased $1 million, or 2 percent, to $58 million.
Lower average prices reduced power costs by $17 million. Prices for purchased
power averaged $23 per mWh in the first quarter of 1998 compared to $28 per
mWh in the first quarter of 1997. The decrease was offset in part by a 23
percent increase in purchased power volumes that added $16 million to costs.
Other operating expenses increased $15 million, or 37 percent, to $48 million.
Increased sales to contestable customers outside the Powercor service area
resulted in higher network fees of $16 million. This increase was offset in
part by higher network revenues of $3 million from customers inside Powercor's
franchise area serviced by other energy suppliers.
UNREGULATED ENERGY TRADING
EARNINGS CONTRIBUTION
The unregulated energy trading segment reported losses of $0.5 million in the
quarter as compared to a $1 million loss in the first quarter of 1997.
PacifiCorp Power Marketing, Inc. recorded electricity trading revenues of $498
million, a related gross margin of $2 million and break even results in the
first quarter of 1998 compared to revenues of $39 million, a gross margin of
$1 million and a net loss of $1 million in 1997.
TPC, acquired in April 1997, recorded natural gas trading revenues of
$318 million, a gross margin of $3 million and a net loss of $0.6 million in
1998.
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OTHER BUSINESSES
EARNINGS CONTRIBUTION
Other operations reported a loss of $39 million in the quarter compared to
earnings of $2 million in the same period a year ago. The loss is the result
of an $86 million pretax charge for costs associated with the Company's
terminated bid for TEG. These costs, dating back to June of 1997, had been
deferred pending the outcome of the transaction.
Results from other operations for the quarter were benefited by approximately
$23 million in increased interest income and reduced interest expense as the
result of cash received from asset sales in 1997. The after-tax cash proceeds
from these sales totaled approximately $1.5 billion.
On March 2, 1998, a subsidiary of Holdings purchased approximately 46 million
TEG shares at a price of 820 pence per share, or $625 million, utilizing a
portion of the cash proceeds from asset sales.
On May 1, 1998, the Company received approximately $70 million in cash
proceeds in the initial closing for the sale of its affordable housing
properties. The completion of this sale is expected to occur in the near
future upon receipt of various consents. This sale transaction will not have
a material impact on the Company's 1998 earnings.
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PacifiCorp
and its Consolidated Subsidiaries
Summary Financial Information
(In Thousands, Except Per Share Amounts)
(Unaudited)
3 Months Ended March 31 $ %
1998 1997 Change Change
- ------------------------------------------------------------------------------------------
REVENUES
Domestic Electric Operations
(See next page) $ 1,077,000 $ 793,200 $ 283,800 36
Australian Electric Operations
(See next page) 162,500 183,400 (20,900) (11)
Unregulated Energy Trading (1) 815,600 38,900 776,700 *
Other Operations (2) 20,600 26,300 (5,700) (22)
-----------------------------------------------------
TOTAL 2,075,700 1,041,800 1,033,900 99
-----------------------------------------------------
EXPENSES
Domestic Electric Operations
(See next page) 981,200 596,500 384,700 64
Australian Electric Operations 121,700 128,500 (6,800) (5)
Unregulated Energy Trading (1) 816,300 40,400 775,900 *
Other Operations (2) 17,000 15,000 2,000 13
-----------------------------------------------------
TOTAL 1,936,200 780,400 1,155,800 148
-----------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
Domestic Electric Operations 95,800 196,700 (100,900) (51)
Australian Electric Operations 40,800 54,900 (14,100) (26)
Unregulated Energy Trading (1) (700) (1,500) 800 53
Other Operations (2) 3,600 11,300 (7,700) (68)
-----------------------------------------------------
TOTAL 139,500 261,400 (121,900) (47)
Interest expense 94,300 106,000 (11,700) (11)
Other (income) expense 75,400 (3,400) 78,800 *
-----------------------------------------------------
Income from continuing operations
before income taxes (30,200) 158,800 (189,000) (119)
Income taxes (15,100) 56,100 (71,200) (127)
-----------------------------------------------------
Income from continuing operations (15,100) 102,700 (117,800) (115)
Discontinued operations (3) - 18,300 (18,300) (100)
-----------------------------------------------------
NET INCOME (15,100) 121,000 (136,100) (112)
Preferred dividend requirement 4,800 6,100 (1,300) (21)
-----------------------------------------------------
EARNINGS CONTRIBUTION (LOSS)
ON COMMON STOCK (4)
Domestic Electric Operations 5,600 74,600 (69,000) (92)
Australian Electric Operations 14,100 21,000 (6,900) (33)
Unregulated Energy Trading (1) (500) (1,000) 500 50
Other Operations (2) (39,100) 2,000 (41,100) *
-----------------------------------------------------
Continuing operations (19,900) 96,600 (116,500) (121)
Discontinued operations (3) - 18,300 (18,300) (100)
-----------------------------------------------------
TOTAL $ (19,900) $ 114,900 $ (134,800) (117)
=====================================================
Average common shares outstanding 297,059 295,393 1,666 1
EARNINGS PER COMMON SHARE - BASIC AND DILUTIVE
Domestic Electric Operations $ 0.02 $ 0.25 $ (0.23) (92)
Australian Electric Operations 0.05 0.07 (0.02) (29)
Unregulated Energy Trading (1) - - - -
Other Operations (2) (0.14) 0.01 (0.15) *
-----------------------------------------------------
Continuing operations (0.07) 0.33 (0.40) (121)
Discontinued operations (3) - 0.06 (0.06) (100)
-----------------------------------------------------
TOTAL $ (0.07) $ 0.39 $ (0.46) (118)
=====================================================
Dividends paid per common share $ 0.27 $ 0.27 $ - -
=====================================================
<FN>
* Not a meaningful number
</FN>
9
PacifiCorp
and its Consolidated Subsidiaries
Summary Financial Information
(Unaudited)
3 Months Ended March 31 $ %
1998 1997 Change Change
- ------------------------------------------------------------------------------------------
DOMESTIC ELECTRIC REVENUES (In thousands)
Residential $ 231,800 $ 233,100 $ (1,300) (1)
Commercial 161,400 150,200 11,200 7
Industrial 162,700 155,000 7,700 5
Other 7,600 7,800 (200) (3)
-----------------------------------------------------
Retail sales 563,500 546,100 17,400 3
Wholesale sales 499,100 229,700 269,400 117
Other 14,400 17,400 (3,000) (17)
-----------------------------------------------------
TOTAL $ 1,077,000 $ 793,200 $ 283,800 36
=====================================================
DOMESTIC ELECTRIC ENERGY SALES (Millions of kWh)
Residential 3,751 3,827 (76) (2)
Commercial 2,992 2,784 208 7
Industrial 4,891 4,745 146 3
Other 159 169 (10) (6)
-----------------------------------------------------
Retail sales 11,793 11,525 268 2
Wholesale sales 22,443 10,240 12,203 119
-----------------------------------------------------
TOTAL 34,236 21,765 12,471 57
=====================================================
DOMESTIC ELECTRIC EXPENSES (In thousands)
Fuel $ 122,700 $ 116,600 $ 6,100 5
Purchased power 458,700 203,900 254,800 125
Other operations and maintenance 110,600 113,700 (3,100) (3)
Depreciation and amortization 98,100 89,300 8,800 10
Administrative and general 78,000 73,000 5,000 7
Special charges 113,100 - 113,100 *
-----------------------------------------------------
TOTAL $ 981,200 $ 596,500 $ 384,700 64
=====================================================
AUSTRALIAN ELECTRIC REVENUES (In thousands)
Residential 48,600 58,500 (9,900) (17)
Commercial 53,300 49,300 4,000 8
Industrial 55,700 57,900 (2,200) (4)
-----------------------------------------------------
Energy sales 157,600 165,700 (8,100) (5)
Other 4,900 17,700 (12,800) (72)
-----------------------------------------------------
TOTAL $ 162,500 $ 183,400 $ (20,900) (11)
=====================================================
AUSTRALIAN ELECTRIC ENERGY SALES (Millions of kWh)
Residential 576 608 (32) (5)
Commercial 1,040 662 378 57
Industrial 1,356 1,150 206 18
-----------------------------------------------------
Total 2,972 2,420 552 23
=====================================================
March December $ %
1998 1997 Change Change
-----------------------------------------------------
CONSOLIDATED CAPITALIZATION (In thousands)
Common equity $ 4,250,000 $ 4,321,000 $ (71,000) (2)
Preferred stock 241,000 241,000 - -
Preferred securities of trusts holding
solely PacifiCorp debentures 341,000 340,000 1,000 -
Long-term debt 4,425,000 4,415,000 10,000 -
Short-term debt 725,000 555,000 170,000 31
-----------------------------------------------------
TOTAL $ 9,982,000 $ 9,872,000 $ 110,000 1
=====================================================
<FN>
* Not a meaningful number
</FN>
(1) Unregulated Energy Trading includes the natural gas and wholesale
electricity trading activities of TPC Corporation, acquired in April
1997, and PacifiCorp Power Marketing, respectively.
(2) Other Operations includes the operations of PacifiCorp Financial
Services, Inc., Pacific Generation Company (sold Nov. 1997), and several
start-up phase ventures, as well as activities of PacifiCorp Group
Holdings Company.
(3) Represents the discontinued operations of Pacific Telecom, Inc., a
telecommunications subsidiary.
(4) Earnings contribution on common stock by segment:
(a) Does not reflect elimination for interest on intercompany
borrowing arrangements.
(b) Includes income taxes on a separate company basis, with any
benefit or detriment of consolidation reflected in Other
Operations.
(c) Amounts are net of preferred dividend requirements and minority
interest.