2014

Duquesne Light Holdings Announces Third Quarter 2003 Results Continued Success of Back-to-Basics Strategy



    PITTSBURGH, Oct. 23 /PRNewswire-FirstCall/ -- Continuing the favorable
 performance resulting from the ongoing implementation of its Back-to-Basics
 business strategy, Duquesne Light Holdings (NYSE:   DQE) today reported earnings
 available for common stock of $30.6 million, or $0.41 per share, for the third
 quarter of 2003, as compared to $26.8 million, or $0.36 per share, for the
 same period in 2002.
     Earnings from continuing operations were $30.2 million, or $0.40 per
 share, for third quarter 2003, compared to $30.2 million, or $0.41 per share,
 for the same period in 2002, including $0.2 million of dividends on preferred
 stock.  Despite cooler summer weather in the Pittsburgh area in 2003, which
 negatively impacted Duquesne Light Company's revenue and earnings, overall
 third quarter 2003 performance was consistent with the prior year, primarily
 due to the following factors.
 
      - Earnings from DQE Financial increased $1.8 million, primarily as a
        result of higher prices from its landfill gas sales and lower
        depreciation and amortization expense.
      - Earnings from DQE Energy Services increased $1.5 million, primarily due
        to additional profits from a new synthetic fuel facility management
        contract entered into after the third quarter of 2002.
      - Duquesne Light Company's interest expense was $1.7 million less than in
        the third quarter of 2002 due to debt retirements, which positively
        impacted third quarter 2003 earnings by $1.0 million.
      - DQE Enterprises recognized a $0.6 million after-tax gain related to the
        sale of all of its remaining publicly traded investments and received
        proceeds of approximately $2.5 million.
 
     Included in the third quarter 2003 results was income from discontinued
 operations of $0.4 million, or $0.01 per share, compared to a loss of $3.4
 million, or $0.05 per share, in the third quarter of 2002. The 2002 loss from
 discontinued operations included the results of both AquaSource and the
 propane distribution business of Pro Am, which was sold in December 2002.  The
 sale of AquaSource's investor-owned utilities was completed in July 2003.
 
     Year-to-Date Results
 For the year-to-date period through Sept. 30, 2003, earnings available for
 common stock were $94.1 million, or $1.26 per share, compared to a loss of
 $167.5 million, or $2.68 per share, in the first nine months of 2002.
 Included in the 2002 results was an after-tax charge of $113.7 million, or
 $1.82 per share, from the cumulative effect of a change in accounting
 principle.
     For the nine months ended Sept. 30, 2003, earnings from continuing
 operations were $78.6 million, or $1.05 per share, including $0.4 million of
 dividends on preferred stock.  This is compared to earnings for the same
 period in 2002 of $48.4 million, or $0.77 per share, including $0.5 million of
 dividends on preferred stock, before the cumulative effect of a change in
 accounting principle, mentioned earlier.  The year-to-date increase was due
 primarily to the following factors.
 
      - DQE Financial recognized an after-tax gain of $7.0 million related to
        the sale of its investment in a natural gas operating partnership in
        the first quarter of 2003.  In addition, earnings from DQE Financial
        increased $5.8 million, primarily as a result of higher prices from its
        landfill gas sales and lower depreciation and amortization expense.
      - Earnings from Duquesne Light's supply business increased $5.6 million,
        reflecting a margin paid by customers who purchase power from the
        company as part of the POLR II arrangement, which provides electricity
        to customers who have not selected an alternative generation supplier.
      - Earnings from DQE Energy Services increased $3.2 million, primarily due
        to additional profits from a new synthetic fuel facility management
        contract entered into after the third quarter of 2002.
      - DQE Enterprises recognized an after-tax impairment charge of $1.0
        million in 2003, related to energy-technology investments, compared to
        a $10.8 million charge in the prior-year period.
 
     Included in the year-to-date 2003 results was income from discontinued
 operations of $15.5 million, or $0.21 per share, compared to a loss of $102.2
 million, or $1.63 per share, for the prior-year period.  The 2003 results
 included the $11.5 million after-tax gain relating to the increase in the fair
 value of AquaSource's investor-owned utilities.  The 2002 loss from
 discontinued operations included the results of both AquaSource and Pro Am, as
 well as the after-tax charge of $100.9 million relating to an impairment of
 the long-lived assets of AquaSource.
 
     Third Quarter Update
     International Brotherhood of Electrical Workers (IBEW) Local 29 approved a
 new three-year labor agreement with Duquesne Light Company on Oct. 7.  The new
 contract will help the company control health care expenses through cost
 sharing with employees.  Duquesne Light Company employs a total of 1,428 in
 the Pittsburgh region, with approximately 900 full-time employees covered by
 the collective bargaining agreement with the IBEW.
     Duquesne Light Holdings has continued discussions with the Internal
 Revenue Service (IRS) regarding certain structured lease transactions under
 review.  In July, the company was accepted into the IRS' new Fast Track
 Settlement Program, designed to promote resolution generally within 120 days
 of acceptance.  As part of this program, settlement discussions are expected
 to commence Oct. 29, 2003.  The company's goal continues to be to resolve
 these tax matters in their entirety.
     Subsidiary DQE Energy Services operates both "inside-the-fence" energy
 facilities and synthetic-fuel facilities.  Tax credits for the production and
 sale of solid synthetic fuels produced from coal recently have come under
 review by the Internal Revenue Service.  The third-party owner of synthetic-
 fuel facilities, operated by DQE Energy Services, is entitled to these Section
 29 tax credits.  Another subsidiary, DQE Financial, holds an 8.3 percent
 interest in a limited partnership, which owns and operates synthetic fuel
 facilities, and qualifies for tax credits.  For the nine months ended Sept.
 30, 2003, DQE Energy Services' earnings related to operating synthetic-fuel
 facilities, for a third party, were $14.1 million, and DQE Financial
 recognized $12.8 million of tax credits and, including the credits,
 $6.2 million of earnings related to its limited partnership investment.
     Duquesne Light Company continues to make progress toward finalizing its
 post-2004 provider-of-last-resort plan.  The company plans to file its plan
 with the Pennsylvania Public Utility Commission in November.  Once filed, the
 regulatory approval process is expected to last approximately six months.
 
     Liquidity
     Third quarter 2003 capital expenditures totaled approximately $22 million,
 with $21 million at Duquesne Light Company and $1 million at unregulated
 subsidiaries.  The company currently estimates that capital expenditures for
 continuing operations will total approximately $77 million in 2003, which
 includes $75 million for Duquesne Light Company and $2 million for other
 businesses.
     The company recently renewed $290 million of revolving credit facilities,
 with $180 million at Duquesne Light Company and $110 million at Duquesne Light
 Holdings.  These agreements do not have any ratings triggers and contain a
 one-year term-out option.  In addition, the company had a cash balance of
 approximately $196 million as of Sept. 30, 2003.
 
     Earnings Outlook
     The company confirms its previous 2003 earnings guidance of $91 million to
 $95 million from continuing operations.  This guidance includes the $7 million
 gain from DQE Financial's sale of its investment in a natural gas operating
 partnership in the first quarter.
 
     Strategic Overview
     The company has made considerable progress in implementing its Back-to-
 Basics business strategy, which features a more concentrated focus on the
 company's electric utility operations and its complementary businesses.  Key
 initiatives targeted included strengthening its balance sheet, conserving
 cash, divesting non-core businesses, and developing a long-term earnings
 stream from its core electric business.  As evidenced by its 2003 performance
 to-date, subsidiary Duquesne Light Company is a solid traditional utility with
 a predictable earnings stream and stable cash flow that helps support
 projected dividend and capital expenditure requirements.
     A live Internet broadcast of the company's management presentation to
 members of the financial community is scheduled for 11:15 a.m., EST, Tuesday,
 Oct. 28, and can be accessed at www.duquesnelight.com.  The presentation will
 be held at the Edison Electric Institute (EEI) Financial Conference in
 Orlando, Fla.  A replay of the presentation will be made available on the
 company's website through Nov. 10.  Please refer to the company's 10-Q, which
 will be filed Nov. 14, for additional details regarding third quarter 2003
 results.
 
     About the Company
     Duquesne Light Holdings is an energy services holding company.  Duquesne
 Light Company, its principal subsidiary, is a leader in the transmission and
 distribution of electric energy, offering technological innovation and
 superior customer service and reliability to more than half a million direct
 customers throughout southwestern Pennsylvania.  Duquesne Light Holdings also
 includes several affiliate companies that complement its core electric-utility
 operations.
     The foregoing contains forward-looking statements, the results of which
 may materially differ from those implied due to known and unknown risks and
 certainties, some of which are discussed below.  Projected Duquesne Light
 Holdings cash flow, earnings, earnings growth and dividends will depend on the
 performance of Duquesne Light 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, by final PUC approval of POLR III and by the
 continued performance of the generation supplier. The ultimate structure of
 POLR III will be subject to PUC review and approval, and may depend on the
 ability to contract with suitable third-party suppliers and the terms
 negotiated with such suppliers. Any debt reductions will depend on the
 availability of cash flows. Purchase price adjustments related to the sale of
 AquaSource, and the resolution and disposition of the retained liabilities and
 indemnities, may affect earnings and cash flows. Customer energy demand, fuel
 costs, plant operations and any disallowances of Section 29 tax credits by the
 IRS could affect DQE Energy Services' earnings. The outcome of the shareholder
 litigation initiated against Duquesne Light Holdings may affect performance.
 The final resolution of proposed adjustments regarding income tax liabilities
 of Duquesne Light Holdings and its affiliates (which will depend on
 negotiations with the appropriate tax authorities) could affect financial
 position, earnings, and cash flows. The resolution of the Fresh Kills
 litigation could affect cash flows and earnings. 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 credit ratings received
 from the rating agencies could affect the cost of borrowing, the access to
 capital markets and liquidity.  Overall performance by Duquesne Light 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.
 
 
     STATEMENT OF INCOME
 
      (All amounts in millions, except per
       share data)                             Three Months      Nine Months
                                                  Ended             Ended
                                               September 30,     September 30,
      (Unaudited)                             2003     2002     2003      2002
     Operating Revenues:
        Retail sales of electricity         $213.7   $248.7   $591.9    $719.6
        Other                                 32.3     26.4     90.2      74.2
                 Total Operating Revenues    246.0    275.1    682.1     793.8
     Operating Expenses:
        Purchased power                      109.1    124.3    298.8     327.2
        Other operating and maintenance       53.0     50.1    154.8     155.0
        Depreciation and amortization         21.0     31.8     67.1     160.1
        Taxes other than income taxes         14.0     17.3     40.2      52.0
                 Total Operating Expenses    197.1    223.5    560.9     694.3
     Operating Income                         48.9     51.6    121.2      99.5
     Other Income:
        Investment income                     15.2     16.5     56.2      55.5
        Investment impairment                   -        -      (1.0)    (10.8)
                 Total Other Income           15.2     16.5     55.2      44.7
     Interest and Other Charges               17.9     19.6     56.4      63.9
     Income From Continuing Operations
      Before Income Taxes                     46.2     48.5    120.0      80.3
     Income Taxes                             16.0     18.1     41.0      31.4
     Income From Continuing Operations        30.2     30.4     79.0      48.9
     Income (Loss) from Discontinued
      Operations, net of tax                   0.4     (3.4)    15.5    (102.2)
     Income before Cumulative Effect of
      Change in Accounting Principle          30.6     27.0     94.5     (53.3)
     Cumulative Effect of Change in
      Accounting Principle (a)                  -        -        -     (113.7)
     Net Income (Loss)                        30.6     27.0     94.5    (167.0)
     Dividends on Preferred Stock               -       0.2      0.4       0.5
     Earnings (Loss) Available for Common
      Stock                                  $30.6    $26.8    $94.1   ($167.5)
 
     Average Number of Common Shares          75.1     74.1     74.8      62.6
 
     Earnings (Loss) Per Share of Common
      Stock                                   0.41     0.36     1.26     (2.68)
 
     Dividends Declared Per Share of
      Common Stock                           $0.25    $0.25    $0.75     $1.09
 
     Actual Number of Common Shares           75.1     74.1     75.1      74.1
 
     (a) Relates to the impairment of goodwill.
 
 
     OPERATING STATISTICS
 
                                                         Three Months Ended
                                                            September 30,
        (Unaudited)                                    2003              2002
 
        MEGAWATT-HOUR SALES (in thousands):
            Residential                               1,083             1,235
            Commercial                                1,765             1,863
            Industrial                                  803               871
        RETAIL SALES OF ELECTRICITY                   3,651             3,969
 
        OPERATING REVENUES (in millions):
        Retail Sales of Electricity:
            Residential                               $86.4             $98.2
            Commercial                                 90.4             105.8
            Industrial                                 33.4              41.5
            EGS Transmission                            3.5               3.2
        Revenues from Retail Sales of
         Electricity                                  213.7             248.7
        Other                                          32.3              26.4
        TOTAL OPERATING REVENUES                     $246.0            $275.1
 
                                                          Nine Months Ended
                                                            September 30,
        (Unaudited)                                    2003              2002
 
        MEGAWATT-HOUR SALES (in thousands):
            Residential                               2,843             2,993
            Commercial                                4,886             4,982
            Industrial                                2,378             2,534
        RETAIL SALES OF ELECTRICITY                  10,107            10,509
 
        OPERATING REVENUES (in millions):
        Retail Sales of Electricity:
            Residential                              $228.3            $257.9
            Commercial                                256.2             324.0
            Industrial                                 97.8             129.6
            EGS Transmission                            9.6               8.1
        Revenues from Retail Sales of Electricity     591.9             719.6
        Other                                          90.2              74.2
        TOTAL OPERATING REVENUES                     $682.1            $793.8
 
 

SOURCE Duquesne Light

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