Pepco Holdings, Inc. : Pepco Holdings Reports Full Year and Fourth Quarter 2011 Earnings; 2012 Earnings Guidance Announced
02/24/2012| 07:40am US/Eastern
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Pepco Holdings, Inc. (NYSE: POM) today reported fourth quarter and full
year 2011 earnings from continuing operations as follows:
Three Months Ended
Year Ended
December 31,
December 31,
2011
2010
2011
2010
Net Income from Continuing Operations (GAAP)
Net Income ($ in millions)
$
23
$
14
$
260
$
139
Earnings Per Share
$
0.10
$
0.06
$
1.15
$
0.62
Adjusted Net Income from Continuing Operations (Non-GAAP)
Adjusted Net Income ($ in millions)
$
34
$
56
$
283
$
277
Adjusted Earnings Per Share
$
0.15
$
0.25
$
1.25
$
1.24
"2011 was a year of significant progress on our key initiatives," said
Joseph M. Rigby, Chairman, President and Chief Executive Officer. "While
recognizing there is still more work to be done, we are pleased that our
investments to improve system reliability and the customer experience
are beginning to produce tangible results. Earnings were impacted by our
increased spending on system maintenance and tree trimming, which are
positively impacting our operating statistics and improving our
restoration performance, as demonstrated during Hurricane Irene." Rigby
added, "Throughout the year, we invested nearly $900 million in
transmission and distribution infrastructure including projects focused
on improving reliability and installing advanced technology. This
technology includes smart meters that will provide detailed
account-specific energy use information to our customers and advanced
control systems that will expedite power restoration after outages.
Investments such as these are important components of our strategy to
provide enhanced value to our customers and investors."
Rigby went on to say that it is critically important to ensure timely
cost recovery and the opportunity to earn reasonable rates of return on
PHI's extensive reliability investments. "We filed distribution rate
cases in each of the five electric jurisdictions we serve to help keep
the rate of cost recovery in line with our rate of investment. In
addition, the filings propose cost recovery mechanisms that would reduce
the time to recover reliability-related investment as well as mitigate
the need to file costly, frequent rate cases. Reducing regulatory lag
will continue to be a significant focus in 2012."
The increase in adjusted net income from continuing operations
(Non-GAAP) for the full year 2011, as compared to the full year 2010,
was primarily the result of higher transmission and distribution revenue
(due to higher rates driven by increased investment), lower interest
expense, and higher default electricity supply margins (primarily due to
an adjustment for the cost recovery of higher cash working capital
costs). Partially offsetting the earnings increases were higher Power
Delivery operation and maintenance expense (due to increased electric
system preventative maintenance and increased tree trimming) and the
favorable impact of income tax adjustments in the 2010 period.
The decrease in adjusted net income from continuing operations
(Non-GAAP) in the fourth quarter of 2011, as compared to the 2010
quarter was primarily the result of the favorable impact of an income
tax settlement and income tax adjustments in the 2010 period.
Discontinued Operations
In 2010, the Board of Directors of Pepco Holdings approved a plan for
the disposition of Conectiv Energy Holding Company. The plan consisted
of the sale of the wholesale power generation business, which was
completed on July 1, 2010, and the liquidation of all of Conectiv
Energy's remaining assets and businesses, which has been substantially
completed. As a result of the plan of disposition, Conectiv Energy's
results of operations for the 2011 and 2010 quarterly and annual periods
are reported as discontinued operations. For the twelve months ended
December 31, 2011, the net loss from discontinued operations was $3
million.
Special Items and Other Non-GAAP Adjustments
Management believes the special items and other non-GAAP adjustments
shown below are not representative of Pepco Holdings' ongoing business
operations. The other non-GAAP adjustments include mark-to-market losses
resulting from economic hedging activities associated with the retail
energy supply business of Pepco Energy Services, and the impact of
adopting a tax law change in the District of Columbia. The effect of
these items was excluded from the 2011 earnings guidance range.
Management uses earnings excluding special items and other non-GAAP
adjustments and related per share data internally to evaluate Pepco
Holdings' period-over-period financial performance and, therefore,
believes that this information is useful to investors. The presentation
of earnings excluding special items and other non-GAAP adjustments and
related per share data is intended to complement, and should not be
considered as an alternative to, reported earnings in accordance with
accounting principles generally accepted in the United States (GAAP).
Reconciliation of GAAP Earnings to
Earnings Excluding Special Items and Other Non-GAAP Adjustments
Three Months Ended
Twelve Months Ended
Net Income from Continuing Operations -
Millions of dollars
December 31,
December 31,
2011
2010
2011
2010
Reported (GAAP) Net Income from Continuing Operations
$
23
$
14
$
260
$
139
Adjustments - Special Items (after-tax):
--
Debt extinguishment costs ($54 million and $189 million pre-tax,
respectively)
-
32
-
113
--
Restructuring charge ($16 million and $30 million pre-tax,
respectively)
-
10
-
18
--
Effects of Pepco divestiture-related claims ($11 million, pre-tax)
-
-
-
6
23
56
260
276
Adjustments - Guidance-related (after-tax):
11
-
18
1
--
Mark-to-market losses from PES retail energy economic hedging
activities
($18 million, $30 million, and $2 million pre-tax, respectively)
--
Effect of adopting a tax law change in District of Columbia
($7 million pre-tax)
-
-
5
-
Adjusted Net Income from Continuing Operations (Non-GAAP)
$
34
$
56
$
283
$
277
Three Months Ended
Twelve Months Ended
Earnings per Share from Continuing Operations
December 31,
December 31,
2011
2010
2011
2010
Reported (GAAP) Earnings per Share from Continuing Operations
$
0.10
$
0.06
$
1.15
$
0.62
Adjustments - Special Items (after-tax):
--
Debt extinguishment costs
-
0.15
-
0.51
--
Restructuring charge
-
0.04
-
0.08
--
Effects of Pepco divestiture-related claims
-
-
-
0.03
0.10
0.25
1.15
1.24
Adjustments - Guidance-related (after-tax):
--
Mark-to-market losses from PES retail energy economic hedging
activities
0.05
-
0.08
-
--
Effect of adopting a tax law change in District of Columbia
-
-
0.02
-
Adjusted Earnings per Share from Continuing Operations (Non-GAAP)
$
0.15
$
0.25
$
1.25
$
1.24
Earnings Guidance
Pepco Holdings today announced an earnings guidance range for 2012 of
between $1.15 and $1.30 per share. The guidance range:
excludes the results of discontinued operations and the impact of any
special, unusual or extraordinary items,
assumes normal weather conditions, and
excludes the after-tax net mark-to-market effects of economic hedging
activities associated with the retail energy supply business of Pepco
Energy Services.
2011 Events
Operations
Power Delivery electric sales were 49,266 gigawatt hours (GWh) in
2011, compared to 50,703 GWh in 2010. In the electric service
territory, heating degree days were lower by 6 percent and cooling
degree days were lower by 9 percent in 2011, compared to 2010. Weather
adjusted electric sales were 48,785 GWh in 2011, compared to 49,047
GWh in 2010.
Power Delivery electric sales were 10,966 GWh in the fourth quarter of
2011, compared to 11,685 GWh for the same period in 2010. In the
electric service territory, heating degree days were lower by 23
percent for the three months ended December 31, 2011, compared to the
same period in 2010. Weather adjusted electric sales were 11,255 GWh
in the fourth quarter of 2011, compared to 11,543 GWh for the same
period in the prior year.
On August 18, 2011, PJM Interconnection, LLC notified Pepco Holdings
that the scheduled in-service date for the Mid-Atlantic Power Pathway
(MAPP) project has been delayed from June 1, 2015 to the 2019 to 2021
time period. MAPP is a high voltage 152-mile interstate transmission
project Pepco Holdings has proposed to improve reliability and provide
interconnection to diverse generation sources.
In October 2011, Power Delivery established a forecast of capital
expenditures for 2012 through 2016. The forecast assumes a MAPP
in-service date of 2020. Total Power Delivery capital expenditures
forecasted for the five year period are $5.6 billion.
As of December 31, 2011, Delmarva Power's installation of advanced
meters in its Delaware electric service territory was essentially
complete (99 percent activated) and Pepco had installed approximately
90 percent of its advanced meters in its District of Columbia service
territory (21 percent activated) and 12 percent of its advanced meters
in its Maryland service territory (activation to begin in 2012). The
respective Public Service Commissions have approved the creation of a
regulatory asset to defer Advanced Metering Infrastructure costs
between rate cases, as well as the accrual of a return on the deferred
costs.
Pepco Energy Services signed $47 million and $129 million of energy
efficiency contracts for the fourth quarter and full year 2011,
respectively.
In the fourth quarter of 2011, Pepco Energy Services incurred $11
million of net mark-to-market losses compared to less than $1 million
of net mark-to-market losses in the fourth quarter of 2010. For the
full year 2011, Pepco Energy Services incurred $18 million of net
mark-to-market losses compared to $1 million of net mark-to-market
losses for the full year 2010. The mark-to-market losses result from
derivative contracts that economically hedge the delivery of
electricity and gas to retail customers. The mark-to-market losses as
of December 31, 2011 are expected to reverse upon Pepco Energy
Services' delivery of the underlying commodity to its retail customers.
Regulatory - Decisions
On December 20, 2011, the Delaware Public Service Commission (DPSC)
approved Delmarva Power's request to implement dynamic pricing for its
Delaware customers. Dynamic pricing will reward Standard Offer Service
(SOS) customers for lowering their energy use during those times when
energy demand and, consequently, the cost of supplying electricity are
higher. Implementation for residential customers will be phased in
over 2012 and 2013. Implementation for commercial and industrial SOS
customers will be phased in over 2013 and 2014.
On July 8, 2011, the Maryland Public Service Commission (MPSC)
approved the settlement agreement in Delmarva Power's electric base
rate case. The MPSC granted a $12 million annual increase in Delmarva
Power's electric distribution base rates. The new rates were effective
July 8, 2011. Although the return on equity was not specified in the
proposed settlement, the MPSC authorized that the return on equity for
purposes of calculating the allowance for funds used during
construction and regulatory asset carrying costs would remain
unchanged. The current return on equity for those items is 10 percent.
On June 21, 2011, the DPSC approved the settlement agreement in
Delmarva Power's natural gas delivery base rate case. The DPSC granted
a $6 million annual increase in Delmarva Power's natural gas delivery
base rates, based on a 10 percent return on equity. The new rates were
effective July 1, 2011. As permitted by Delaware law, Delmarva Power
implemented interim rate increases of $2.5 million in August 2010 and
$7.7 million in February 2011. The excess amount collected was
returned to customers.
On January 18, 2011, the DPSC approved a $16 million annual increase
in Delmarva Power's electric distribution base rates based on a 10
percent return on equity. The new rates were effective February 1,
2011. As permitted by Delaware law, Delmarva Power implemented interim
rate increases of $2.5 million in November 2009 and $23.7 million in
April 2010. The excess amount collected was returned to customers.
Regulatory - Pending Cases
On December 16, 2011, Pepco filed an electric distribution base rate
case in Maryland. The filing seeks approval of an annual rate increase
of $68 million, based on a requested return on equity of 10.75
percent. In an effort to reduce regulatory lag, the filing includes a
request for the approval of a reliability investment recovery
mechanism (RIM) and the use of fully forecasted test years in future
rate cases. A decision in the case is expected in July 2012.
On December 9, 2011, Delmarva Power filed an electric distribution
base rate case in Maryland. The filing seeks approval of an annual
rate increase of $25 million, based on a requested return on equity of
10.75 percent. In an effort to reduce regulatory lag, the filing
includes a request for the approval of a RIM and the use of fully
forecasted test years in future rate cases. A decision in the case is
expected in July 2012.
On December 2, 2011, Delmarva Power filed an electric distribution
base rate case in Delaware. The filing seeks approval of an annual
rate increase of $32 million, based on a requested return on equity of
10.75 percent. As permitted by Delaware law, Delmarva Power
implemented an interim rate increase of $2.5 million on January 31,
2012, subject to refund. In an effort to reduce regulatory lag, the
filing includes a request for the approval of a RIM and the use of
fully forecasted test years in future rate cases. A decision in the
case is expected in July 2012.
On October 18, 2011, Atlantic City Electric filed a petition in New
Jersey for the approval of the continuance and expansion of the
recently completed Infrastructure Investment Program (IIP). The IIP
allows recovery of Atlantic City Electric's non-revenue generating
infrastructure investment capital expenditures through a special rate
outside of the normal rate recovery mechanism of a base rate filing.
Atlantic City Electric currently proposes to spend approximately $63
million, $94 million and $81 million in 2012, 2013 and 2014,
respectively, on reliability-related capital expenditures.
On August 5, 2011, Atlantic City Electric filed an electric
distribution base rate case in New Jersey. The filing seeks approval
of an annual rate increase of $59 million, based on a requested return
on equity of 10.75 percent.
On July 8, 2011, Pepco filed an electric distribution base rate case
in the District of Columbia. The filing seeks approval of an annual
rate increase of $42 million, based on a requested return on equity of
10.75 percent. In an effort to reduce regulatory lag, the filing
includes a request for the approval of a RIM and the use of fully
forecasted test years in future rate cases. A decision in the case is
expected in the second quarter of 2012.
Other
In January 2012, Pepco Holdings subsidiaries filed suit against the
Internal Revenue Service in the U.S. Court of Federal Claims to defend
its tax position and recover the tax payment, interest and penalties
resulting from the disallowed deductions associated with its
cross-border energy lease investments in connection with the audit of
its 2001 and 2002 income tax returns.
On June 14, 2011, the Council of the District of Columbia adopted the
Fiscal Year 2012 Budget Support Act of 2011. The Act includes a
unitary tax provision under which all commonly controlled subsidiaries
of Pepco Holdings will be included in the District of Columbia income
tax filing. This new reporting method became law on September 14, 2011
and is effective for tax years beginning on or after December 31,
2010. The effects of the law change reduced Pepco Holdings' 2011
after-tax earnings by $5 million, consisting of additional state
income tax expense ($2 million, after-tax) and a charge associated
with the recalculation of the equity investment in certain
cross-border energy leases due to a change in state tax cash flow
assumptions ($3 million, after-tax).
Further details regarding changes in consolidated earnings between 2011
and 2010 can be found in the following schedules. Additional information
regarding financial results and recent regulatory events can be found in
the Pepco Holdings, Inc. Form 10-K for the year ended December 31, 2011
as filed with the Securities and Exchange Commission, and which is also
available at www.pepcoholdings.com/investors.
Conference Call for Investors
Pepco Holdings Inc. will host a conference call to discuss fourth
quarter results on Friday, Feb. 24 at 11 a.m. E.T. Investors, members of
the media and other interested persons may access the conference call on
the Internet at http://www.pepcoholdings.com/investors
or by calling 1-866-713-8395 before 10:55 a.m. The pass code for the
call is 28200193. International callers may access the call by dialing
1-617-597-5309, using the same pass code, 28200193. An on-demand replay
will be available for seven days following the call. To hear the replay,
dial 1-888-286-8010 and enter pass code 39586558. International callers
may access the replay by dialing 1-617-801-6888 and entering the same
pass code 39586558. An audio archive will be available at PHI's website, http://www.pepcoholdings.com/investors.
Note: If any non-GAAP financial information (as defined by the
Securities and Exchange Commission in Regulation G) is used during the
quarterly earnings conference call, a presentation of the most directly
comparable GAAP measure and a reconciliation of the differences will be
available at http://www.pepcoholdings.com/investors
promptly after the conclusion of the conference call.
About PHI: Pepco Holdings, Inc. (NYSE: POM) is one of the largest
energy delivery companies in the Mid-Atlantic region, serving about 2
million customers in Delaware, the District of Columbia, Maryland and
New Jersey. PHI subsidiaries Pepco, Delmarva Power and Atlantic City
Electric provide regulated electricity service; Delmarva Power also
provides natural gas service. PHI also provides energy efficiency and
renewable energy services through Pepco Energy Services.
Forward-Looking Statements: Some of the statements contained in
this news release with respect to Pepco Holdings, Pepco, Delmarva Power
and Atlantic City Electric, including each of their respective
subsidiaries (each, a "Reporting Company"), are forward-looking
statements within the meaning of the U.S. federal securities laws, and
are subject to the safe harbor created thereby and by the Private
Securities Litigation Reform Act of 1995. You can identify
forward-looking statements by terminology such as "may," "might,"
"will," "should," "could," "expects," "intends," "assumes," "seeks to,"
"plans," "anticipates," "believes," "projects," "estimates," "predicts,"
"potential," "future," "goal," "objective," or "continue" or the
negative of such terms or other variations thereof or comparable
terminology, or by discussions of strategy that involve risks and
uncertainties. Forward-looking statements involve estimates,
assumptions, known and unknown risks, uncertainties and other factors
that may cause one or more Reporting Company's actual results, levels of
activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. Therefore,
forward-looking statements are not guarantees or assurances of future
performance, and actual results could differ materially from those
indicated by the forward-looking statements. These factors should be
read together with the risk factors included in the "Risk Factors"
section of each Reporting Company's annual and quarterly reports filed
in 2011, and investors should refer to these risk factor sections. All
of such factors are difficult to predict, contain uncertainties, are
beyond each Reporting Company's control and may cause actual results to
differ materially from those contained in forward-looking statements.
Any forward-looking statements speak only as to the date this news
release was released, and each Reporting Company undertakes no
obligation to update any forward-looking statements to reflect events or
circumstances after such date or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is
not possible for a Reporting Company to predict all such factors, nor
can the impact of any such factor be assessed on such Reporting
Company's business (viewed independently or together with the business
or businesses of some or all of the other Reporting Companies) or the
extent to which any factor, or combination of factors, may cause results
to differ materially from those contained in any forward-looking
statement. The factors described above should not be construed as
exhaustive.
Pepco Holdings, Inc.
Earnings Per Share Variance
2011 / 2010
Twelve Months Ended December 31,
Power
Pepco Energy
Other Non-
Corporate
Total
Delivery
Services
Regulated
and Other
PHI
2010 Earnings (loss) per share from Continuing Operations (GAAP)
(1)
$
0.92
$
0.16
$
0.11
$
(0.57
)
$
0.62
2010 Adjustments - Special Items (2)
-- Restructuring Charge
0.08
-
-
-
0.08
-- Effects of Pepco Divestiture-Related Claims
0.03
-
-
-
0.03
-- Debt Extinguishment Costs
-
-
-
0.51
0.51
2010 Adjusted earnings (loss) per share from Continuing Operations
(Non-GAAP)
1.03
0.16
0.11
(0.06
)
1.24
Change from 2010 Adjusted earnings (loss)
per share from Continuing Operations
Regulated Operations
-- Distribution Revenue
-
Weather (estimate) (3)
(0.02
)
-
-
-
(0.02
)
-
Rate Increases
0.10
-
-
-
0.10
-
Other Distribution Revenue
(0.02
)
-
-
-
(0.02
)
-- Network Transmission Revenue
0.07
-
-
-
0.07
-- ACE Basic Generation Service (primarily unbilled revenue)
(0.01
)
-
-
-
(0.01
)
-- Standard Offer Service Margin
0.08
-
-
-
0.08
-- Operation & Maintenance
(0.25
)
-
-
-
(0.25
)
-- Depreciation
(0.04
)
-
-
-
(0.04
)
-- Other, net
0.03
-
-
-
0.03
Pepco Energy Services
-- Retail Energy Supply
-
(0.06
)
-
-
(0.06
)
-- Energy Services
-
0.04
-
-
0.04
Other Non-Regulated
-
-
-
-
-
Corporate and Other
-
-
-
0.03
0.03
Net Interest Expense
(0.01
)
0.03
-
0.15
0.17
Income Tax Adjustments
-- Interest Related to Tax Settlement (covering prior tax years)
0.04
-
0.04
-
0.08
-- Other Income Tax Adjustments, net
(0.06
)
0.01
0.03
(0.16
)
(0.18
)
Dilution
(0.01
)
-
-
-
(0.01
)
2011 Adjusted earnings (loss) per share from Continuing Operations
(Non-GAAP)
$
0.93
$
0.18
$
0.18
$
(0.04
)
$
1.25
2011 Adjustments - Guidance-Related (2)
-- Pepco Energy Services Retail Energy Supply Net Mark-to- market
Losses
-
(0.08
)
-
-
(0.08
)
-- District of Columbia Unitary Tax Impact
-
-
(0.02
)
-
(0.02
)
2011 Earnings (loss) per share from Continuing Operations (GAAP)
(4)
$
0.93
$
0.10
$
0.16
$
(0.04
)
$
1.15
(1)
The 2010 weighted average number of basic and diluted shares
outstanding was 224 million.
(2)
Management believes the special items and guidance related non-GAAP
adjustments are not representative of the Company's ongoing business
operations.
(3)
The effect of weather compared to the 20-year average weather is
estimated to have increased earnings by $0.01 per share.
(4)
The 2011 weighted average number of basic and diluted shares
outstanding was 226 million.
Pepco Holdings, Inc.
Earnings Per Share Variance
2011 / 2010
Three Months Ended December 31,
Power
Pepco Energy
Other Non-
Corporate
Total
Delivery
Services
Regulated
and Other
PHI
2010 Earnings (loss) per share from Continuing Operations (GAAP)
(1)
$
0.20
$
0.03
$
0.02
$
(0.19
)
$
0.06
2010 Adjustments - Special Items (2)
-- Restructuring Charge
0.04
-
-
-
0.04
-- Debt Extinguishment Costs
-
-
-
0.15
0.15
2010 Adjusted earnings (loss) per share from Continuing Operations
(Non-GAAP)
0.24
0.03
0.02
(0.04
)
0.25
Change from 2010 Adjusted earnings (loss)
per share from Continuing Operations
Regulated Operations
-- Distribution Revenue
-
Weather (estimate) (3)
(0.02
)
-
-
-
(0.02
)
-
Rate Increases
0.01
-
-
-
0.01
-
Other Distribution Revenue
(0.01
)
-
-
-
(0.01
)
-- Network Transmission Revenue
0.02
-
-
-
0.02
-- ACE Basic Generation Service (primarily unbilled revenue)
0.01
-
-
-
0.01
-- Standard Offer Service Margin
0.01
-
-
-
0.01
-- Operation & Maintenance
(0.03
)
-
-
-
(0.03
)
-- Depreciation
(0.01
)
-
-
-
(0.01
)
-- Other, net
0.01
-
-
-
0.01
Pepco Energy Services
-- Retail Energy Supply
-
-
-
-
-
-- Energy Services
-
-
-
-
-
Other Non-Regulated
-
-
-
-
-
Corporate and Other
-
-
-
0.04
0.04
Net Interest Expense
(0.01
)
-
-
-
(0.01
)
Income Tax Adjustments
-- Other Income Tax Adjustments, net
(0.11
)
0.01
-
(0.02
)
(0.12
)
2011 Adjusted earnings (loss) per share from Continuing Operations
(Non-GAAP)
$
0.11
$
0.04
$
0.02
$
(0.02
)
$
0.15
2011 Adjustments - Guidance-Related (2)
-- Pepco Energy Services Retail Energy Supply - Net Mark-to-market
Losses
-
(0.05
)
-
-
(0.05
)
2011 Earnings (loss) per share from Continuing Operations (GAAP)
(4)
$
0.11
$
(0.01
)
$
0.02
$
(0.02
)
$
0.10
(1)
The 2010 weighted average number of basic and diluted shares
outstanding was 225 million.
(2)
Management believes the special items and guidance related non-GAAP
adjustments are not representative of the Company's ongoing business
operations.
(3)
The effect of weather compared to the 20-year average weather is
estimated to have decreased earnings by $0.01 per share.
(4)
The 2011 weighted average number of basic and diluted shares
outstanding was 227 million.
SEGMENT INFORMATION
Year Ended December 31, 2011
(millions of dollars)
Pepco
Other
Power
Energy
Non-
Corporate
PHI
Delivery
Services
Regulated
and Other (a)
Consolidated
Operating Revenue
$
4,650
$
1,238
$
48
$
(16
)
$
5,920
Operating Expenses (b)
4,150
1,206
(30
)
(c)
(43
)
5,283
Operating Income
500
32
78
27
637
Interest Income
1
1
4
(5
)
1
Interest Expense
208
3
13
30
254
Impairment Losses
-
-
-
(5
)
(5
)
Other Income (Expenses)
29
3
(4
)
2
30
Preferred Stock Dividends
-
-
3
(3
)
-
Income Tax Expense (d)
112
9
27
1
149
Net Income (Loss) from Continuing Operations
210
24
35
(c)
(9
)
260
Total Assets (Excluding Assets Held For Sale)
11,008
565
1,499
1,838
14,910
Construction Expenditures
$
888
$
14
$
-
$
39
$
941
(a)
Total Assets in this column includes Pepco Holdings' goodwill
balance of $1.4 billion, all of which is allocated to the Power
Delivery segment for purposes of assessing impairment. Total
assets also include capital expenditures related to certain
hardware and software expenditures which primarily benefit the
Power Delivery business. These expenditures are recorded as
incurred in the Corporate and Other segment and are allocated to
Power Delivery once the assets are placed in service. Corporate
and Other includes intercompany amounts of $(16) million for
Operating Revenue, $(16) million for Operating Expense, $(22)
million for Interest Income, $(22) million for Interest Expense,
and $(3) million for Preferred Stock Dividends.
(b)
Includes depreciation and amortization expense of $426 million,
consisting of $394 million for Power Delivery, $17 million for Pepco
Energy Services, $2 million for Other Non-Regulated, and $13 million
for Corporate and Other.
(c)
Includes $39 million pre-tax ($3 million after-tax) gain from the
early termination of cross-border energy leases held in trust.
(d)
Includes tax benefits of $14 million for Power Delivery primarily
associated with an interest benefit related to federal tax
liabilities and a $22 million reversal of previously recognized tax
benefits for Other Non-Regulated associated with the early
termination of cross-border energy leases held in trust.
Year Ended December 31, 2010
(millions of dollars)
Pepco
Other
Power
Energy
Non-
Corporate
PHI
Delivery
Services
Regulated
and Other (a)
Consolidated
Operating Revenue
$
5,114
$
1,883
$
54
$
(12
)
$
7,039
Operating Expenses (b)(c)
4,611
(d)
1,812
6
(14
)
6,415
Operating Income
503
71
48
2
624
Interest Income
2
1
3
(6
)
-
Interest Expense
207
16
12
71
306
Other Income (Expenses)
20
2
(2
)
1
21
Loss on Extinguishment of Debt
-
-
-
(189
)
(e)
(189
)
Preferred Stock Dividends
-
-
3
(3
)
-
Income Tax Expense (Benefit)
112
(f)
22
9
(132
)
(g)
11
Net Income (Loss) from Continuing Operations
206
36
25
(128
)
139
Total Assets (Excluding Assets Held For Sale)
10,621
623
1,537
1,582
14,363
Construction Expenditures
$
765
$
7
$
-
$
30
$
802
(a)
Total Assets in this column includes Pepco Holdings' goodwill
balance of $1.4 billion, all of which is allocated to the Power
Delivery segment for purposes of assessing impairment. Total
assets also include capital expenditures related to certain
hardware and software expenditures which primarily benefit the
Power Delivery business. These expenditures are recorded as
incurred in the Corporate and Other segment and are allocated to
Power Delivery once the assets are placed in service. Corporate
and Other includes intercompany amounts of $(12) million for
Operating Revenue, $(10) million for Operating Expense, $(36)
million for Interest Income, $(36) million for Interest Expense,
and $(3) million for Preferred Stock Dividends.
(b)
Includes depreciation and amortization expense of $393 million,
consisting of $357 million for Power Delivery, $24 million for Pepco
Energy Services, $1 million for Other Non-Regulated, and $11 million
for Corporate and Other.
(c)
Includes restructuring charge of $30 million, consisting of $29
million for Power Delivery and $1 million for Corporate and Other.
(d)
Includes $11 million expense related to effects of Pepco
divestiture-related claims.
(e)
Includes $174 million ($104 million after-tax) related to loss on
extinguishment of debt and $15 million ($9 million after-tax)
related to the reclassification of treasury rate lock losses from
AOCL to income related to cash tender offers for debt made in 2010.
(f)
Includes $12 million of net Federal and state income tax benefits
primarily related to adjustments of accrued interest on uncertain
and effectively settled tax positions.
(g)
Includes $14 million of state tax benefits resulting from the
restructuring of certain PHI subsidiaries and $17 million of state
income tax benefits associated with the loss on extinguishment of
debt, partially offset by a charge of $3 million to write off
deferred tax assets related to the Medicare Part D subsidy.
PEPCO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2011
2010
2011
2010
UNAUDITED
(Millions of dollars, except per share data)
Operating Revenue
Power Delivery
$
979
$
1,103
$
4,650
$
5,114
Pepco Energy Services
245
403
1,238
1,883
Other
10
11
32
42
Total Operating Revenue
1,234
1,517
5,920
7,039
Operating Expenses
Fuel and purchased energy
675
948
3,422
4,631
Other services cost of sales
44
42
172
140
Other operation and maintenance
232
248
914
884
Restructuring charge
-
16
-
30
Depreciation and amortization
101
107
426
393
Other taxes
105
107
451
434
Gain on early termination of finance leases held in trust
-
-
(39)
-
Deferred electric service costs
(14)
(39)
(63)
(108)
Effects of Pepco divestiture-related claims
-
-
-
11
Total Operating Expenses
1,143
1,429
5,283
6,415
Operating Income
91
88
637
624
Other Income (Expenses)
Interest and dividend income
1
-
1
-
Interest expense
(65)
(66)
(254)
(306)
Gain (loss) from equity investments
1
-
(3)
(1)
Loss on extinguishment of debt
-
(54)
-
(189)
Impairment losses
(5)
-
(5)
-
Other income
6
5
33
22
Total Other Expenses
(62)
(115)
(228)
(474)
Income (Loss) from Continuing Operations Before Income Tax Expense
29
(27)
409
150
Income Tax Expense (Benefit) Related to Continuing Operations
6
(41)
149
11
Net Income from Continuing Operations
23
14
260
139
(Loss) Income from Discontinued Operations, net of Income Taxes
(4)
19
(3)
(107)
Net Income
$
19
$
33
$
257
$
32
Earnings per share of common stock from Continuing Operations
$
0.10
$
0.06
$
1.15
$
0.62
(Loss) earnings per share of common stock from Discontinued
Operations
(0.02)
0.08
(0.01)
(0.48)
Earnings per share of common stock
$
0.08
$
0.14
$
1.14
$
0.14
PEPCO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
December 31,
ASSETS
2011
2010
(millions of dollars)
CURRENT ASSETS
Cash and cash equivalents
$
109
$
20
Restricted cash equivalents
11
11
Accounts receivable, less allowance for uncollectible accounts
of $49 million and $51 million, respectively
929
1,027
Inventories
132
126
Derivative assets
5
45
Prepayments of income taxes
74
276
Deferred income tax assets, net
59
90
Prepaid expenses and other
120
51
Conectiv Energy assets held for sale
-
111
Total Current Assets
1,439
1,757
INVESTMENTS AND OTHER ASSETS
Goodwill
1,407
1,407
Regulatory assets
2,196
1,915
Investment in finance leases held in trust
1,349
1,423
Income taxes receivable
84
114
Restricted cash equivalents
15
5
Assets and accrued interest related to uncertain tax positions
37
11
Other
163
169
Conectiv Energy assets held for sale
-
6
Total Investments and Other Assets
5,251
5,050
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment
12,855
12,120
Accumulated depreciation
(4,635
)
(4,447
)
Net Property, Plant and Equipment
8,220
7,673
TOTAL ASSETS
$
14,910
$
14,480
PEPCO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
December 31,
LIABILITIES AND EQUITY
2011
2010
(millions of dollars, except shares)
CURRENT LIABILITIES
Short-term debt
$ 732
$
534
Current portion of long-term debt and project funding
112
75
Accounts payable and accrued liabilities
549
587
Capital lease obligations due within one year
8
8
Taxes accrued
110
96
Interest accrued
47
45
Liabilities and accrued interest related to uncertain tax positions
3
3
Derivative liabilities
26
66
Other
274
321
Liabilities associated with Conectiv Energy assets held for sale
-
62
Total Current Liabilities
1,861
1,797
DEFERRED CREDITS
Regulatory liabilities
526
528
Deferred income taxes, net
2,863
2,714
Investment tax credits
22
26
Pension benefit obligation
424
332
Other postretirement benefit obligations
469
429
Income taxes payable
-
2
Liabilities and accrued interest related to uncertain tax positions
32
148
Derivative liabilities
6
21
Other
191
175
Liabilities associated with Conectiv Energy assets held for sale
-
10
Total Deferred Credits
4,533
4,385
LONG-TERM LIABILITIES
Long-term debt
3,794
3,629
Transition bonds issued by ACE Funding
295
332
Long-term project funding
13
15
Capital lease obligations
78
86
Total Long-Term Liabilities
4,180
4,062
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock, $.01 par value - authorized 400,000,000 shares,
227,500,190 and 225,082,252 shares outstanding,
respectively
2
2
Premium on stock and other capital contributions
3,325
3,275
Accumulated other comprehensive loss
(63
)
(106
)
Retained earnings
1,072
1,059
Total Shareholders' Equity
4,336
4,230
Non-controlling interest
-
6
Total Equity
4,336
4,236
TOTAL LIABILITIES AND EQUITY
$ 14,910
$
14,480
POWER DELIVERY SALES AND REVENUES
Three Months Ended
Twelve Months Ended
December 31,
December 31,
Power Delivery Sales (Gigawatt Hours)
2011
2010
2011
2010
Regulated T&D Electric Sales
Residential
3,514
3,877
17,728
18,398
Commercial and industrial
7,377
7,730
31,282
32,045
Transmission and other
75
78
256
260
Total Regulated T&D Electric Sales
10,966
11,685
49,266
50,703
Default Electricity Supply Sales
Residential
2,977
3,566
15,545
17,385
Commercial and industrial
1,415
1,542
6,168
7,034
Other
19
25
73
93
Total Default Electricity Supply Sales
4,411
5,133
21,786
24,512
Power Delivery Electric Revenue (Millions of dollars)
Regulated T&D Electric Revenue
Residential
$
144
$
154
$
683
$
683
Commercial and industrial
208
215
884
883
Transmission and other
83
76
324
292
Total Regulated T&D Electric Revenue
435
445
1,891
1,858
Default Electricity Supply Revenue
Residential
305
378
1,668
2,022
Commercial and industrial
134
152
642
733
Other
27
41
152
196
Total Default Electricity Supply Revenue
466
571
2,462
2,951
Other Electric Revenue
17
16
67
68
Total Electric Operating Revenue
$
918
$
1,032
$
4,420
$
4,877
Power Delivery Gas Sales and Revenue
Regulated Gas Sales (Bcf)
Residential
1
3
7
8
Commercial and industrial
2
2
5
5
Transportation and other
2
1
7
6
Total Regulated Gas Sales
5
6
19
19
Regulated Gas Revenue (Millions of dollars)
Residential
$
31
$
40
$
113
$
118
Commercial and industrial
16
21
61
65
Transportation and other
2
3
9
8
Total Regulated Gas Revenue
49
64
183
191
Other Gas Revenue
12
7
47
46
Total Gas Operating Revenue
$
61
$
71
$
230
$
237
Total Power Delivery Operating Revenue
$
979
$
1,103
$
4,650
$
5,114
POWER DELIVERY - CUSTOMERS
December 31, 2011
December 31, 2010
Regulated T&D Electric Customers (in thousands)
Residential
1,636
1,635
Commercial and industrial
198
198
Transmission and other
2
2
Total Regulated T&D Electric Customers
1,836
1,835
Regulated Gas Customers (in thousands)
Residential
115
114
Commercial and industrial
9
9
Transportation and other
-
-
Total Regulated Gas Customers
124
123
WEATHER DATA - CONSOLIDATED ELECTRIC SERVICE TERRITORY
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2011
2010
2011
2010
Heating Degree Days
1,267
1,635
3,968
4,231
20 Year Average
1,542
1,519
4,311
4,248
Percentage Difference from Average
-18%
8%
-8%
-
Percentage Difference from Prior Year
-23%
-6%
Cooling Degree Days
14
32
1,684
1,860
20 Year Average
30
29
1,361
1,310
Percentage Difference from Average
-53%
10%
24%
42%
Percentage Difference from Prior Year
-56%
-9%
PEPCO ENERGY SERVICES
Operating Summary
Three Months Ended
Twelve Months Ended
(Millions of dollars)
December 31,
December 31,
2011
2010
2011
2010
Retail Electric Sales (GWh)
1,360
(4)
2,303
7,080
(4)
11,560
Retail Energy Supply(1)
Operating Revenue (2) (3)
$
185
$
344
$
996
$
1,704
Cost of Goods Sold (2)
186
316
936
1,568
Gross Margin
(1
)
(5)
28
60
(5)
136
Operation and Maintenance Expenses
8
15
36
53
Depreciation
2
7
10
16
Operating Expense
10
22
46
69
Operating (Loss) Income
(11
)
6
14
67
Energy Services
Operating Revenue (2)
$
64
$
61
$
257
$
197
Cost of Goods Sold (2)
49
44
185
141
Gross Margin
15
17
72
(6)
56
Operation and Maintenance Expenses
10
10
40
37
Depreciation
2
2
7
7
Operating Expense
12
12
47
44
Operating Income
3
5
25
12
Unallocated Overhead Cost
1
2
7
8
Operating (Loss) Income
$
(9
)
$
9
$
32
$
71
Notes:
(1)
Includes power generation.
(2)
Certain transactions among Pepco Energy Service businesses are not
eliminated.
(3)
Includes mark-to-market losses of $18 million for the three months
ended December 31, 2011. Includes mark-to-market losses of $30
million and $2 million for the full years 2011 and 2010,
respectively.
(4)
Retail electric sales decreased due to the continuing expiration of
existing contracts in connection with the wind down of the retail
energy supply business.
(5)
Retail Energy Supply gross margin decreased due to the continuing
expiration of existing retail supply contracts and mark-to-market
losses on gas and electric derivative contracts.
(6)
Energy Services gross margin increased due to more activity in the
energy performance and high voltage construction businesses.
Pepco Holdings, Inc. Media: Robert Hainey, 202-872-2680 or Investors: Donna
Kinzel, 302-429-3004
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