Exhibit 99.1
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma financial information presented on the following pages
is derived from the historical financial statements of DQE, Inc. and
subsidiaries ("DQE"). The unaudited pro forma condensed consolidated balance
sheet information as of December 31, 1999 gives pro forma effect to the
generation asset divestiture described in Item 2 as if such transaction had been
consummated on December 31, 1999. The unaudited pro forma condensed
consolidated statement of income gives pro forma effect to the generation asset
divestiture described in Item 2 as if the transaction had been consummated on
January 1, 1999.
The pro forma adjustments do not reflect any operating efficiencies or cost
savings that may be achievable with respect to the divested assets. The pro
forma adjustments do not include any adjustments to historical revenues and
expenses for any future price changes or any adjustments to operating expenses
for any future operation changes except for those items that are directly
related to the operation of the generation facilities.
The unaudited pro forma financial information is not necessarily indicative of
the financial position or operating results that would have occurred had the
generation assets divestiture been consummated on the dates for which such
transaction is being given effect. The pro forma adjustments reflecting the
generation asset divestiture are based upon the assumptions set forth in the
notes to the unaudited pro forma condensed consolidated financial statements.
The unaudited pro forma condensed consolidated financial information presented
on the following pages should be read in conjunction with the audited historical
financial statements (including the notes thereto) of DQE, which are contained
in its Annual Report on Form 10-K.
DQE
Pro Forma Condensed Consolidated Balance Sheet
December 31, 1999
Amounts in Thousands
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Pro Forma
UNAUDITED As Reported Adjustments As Adjusted
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ASSETS
Current assets:
Cash and temporary cash investments $ 54,229 $ - $ 54,229
Receivables 184,248 - 184,248
Other current assets 137,180 (33,057)e 104,123
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Current assets 375,657 (33,057) 342,600
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Long-term investments 639,284 - 639,284
Property, plant and equipment - net 1,828,067 (189,000)e 1,639,067
Transition costs 2,008,171 (1,300,559)e 707,612
Regulatory assets 224,002 - 224,002
Divestiture costs 218,653 (218,653)e -
Other 315,158 - 315,158
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Non-current assets 5,233,335 (1,708,212) 3,525,123
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TOTAL ASSETS $ 5,608,992 $(1,741,269) $ 3,867,723
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CAPITALIZATION and LIABILITIES
Current liabilities:
Notes payable and current debt maturities $ 812,052 $ (632,131)c $ 179,921
Other current liabilities 171,591 - 171,591
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Current liabilities 983,643 (632,131) 351,512
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Non-current liabilities:
Deferred income taxes 1,020,103 (246,056) 774,047
Deferred income 126,434 - 126,434
Other non-current liabilities 225,688 - 225,688
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Non-current liabilities 1,372,225 (246,056) 1,126,169
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Capitalization:
Long-term debt 1,633,077 (350,162)c 1,282,915
Preferred stock 272,182 - 272,182
Common shareholders' equity:
Common stock 994,935 - 994,935
Retained earnings 953,785 (43,586) 910,199
Treasury stock (602,689) (469,334)d (1,072,023)
Accumulated other comprehensive income 1,834 - 1,834
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Common shareholders' equity 1,347,865 (512,920) 834,945
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Total Capitalization 3,253,124 (863,082) 2,390,042
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TOTAL LIABILITIES and CAPITALIZATION $ 5,608,992 $(1,741,269) $ 3,867,723
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See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Exhibit 99.1
DQE
Pro Forma Condensed Consolidated Statement of Income
Year ended December 31, 1999
Amounts in thousands, except per share amounts
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Pro Forma
UNAUDITED As Reported Adjustments As Adjusted
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Operating Revenues:
Electricity sales $ 1,093,537 $ - a $ 1,093,537
Water sales 122,389 122,389
Other 125,275 125,275
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Total Operating Revenues 1,341,201 - 1,341,201
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Operating Expenses:
Fuel 167,080 (167,080)a -
Purchased power 58,102 364,036 a 422,138
Other operating 437,679 (68,117)a 369,562
Maintenance 75,400 (48,133)a 27,267
Depreciation and amortization 196,319 84,559 b 280,878
Taxes other than income taxes 87,779 (45,670)a 42,109
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Total Operating Expenses 1,022,359 119,595 1,141,954
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Operating Income 318,842 (119,595) 199,247
Other Income 152,003 - 152,003
Interest and Other Charges (158,707) 45,089 c (113,618)
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Income Before Taxes 312,138 (74,506) 237,632
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Income Taxes 110,722 (30,920)f 79,802
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Net Income 201,416 (43,586) 157,830
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Dividends on Preferred Stock 1,569 - 1,569
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Earnings Available for Common Stock $ 199,847 $ (43,586) $ 156,261
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Average Number of Common Shares
Outstanding (Thousands of Shares) 75,463 (11,049)d 64,414
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Earnings Per Share of Common Stock:
Basic $ 2.65 $ 2.43
Diluted $ 2.62 $ 2.40
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See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Exhibit 99.1
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(a) In conjunction with the generation station auction, Orion will supply
energy to Duquesne Light to cover the Provider of Last Resort (POLR)
obligation for customers who do not switch to another energy supplier. No
change would result to operating revenues as the amount of POLR revenues
are unaffected. Operating expenses related to coal and nuclear generation
(fuel, operating and maintenance costs, and property taxes) have been
eliminated. In addition, purchased power and gross receipt taxes have been
adjusted to reflect the impact of the provider of last resort agreement
with Orion. Under this agreement, the cost of the purchased power will be
equal to the operating revenue received from customers who do not switch to
another energy supplier.
(b) Since Duquesne Light would have recovered approximately $1.1 billion of
transition costs (net of deferred taxes) at the beginning of 1999 through
the generation auction, the permitted return on the unrecovered balance of
transition costs would have been substantially reduced. This reduced return
is reflected as additional amortization expense. The increase in
amortization expense is offset by a reduction in depreciation expense
related to the generation facilities of $21,793.
(c) Adjustment represents the impact of the elimination of the interest
component on the Beaver Valley Unit 2 lease of $35,245 and the incremental
debt and interest expense of $9,844 incurred by DQE from the issuance of
commercial paper and other debt in anticipation of receiving generation
auction proceeds.
(d) Adjustment represents the impact of the repurchase of $469,334 of common
stock on January 1, 1999. This amount reflects the estimated amount of
treasury stock purchases to be made by DQE with the auction proceeds.
(e) Adjustment represents the write-off of the net book value of the generation
plant assets, materials and supplies inventory, the recovery on December
31, 1999 of the transition assets (including the related deferred income
taxes) and the recovery of the previously deferred divestiture expenses.
(f) Adjustment represents the net income tax impact of all of the pro forma
adjustments utilizing Duquesne Light's effective tax rate.