NEWS RELEASE
April 21, 2006
For Release: Immediately
Contact: Investors: Stacey A. Renner, (845) 486-5730
News Media: Denise D. VanBuren, (845) 471-8323
CH Energy Group Reports First Quarter Earnings
(Poughkeepsie, NY) The impact of warmer winter weather and the expense of
restoring electric service in the wake of storms were the primary factors that
combined to reduce first-quarter earnings for CH Energy Group, Inc. (NYSE:CHG)
by 13 cents per share as compared to those of the first quarter of 2005. The
Company posted quarterly results of $1.16 versus $1.29 one year ago.
"We estimate that residential heating degree days (a measurement of
heating requirements) were 9 percent lower than those of a year ago, and about
10 percent below normal; that fact alone was enough to reduce earnings
corporate-wide by about 16 cents per share," explained Chairman of the Board,
President and C.E.O. Steven V. Lant. "In addition, we incurred about $1.7
million in increased expenses to restore electric service after windstorms
within Central Hudson's service territory, which further reduced our quarterly
earnings by about 7 cents. Clearly, unusually warm yet stormy winter weather
took its toll this quarter. However, weather variations average out over time
and our fundamentals remain solid."
Those impacts were partially offset by the benefits of several
regulatory mechanisms.
Regulated Electric and Gas Business
Central Hudson Gas & Electric Corporation earnings were down 12 cents
as compared to those of the first quarter of 2005. Electric net operating
revenues decreased by 6 cents between the first quarter of 2005 and the first
quarter of 2006, as deliveries declined by 5 percent. Natural gas net operating
revenues also decreased by 6 cents quarter to quarter, representing a decline in
deliveries of 14 percent. Central Hudson's earnings for the quarter were buoyed,
however, by several regulatory mechanisms, including funds made available toward
achieving allowed operating income levels.
Fuel Distribution Business
Earnings were 2 cents lower in the fuel distribution business during
2006's first quarter versus those of a year ago, with weather estimated to have
reduced earnings by 5 cents. Total petroleum sales fell by more than 7 percent,
as compared to the first three months of 2005 and sales to residential customers
declined by 13 percent. Importantly, improved service profitability and margins,
as well as the contributions of acquisitions made in the fourth quarter of 2005,
helped to offset the decline in the gross profit from reduced sales associated
with warmer winter weather.
Other Business
Increased income associated with short-term investments held by the
holding company added 1 cent to quarterly earnings, as compared to the first
quarter of 2005.
About CH Energy Group, Inc.
With nearly 450,000 customers, CH Energy Group, Inc. is a family of
companies seizing new opportunities in the energy marketplace through two
primary subsidiaries: Central Hudson Gas & Electric Corporation is a regulated
transmission and distribution utility serving approximately 363,500 customers in
eight counties of New York State's Mid-Hudson River Valley, and delivering
natural gas and electricity in a 2,600-square-mile service territory that
extends from the suburbs of metropolitan New York City north to the Capital
District at Albany. Central Hudson Enterprises Corporation, a non-regulated
subsidiary, is the umbrella for a family of energy-related companies and
investments focused primarily on fuel oil distribution and renewable energy.
CHEC's fuel distribution business supplies energy products and services to more
than 85,000 customers in eight states, stretching from Connecticut to the
Washington, D.C. area. CHEC also has interests in a Lexington, Neb., ethanol
plant, two wind power projects, and a biomass plant in upstate New York.
# # #
Conference Call: Mr. Lant will conduct a conference call with analysts and
investors to review financial results at 2:00 p.m. (ET) today, April 21, 2006.
Dial-in: 1-877-209-0397; Conference Name: "CH Energy Group." A digitized replay
of the call will be available from 6:15 p.m. (ET) on April 21, 2006, until 11:59
p.m. (ET) on April 27, 2006, by dialing 1-800-475-6701 and entering access code
#825802. A web cast of the call will be available for replay for approximately
30 days; consolidated financial statements are also available on the Company's
website at www.CHEnergyGroup.com.
Forward-Looking Statements
Statements included in this news release, including documents
incorporated by reference that are not historical in nature, are intended to be,
and are hereby identified as, "forward-looking statements" for purposes of the
safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements may be identified by words including
"anticipates," "believes," "projects," "intends," "estimates," "expects,"
"plans," "assumes," "seeks," and similar expressions. Forward-looking statements
including, without limitation, those relating to CH Energy Group, Inc. and its
subsidiaries' future business prospects, revenues, proceeds, working capital,
liquidity, income and margins, are subject to certain risks and uncertainties
that could cause actual results to differ materially from those indicated in the
forward-looking statements, due to several important factors including those
identified from time to time in the forward-looking statements. Those factors
include, but are not limited to: weather; energy supply and demand; fuel prices;
interest rates; potential future acquisitions; developments in the legislative,
regulatory and competitive environment; market risks; electric and gas industry
restructuring and cost recovery; the ability to obtain adequate and timely rate
relief; changes in fuel supply or costs; the success of strategies to satisfy
electricity requirements now that Central Hudson's major electric generation
assets have been sold; future market prices for energy, capacity, and ancillary
services; the outcome of pending litigation and certain environmental matters,
particularly the status of inactive hazardous waste disposal sites and waste
site remediation requirements; and certain presently unknown or unforeseen
factors, including, but not limited to, acts of terrorism. CH Energy Group, Inc.
and its subsidiaries undertake no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. Given these uncertainties, undue reliance should not be
placed on the forward-looking statements.
page -1-
APPENDIX
Highlights Relative to Prior Year
2006 More
3 Months Ended March 31: 2006 1 2005 1 (Less) than 2005
Operating Revenues $317,231,000 $286,089,000 $ 31,142,000
Income Available for
Common Stock $ 18,300,000 $ 20,339,000 $ (2,039,000)
Earnings Per Share
Of Common Stock (Basic) $1.16 $1.29 $(.13)
Average Shares Outstanding (Basic) 15,762,000 15,762,000
1 Unaudited
Consolidated basic earnings per share of CH Energy Group Inc. (CHEG), decreased
$.13 per share due to the following:
Regulated Electric and Natural Gas Businesses - Central Hudson Gas &
Electric Corp.: - $ .12
----------------------------------------------------------------------
o Down $.14 from an increase in operating expenses mostly related to
storm restoration efforts in the months of January and February 2006
and a $.03 increase in expense related to uncollectible accounts and
injuries and damages.
o Down $.06 due to a decrease in electric net operating revenues. Total
billed electric deliveries decreased 5% including an 8% decrease in
deliveries to residential customers and a 4% reduction in deliveries to
commercial customers, both attributable to a decrease in usage
resulting from warmer weather in the first quarter of 2006. Weather
decreased earnings from electric deliveries by approximately $.05 per
share. Residential heating degree-days (electric and natural gas) were
9% lower than last year and 10% lower than normal.
o Down $.06 due to a decrease in natural gas net operating revenues
primarily from the warmer weather. Despite modest customer growth,
billed deliveries to firm natural gas customers decreased 14%.
Deliveries to residential and commercial customers, largely space
heating deliveries, each decreased 13%, while industrial deliveries,
which are approximately 4% of total firm sales, decreased 29%. The
decrease in heating degree-days reduced earnings by approximately $.06
per share.
o Up $.14 from electric and natural gas regulatory mechanisms. The
increase is due to a reduction in shared earnings (8 cents) from
electric operations resulting from lower ratemaking operating income to
date for the rate year ending June 30, 2006, and the recording of
electric and natural gas revenues (6 cents total) to restore earnings
to the allowed rate of return in accordance with the provisions of
Central Hudson's current Settlement Agreement.
Unregulated - Fuel Distribution Business: - $ .02
--------------------------------------------------
o Down $.03 due to an increase in operating expenses and a slight
increase in interest expense on inter-company debt. The increase in
operating expenses is due to an increase in marketing expense, other
general and administrative expenses and added expenses due to
acquisitions made in the fourth quarter of 2005.
o Up $.01 due to an increase in service profitability of $.02 per share,
which was partially offset by a decrease in gross margin from the sale
of petroleum products of $.01 per share resulting from a decrease in
volumes sold due to warmer weather, customer conservation and customer
attrition. Overall, sales of petroleum products decreased 7% with
sales of heating oil to residential customers dropping 13% due
primarily to the warmer weather. Improved margins per gallon on
petroleum products and earnings from the 2005 acquisitions partially
offset the decrease in gross margin. The 2005 acquisitions also
increased the net residential customer count by 4%. As adjusted for
billing lags, heating degree-days decreased 15%, which impacted
earnings by approximately $.05 per share, after accounting for the
effect of weather-hedging contracts.
Unregulated - Other Businesses : + $ .01
-----------------------------------------
o Up $.01 due to an increase in income from short-term investments and
intercompany debt held by Energy Group, the holding company.
page -2-
First Quarter Results of Operations
- -----------------------------------
Regulated Electric and Natural Gas Businesses - Central Hudson Gas & Electric
Corp.
- --------------------------------------------------------------------------------
Utility deliveries of electricity within Central Hudson's service territory
decreased 5% in the first quarter of 2006 as compared to the same quarter in
2005. Deliveries to residential and commercial customers decreased 8% and 4%,
respectively, resulting from a decrease in usage due to a milder winter.
Deliveries to industrial customers increased 1%. Residential heating degree-days
(electric and natural gas) decreased 9% over the prior year and were 10% lower
than normal.
Utility deliveries of natural gas to firm Central Hudson customers decreased 14%
as compared to last year's delivery volume. Deliveries to residential and
commercial customers, largely space heating deliveries, each decreased 13% due
to the warmer weather and were partially offset by customer growth. Industrial
sales, which are approximately 4% of total firm sales in the comparative
quarters, decreased 29%, while interruptible sales decreased 5%.
Utility electric and natural gas operating revenues increased $16.8 million
(8.8%) from $190.1 million in 2005 to $206.9 million in 2006. Electric revenues
increased $9.4 million (7.4%) and natural gas revenues increased by $7.4 million
(11.6%) due primarily to an increase in amounts collected through Central
Hudson's cost adjustment mechanisms that recover its cost of purchased
electricity and natural gas. The increases are due to higher purchased
electricity and natural gas costs in 2006 as compared to 2005. Electric and
natural gas revenues related to regulatory mechanisms also increased due largely
to revenues made available by Central Hudson's current Settlement Agreement
after ratemaking operating income reached a certain level; however, these
revenues were offset by a decrease in revenues from deliveries.
Total utility operating expenses, including income taxes, increased $18.6
million (10.8%) from $172.0 million in 2005 to $190.6 million in 2006. The
increase in operating expenses results largely from an increase in purchased
electricity and natural gas expense, which increased $7.4 million and $8.5
million, respectively. Both reflect an increase in wholesale costs and a change
in amounts recorded related to the recovery of these costs through Central
Hudson's cost adjustment mechanisms for purchased electricity and natural gas
costs. The total increase in purchased natural gas expense was partially offset
by a decrease in volumes purchased for full service customers due to the milder
winter weather. Other operating expenses, including income taxes, increased $2.7
million reflecting an increase in storm restoration costs due to severe
windstorms in January and February 2006; an increase in expense related to
uncollectible accounts and injuries and damages; and increases in other general
and administrative expenses. These increases were partially offset by a decrease
in income taxes due to lower taxable income.
Other Income increased by $.6 million reflecting an increase in regulatory
carrying charges due from customers related to pension costs and the recording
of favorable regulatory adjustments for the change in interest rates on Central
Hudson's variable rate long-term debt. These adjustments offset the increase in
interest on the variable rate debt noted below.
Interest Charges increased $.7 million due to an increase in interest charges on
long and short-term debt. Interest on long-term debt increased due to the
issuance of medium-term notes in December of 2005 and increased interest on
Central Hudson's variable rate debt. Additional short-term debt was required in
the first quarter of 2006 for working capital needs due to higher fuel prices.
page -3-
Unregulated - Fuel Distribution Business
- -----------------------------------------
Sales of petroleum products for CHEC's fuel distribution business decreased 3.7
million gallons (7.3%) to 46.9 million gallons in the first quarter of 2006 from
50.6 million gallons in the first quarter of 2005. This was due to a decrease of
4.4 million gallons (13.1%) in sales of heating oil from 33.5 million gallons in
2005 to 29.1 million in 2006. The decrease resulted from a reduction in
residential sales due primarily to warmer weather in 2006 as compared to 2005,
as evidenced by a 15% decrease in heating degree-days, as adjusted for billing
lags. The decrease in volume was partially offset by an increase in sales from
acquisitions made in the fourth quarter of 2005. Motor fuel sales increased .9
million gallons (5.6%) from 16.0 million gallons in 2005 to 16.9 million gallons
in 2006 while sales of propane decreased slightly from 1.1 million gallons in
2005 to .9 million gallons in 2006. Motor fuel sales increased principally from
the gain of one large volume customer. The decrease in propane sales is largely
attributable to the warmer weather in 2006.
Revenues, net of the effect of weather hedging contracts, increased $14.1
million (14.7%) from $95.7 million in 2005 to $109.8 million in 2006 due to a
significant increase in the price of petroleum products. Revenues from petroleum
products increased $13.0 million (14.2%) from $91.4 million in 2005 to $104.4
million in 2006 due to an increase in the average selling price to cover the
increased costs of petroleum products. Motor fuel revenues increased $8.7
million (33.9%) from $25.7 million in 2005 to $34.4 million in 2006. Heating oil
revenues also increased $3.9 million (6.1%) from $63.6 million in 2005 to $67.5
million in 2006. Partially offsetting the overall increases in selling price was
a reduction in sales volumes. Other revenues related to service and
installations and energy services increased $1.1 million.
Operating expenses for CHEC's fuel distribution business, including income taxes
and interest charges, increased $14.4 million (15.8%) from $91.2 million in 2005
to $105.6 million in 2006. The cost of petroleum increased $13.5 million or 19%
due to higher wholesale market prices. Other operating expenses increased $.9
million in 2006 due to an increase in marketing expense, other general and
administrative expenses, interest charges on intercompany debt, and additional
expenses associated with the acquisitions made in 2005.
CH Energy Group, Inc. (consolidated) remains in a strong financial position. At
March 31, 2006, CHEG had $78.8 million in cash and cash equivalents and its
current obligations included $29 million of short-term debt outstanding and $33
million of current maturities of long-term debt maturing on March 28, 2007.
###
Please note that this report plus the consolidated financial statements are
available on the Company's website at www.chenergygroup.com.
CH ENERGY GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
3 Months Ended
March 31,
----------------------------
2006 2005
------------- ------------
Operating Revenues
Electric $136,047 $126,658
Natural Gas 70,809 63,430
Competitive Business Subsidiaries 110,375 96,001
------------- ------------
Total Operating Revenues 317,231 286,089
------------- ------------
Operating Expenses
Operations - Purchased Electricity and Fuel Used in
Electric Generation, Purchased Natural Gas,
and Purchased Petroleum 222,425 193,020
Other Expenses of Operation - Regulated Activities 28,495 24,730
Other Expenses of Operation - Comp. Bus. Subsidiaries 15,670 14,524
Depreciation and Amortization 8,952 9,086
Taxes, Other Than Income Tax 7,604 7,916
------------- ------------
Total Operating Expenses 283,146 249,276
------------- ------------
Operating Income 34,085 36,813
------------- ------------
Other Income & Deductions
Interest and Investment Income 2,561 2,365
Other - Net (354) (522)
------------- ------------
Total Other Income & Deductions 2,207 1,843
------------- ------------
Interest Charges
Interest on Debt 3,953 3,247
Other Interest 1,038 1,056
------------- ------------
Total Interest Charges 4,991 4,303
------------- ------------
Income Before Income Taxes and
Preferred Dividends of Subsidiary 31,301 34,353
Income Taxes 12,759 13,772
------------- ------------
Income Before Preferred Dividends of Subsidiary 18,542 20,581
Cumulative Preferred Stock Dividends of Subsidiary 242 242
------------- ------------
Net Income 18,300 20,339
Dividends Declared on Common Stock 8,511 8,512
------------- ------------
Amount Retained in the Business $9,789 $11,827
============= ============
Avg. Shares of Common Stock Outstanding - (Basic) (000s) 15,762 15,762
Avg. Shares of Common Stock Outstanding - (Diluted) (000s) 15,777 15,770
Earnings Per Share - (Basic) $1.16 $1.29
Earnings Per Share - (Diluted) $1.16 $1.28
Dividends Declared Per Share $0.54 $0.54
CH ENERGY GROUP, INC.
CONSOLIDATED BALANCE SHEET
March 31, December 31,
2006 1 2005 2
-------------- -------------
ASSETS (Thousands of Dollars)
UTILITY PLANT
Utility Plant $1,078,168 $1,074,215
Less Accumulated Depreciation 338,414 333,164
-------------- -------------
739,754 741,051
Construction Work in Progress 45,929 38,460
-------------- -------------
Net Utility Plant 785,683 779,511
-------------- -------------
OTHER PROPERTY AND PLANT & EQUIPMENT 22,806 23,138
-------------- -------------
CURRENT ASSETS
Cash and Cash Equivalents 78,756 91,510
Accounts Receivable from Customers 105,312 97,462
Materials & Supplies 29,376 28,350
Fair Value of Derivative Instruments 61 0
Regulatory Assets 20,156 30,764
Special Deposits and Prepayments 23,134 24,350
Accumulated Deferred Income Tax - Net 14,147 8,836
Other 13,373 15,660
-------------- -------------
284,315 296,932
-------------- -------------
DEFERRED CHARGES AND OTHER ASSETS 303,332 279,925
-------------- -------------
TOTAL $1,396,136 $1,379,506
============== =============
CAPITALIZATION and LIABILITIES
CAPITALIZATION
Common Equity 3 $513,759 $503,833
Cumulative Preferred Stock:
Not subject to mandatory redemption 21,027 21,027
Long-term Debt 310,886 343,886
-------------- -------------
845,672 868,746
-------------- -------------
CURRENT LIABILITIES
Current Maturities of Long-Term Debt 33,000 0
Notes Payable 29,000 30,000
Accounts Payable 41,900 54,926
Accrued Interest 2,697 5,156
Dividends Payable 8,754 8,754
Accrued Taxes Payable 11,325 0
Regulatory Liabilities 61 373
Fair Value of Derivative Instruments 137 335
Other 31,342 34,627
-------------- -------------
158,216 134,171
-------------- -------------
DEFERRED CREDITS AND OTHER LIABILITIES 254,109 242,805
-------------- -------------
ACCUMULATED DEFERRED INCOME TAX (NET) 138,139 133,784
-------------- -------------
TOTAL $1,396,136 $1,379,506
============== =============
1 Unaudited.
2 Subject to explanations contained in the
Annual Report of the Company for the Year 2005.
3 Shares outstanding at March 31, 2006 = 15,762,000.
Shares outstanding at December 31, 2005 = 15,762,000.
Selected Financial Information
------------------------------
3 Months Ended March 31,
--------------------------------------
2006 2005 % Variation
------------ ----------- -------------
CENTRAL HUDSON GAS & ELECTRIC CORP.
- -----------------------------------
Sales of Electricity (Mwh): *
Residential 555,555 605,398 (8)
Commercial 498,247 519,943 (4)
Industrial 341,913 340,168 1
Other 10,472 10,379 (1)
------------ ----------- --------
Total Own Territory 1,406,187 1,475,888 (5)
============ =========== ========
Sales of Gas (Mcf.): *
Residential 2,421,517 2,791,539 (13)
Commercial 2,686,135 3,083,645 (13)
Industrial 190,992 267,622 (29)
Other 14,204 16,274 (13)
------------ ----------- --------
Total Firm Sales 5,312,848 6,159,080 (14)
Interruptible Sales 1,116,522 1,180,568 (5)
------------ ----------- --------
Total Own Territory 6,429,370 7,339,648 (12)
============ =========== ========
* Includes volumes related to Electric
or Gas Energy Delivery Services.
Electric Heating Degree Days:
Billing Cycle 2,921 3,200 (9)
Normal Biling Cycle 3,228 3,228 -
Actual in Period 2,781 3,238 (14)
Gas Heating Degree Days:
Billing Cycle 2,875 3,152 (9)
Normal Biling Cycle 3,193 3,183 -
Actual in Period 2,713 3,203 (15)
Electric Output For Own Territory (Mwh.):
Generated 34,329 35,524 (3)
Purchased 1,397,961 1,469,118 (5)
------------ ----------- --------
Total 1,432,290 1,504,642 (5)
============ =========== ========
Gas Send-out Firm Customers (Mcf.) 3,710,872 4,910,410 (24)
============ =========== ========
CH ENERGTY GROUP, INC.
- ----------------------
Earnings Per Share - (Basic) $1.16 $1.29 (10)
Dividends Declared Per Share $0.54 $0.54 -
March 31, Dec. 31,
2006 2005 % Variation
------------ ----------- -------------
Book Value Per Share $32.60 $31.97 2
Retained Earnings (000s) $207,806 $198,017 5
Common Equity Ratio (%) 56.6% 56.0% 1
C H ENERGY GROUP, INC
Selected Financial Indices
12 Months Ended March 31, 2006 vs. Calendar Year 2005
12 Months Calendar
Ended Year
March 31, 2006 2005
------------------ ----------
Earnings Per Share - (Basic) $2.68 $2.81
Earned Return on Common Equity (Per Books) 8.33% 8.77%
Pretax Coverage of Fixed Charges 4.24 x 4.51 x
Dividends Declared $2.16 $2.16
Pay-out Ratio 80.6% 76.9%
Common Equity Ratio 56.6% 56.0%
Retained Earnings ($000) $207,806 $198,017
Book Value Per Share (End of Period) $32.60 $31.97
CH Energy Group Segment Information - Quarter Ended March 31, 2006
Regulated Unregulated
------------------------ ---------------------------
($000s Except Natural Fuel
Earnings Per Share) Electric Gas Distribution Other Elim(s). Total
------------------- ------------------------ --------------------------- ------------ --------------
Revenues from
external customers $136,047 $70,809 $109,835 $540 - $317,231
Intersegment revenues 3 205 - - $ (208) -
------------------------ --------------------------- ---------- --------------
Total Revenues $136,050 $71,014 $109,835 $540 $ (208) $317,231
Earnings before income taxes $11,372 $11,017 $7,196 $1,474 - $31,059
Net Income $6,443 $6,368 $4,318 $1,171 - $18,300
Earnings per share (basic) $0.41 $0.41 $0.27 $0.07 (1) - $1.16
Segment Assets @ 3/31/06 $849,802 $294,826 $158,549 $93,771 $ (812) $1,396,136
(1)The amount of Unregulated EPS attributable to CHEC's other business activities was $0.02 per share, with the balance
of $.05 per share resulting primarily from investment activity.
CH Energy Group Segment Information - Quarter Ended March 31, 2005
Regulated Unregulated
------------------------ ---------------------------
($000s Except Natural Fuel
Earnings Per Share) Electric Gas Distribution Other Elim(s). Total
------------------- ------------------------ --------------------------- ---------- --------------
Revenues from
external customers $126,658 $63,430 $95,756 $245 - $286,089
Intersegment revenues 3 167 - - $ (170) -
------------------------ --------------------------- ---------- --------------
Total Revenues $126,661 $63,597 $95,756 $245 $ (170) $286,089
Earnings before income taxes $12,839 $12,239 $7,770 $1,263 - $34,111
Net Income $7,494 $7,254 $4,663 $928 - $20,339
Earnings per share (basic) $0.48 $0.46 $0.29 $0.06 (1) - $1.29
Segment Assets @ 3/31/05 $781,256 $265,076 $149,305 $115,974 $ (791) $1,310,820
(1)The amount of Unregulated EPS attributable to CHEC's other business activities was $0.01 per share, with the balance
of $.05 per share resulting primarily from investment activity.