Exhibit 99.1
[LOGO] DQE
News Release
Date January 31, 2002
For Release Upon Receipt
Contact Media: Financial Community:
John Laudenslager Quynh McGuire
412-393-1502 412-393-1259
DQE ANNOUNCES 2001 YEAR-END RESULTS
PITTSBURGH - DQE today reported a loss of $153.9 million, or $2.75 per share,
for year-end 2001. This includes one-time charges of approximately $216.8
million, or $3.88 per share. For year-end 2001, operating earnings were $62.9
million, or $1.13 per share, including an after-tax gain of approximately $8.4
million, or 15 cents per share, related to the sale of the energy facility at
the Pittsburgh Airport that involved an extension of an existing operations and
maintenance contract. The one-time charges include $99.7 million relating to
AquaSource; $42.3 million relating primarily to energy technology investments;
$43.7 million relating to landfill gas investments; $19.9 million of
restructuring charges related to a corporate overhead reduction program; and
$11.2 million relating to the sale of the bottled water business and expenses
relating to the strategic review.
In the second half of 2001, DQE announced a new management team and a change in
its strategic direction. The company's Back-to-Basics strategy features a more
concentrated focus on its core electric utility operations and complementary
businesses, such as energy services. DQE currently is exploring, in an orderly
manner, opportunities to sell certain of its non-complementary assets. In
addition, cost reductions as a result of restructuring are expected to enhance
the profitability at DQE and Duquesne Light. While the magnitude of the one-time
charges in 2001 is significant, DQE believes it is now better positioned to
implement its Back-to-Basics strategy in 2002 and beyond. DQE's plan under the
Back-to-Basics strategy is to grow earnings more steadily, with less volatility,
over the next few years. The cornerstone of this strategy will be a focus on
seeking growth through a disciplined investment and management approach. All new
investment opportunities will be expected to have a strong and clear
relationship to DQE's core electric business, as well as the ability to create
sustained value.
On a comparable basis, DQE's year-end 2000 earnings from operations were $102.6
million, or $1.62 per share, excluding a gain of $51.8 million, or 82 cents per
share, primarily from the sale of alternative fuel facilities. A significant
factor in the 2001 decrease was the loss of earnings from the generation assets
that were sold in April 2000, as part of restructuring related to implementation
of customer choice in Pennsylvania. In addition, earnings of $12.3 million on
stranded costs were recorded in 2001, as compared to $45.6 million in 2000, a
reduction of $33.3 million.
In the fourth quarter of 2001, DQE recorded a loss of $66.7 million, or $1.19
per share, including one-time charges of $78.3 million, or $1.40 per share,
related to certain abandonments and impairments of investments. The $78.3
million in one-time charges includes:
. A restructuring charge of $19.9 million related to the streamlining and
integrating of operating units to simplify the company's corporate
structure.
. After-tax asset impairment charges of approximately $43.7 million at DQE
Financial. This included a $29.7 million write-off related to the Fresh
Kills, N.Y., landfill gas site. The remaining amount was due to abandonment
of other non-performing landfill gas investments. The Fresh Kills
investment and construction of a gas processing facility have been
adversely impacted by the vast amount of World Trade Center debris being
shipped to the landfill in the aftermath of the September 11 terrorist
attacks in New York City. In addition, World Trade Center waste handling
activities and the weight of the debris have damaged and continue to impair
the effectiveness of the gas collection system. We are exploring potential
avenues to recover disaster-related costs.
. Investment impairments of approximately $14.7 million primarily related to
the energy-technology investments.
Regulatory Update
As a result of the successful generation sale, Duquesne Light anticipates
recovering its stranded costs seven years earlier than any other major
Pennsylvania utility. We anticipate termination of the stranded costs collection
period by mid-year 2002 for most major rate classes, resulting in decreases to
customer bills. Ultimately, a typical bill is expected to decrease approximately
16 percent, on average, for a residential customer who takes provider-of-last-
resort service from Duquesne Light. This reduction reflects both the end of the
stranded costs collection period and the ongoing full recovery of the additional
costs associated with membership in a regional transmission organization.
As stranded costs are fully recovered for each rate class, Duquesne Light's
earnings will reflect the incremental half-cent margin for each KWH supplied
through the provider-of-last-resort arrangement with Orion Power MidWest, L. P.
At year-end 2001, approximately 78% of Duquesne Light's customer load received
electricity through the provider-of-last-resort arrangement.
In December 2001, FirstEnergy Corp. and DQE reached an agreement under which
FirstEnergy subsidiary, FirstEnergy Solutions, would supply Duquesne Light with
capacity sufficient to meet the anticipated capacity credit obligations under
PJM West protocols for up to approximately 60 percent of Duquesne Light's total
load upon Duquesne Light's entry into the PJM West power pool.
Duquesne's inclusion in PJM West will put the region's transmission facilities
under common control to reduce long-term energy costs and enhance reliability to
customers. PJM operates the world's largest competitive wholesale market and one
of North America's largest power grids.
Earnings Outlook
The company affirms the previous earnings guidance of $1.68 and $1.80 for 2002
and 2003, respectively, representing recurring earnings. The company expects
2002 earnings to equal the current dividend level of $1.68 per share. The
projected 7% increase in 2003 earnings reflects a continued focus on recurring
and sustainable earnings through the Back-to-Basics strategy.
DQE delivers essential products and related services, including electricity,
water and communications, to more than one million customers throughout the
United States.
The foregoing contains forward-looking statements, the results of which may
materially differ from those implied due to known and unknown risks and
uncertainties as discussed below. Projected DQE cash flow, earnings, earnings
growth and dividends will depend on the performance of its subsidiaries, on the
effectiveness of the divestiture of non-core businesses, and Board policy.
Demand for electric, water and telecommunications utility services and landfill
gas, the availability of appropriate investment opportunities in those
industries, changing market conditions and weather conditions, could affect
earnings levels at DQE and each subsidiary. The number of customers who choose
to receive electric generation through the provider-of last-resort-arrangement
with Orion will affect Duquesne Light's earnings. Customer energy demand, fuel
costs and plant operations will affect DQE Energy Services' earnings. The
outcome of the shareholder litigation initiated against each of DQE and
AquaSource will affect DQE's performance. Stock market volatility and business
conditions with respect to energy technology and electronic commerce will affect
DQE's ability to monetize its non-core energy technology and electronic commerce
portfolio. Market conditions and demand for services will affect DQE's ability
to monetize non-core and financial investments, and unregulated businesses. The
tragic events of September 11, 2001 have created broad uncertainty in the global
economy, and DQE continues to assess the impact on its businesses, including but
not limited to DQE Financial. Overall performance by DQE 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 DQE's SEC filings made to date.
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STATEMENT OF INCOME
(Thousands of Dollars) Three Months Twelve Months
Ended December 31, Ended December 31,
(Unaudited) 2001 2000 2001 2000
Operating Revenues:
Sales of Electricity:
Customers $ 240,701 $234,684 $ 1,014,047 $ 999,834
Utilities 2,034 3,009 10,685 29,413
Total Sales of Electricity 242,735 237,693 1,024,732 1,029,247
Water Sales 27,428 30,323 109,045 112,151
Other 40,488 68,566 162,305 186,206
Total Operating Revenues 310,651 336,582 1,296,082 1,327,604
Operating Expenses:
Fuel and purchased power 96,267 83,540 414,309 347,859
Non-Fuel operating and
maintenance 97,693 115,254 359,984 464,154
Impairment of long-lived
assets 67,300 - 176,478 -
Restructuring charge 31,085 - 31,085 -
Depreciation and
amortization 89,786 90,899 370,931 343,232
Taxes other than income
taxes 12,147 4,956 60,056 68,070
Total Operating
Expenses 394,278 294,649 1,412,843 1,223,315
Operating Income (Loss) (83,627) 41,933 (116,761) 104,289
Other Income:
Investment income 17,175 15,846 82,980 227,727
Investment impairment (23,991) - (71,239) -
Other income (6,816) 15,846 11,741 227,727
Interest and other charges 23,594 29,377 104,442 123,610
Income (Loss) Before Income
Taxes and Cumulative
Effect (114,037) 28,402 (209,462) 208,406
Income Taxes (47,474) 6,114 (56,081) 70,350
Income (Loss) Before
Cumulative Effect (66,563) 22,288 (153,381) 138,056
Cumulative Effect of Change
in Accounting Principle -
net (a) - - - 15,495
Net Income (Loss) (66,563) 22,288 (153,381) 153,551
Dividends on Preferred
Stock 157 (379) 516 (806)
Earnings (Loss) Available
for Common Stock ($66,720) $ 22,667 ($153,897) $ 154,357
Average No. of Common
Shares (000) 55,894 56,136 55,888 63,348
Earnings (Loss) Per Share
of Common Stock ($1.19) $ 0.40 ($2.75) $ 2.44
Dividends Declared Per
Share $ 0.42 $ 0.42 $ 1.68 $ 1.62
Actual No. of Common Shares
(000) 55,908 55,886 55,908 55,886
(a) Relates to the accrual of unbilled electric utility customer revenues.
Amount is net of appropriate expenses and taxes.
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OPERATING STATISTICS
(Thousands) Three Months Ended
December 31,
(Unaudited) 2001 2000
KILOWATT-HOUR SALES:
Electric Utility Customers:
Residential 838,434 881,967
Commercial 1,475,953 1,490,406
Industrial 778,790 852,130
Miscellaneous 17,834 17,580
Sales to Electric Utility
Customers 3,111,011 3,242,083
Sales to Other Utilities 77,230 78,789
TOTAL SALES 3,188,241 3,320,872
OPERATING REVENUES:
Electric Utility Customers:
Residential $ 87,364 $ 90,519
Commercial 108,581 96,787
Industrial 40,697 44,830
Miscellaneous 4,059 2,548
Revenues from Electric Utility
Customers 240,701 234,684
Sales to Other Utilities 2,034 3,009
Water Sales 27,428 30,323
Other 40,488 68,566
TOTAL OPERATING REVENUES $ 310,651 $ 336,582
(Thousands) Twelve Months Ended
December 31,
(Unaudited) 2001 2000
KILOWATT-HOUR SALES:
Electric Utility Customers:
Residential 3,583,859 3,508,516
Commercial 6,169,688 6,092,339
Industrial 3,282,731 3,580,516
Miscellaneous 71,445 70,369
Sales to Electric Utility
Customers 13,107,723 13,251,740
Sales to Other Utilities 363,183 962,681
TOTAL SALES 13,470,906 14,214,421
OPERATING REVENUES:
Electric Utility Customers:
Residential $ 371,666 $ 373,154
Commercial 456,330 425,450
Industrial 173,103 191,670
Miscellaneous 12,948 9,560
Revenues from Electric Utility
Customers 1,014,047 999,834
Sales to Other Utilities 10,685 29,413
Water Sales 109,045 112,151
Other 162,305 186,206
TOTAL OPERATING REVENUES $ 1,296,082 $ 1,327,604
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