Allegheny Energy, Inc. Reports Record Second Quarter 2001 Earnings of $1.01 Per Share -- Up 55 Percent Over 2000 Results.Business Editors HAGERSTOWN Hagerstown (hā`gərztoun'), city (1990 pop. 35,445), seat of Washington co., NW Md., on Antietam Creek near its junction with the Potomac River, in the fertile Cumberland Valley; inc. 1791. , Md.--(BUSINESS WIRE)--July 26, 2001 Allegheny Energy Allegheny Energy (NYSE: AYE) is a traditional public utility based in the Pittsburgh suburb of Greensburg. It services communities in Western Pennsylvania, Western Maryland, Northern West Virginia, Northwest Virginia. , Inc. (NYSE NYSE See: New York Stock Exchange :AYE AYE Allegheny Energy, Inc. (stock symbol) AYE Ayer Rajah Expressway AYE Amplifying Your Effectiveness (conference) ) today reported a 55 percent increase in second quarter 2001 earnings per share to a record $1.01, compared to second quarter 2000 earnings per share of $.65. Net income increased 70 percent in the second quarter of 2001 to $121.3 million, compared to second quarter 2000 net income of $71.5 million. The second quarter increase in earnings per share mainly reflects higher net revenue from unregulated Adj. 1. unregulated - not regulated; not subject to rule or discipline; "unregulated off-shore fishing" regulated - controlled or governed according to rule or principle or law; "well regulated industries"; "houses with regulated temperature" 2. operations, primarily related to the energy trading activities of Allegheny Energy Global Markets, which was acquired on March 16, 2001. The Company also attributes the increase to the successful expansion of its energy delivery business through the acquisition of Mountaineer Gas, a natural gas distribution company in West Virginia West Virginia, E central state of the United States. It is bordered by Pennsylvania and Maryland (N), Virginia (E and S), and Kentucky and, across the Ohio R., Ohio (W). Facts and Figures Area, 24,181 sq mi (62,629 sq km). Pop. . In addition, the second quarter 2001 earnings per share reflect Allegheny Allegheny (ăl`əgā'nē, ăl`əgä'nē), river, 325 mi (523 km) long, rising in N central Pa., and flowing NW into N.Y., then SW through Pa. Energy's sale of 14.26 million shares of common stock on May 2, 2001, which reduced the earnings per share by $.08. Earnings for the six months ended June June: see month. 30, 2001, were $221.8 million ($1.93 per share), excluding the first quarter after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. charge of $31.1 million ($.27 per share) associated with the cumulative effect of an accounting change due to the adoption of the Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 133, "Accounting for Derivative Instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. and Hedging Activities." Earnings for the six months ended June 30, 2000, were $157.9 million ($1.43 per share), excluding a first quarter extraordinary charge of $70.5 million ($.64 per share). This 35 percent increase in year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. earnings per share is attributed to unregulated operations reflecting gains from energy trading activities and the continued improvement and expansion of the Company's energy delivery business through the acquisition of Mountaineer Gas. "Our 55 percent increase in second quarter earnings per share and 35 percent growth in year-to-date earnings per share demonstrate that Allegheny Energy's strategy and focus is adding real value for our shareholders," said Alan A`lan´ n. 1. A wolfhound. J. Noia, Chairman, President, and Chief Executive Officer of Allegheny Energy. "The strong performance of our Allegheny Energy Global Markets marketing and trading operation has, as we had anticipated, enhanced the value of our competitive portfolio of generating assets located across the country. Add to that a growing energy delivery business, which continues to provide value, and Allegheny has a very solid combination, poised for even greater success as we continue our transformation into a national energy merchant." Excluding the accounting change and extraordinary and other charges as shown on the following chart, earnings for the twelve months ended June 30, 2001, were $377.6 million ($3.35 per share), compared to $300.9 million ($2.71 per share) for the twelve months ended June 30, 2000. The increase in earnings per share was mainly due to higher net revenue from energy marketing and trading and the improved performance and expansion of the Company's energy delivery business through the acquisition of Mountaineer Gas. "We are pleased with our second quarter and year-to-date results," added Noia. "In addition, we are confident that our unwavering commitment to a proven growth strategy and solid performance year to date will allow us to achieve our 2001 earnings guidance of $3.80-$4.10 a share. Our portfolio of energy businesses is providing shareholder value today, and we will work to continue to deliver positive results for shareholders in the future." Per share earnings for comparable 2001 and 2000 periods were:
Second 6 Months 12 Months
Quarter Ended June Ended June
2001 2000 2001 2000 2001 2000
---- ---- ---- ---- ---- ----
Income before
accounting change and
extraordinary and other $1.01 $.65 $1.93 $1.43 $3.35 $2.71
charges
Accounting change: (.27) (.28)
adoption SFAS 133
Extraordinary charges
for electric utility
restructuring orders (.64) (.06) (.79)
Extraordinary charge
for reacquired debt (.09)
Merger-related costs (.11)
Cancelled pumped-storage
project costs ____ ____ ____ ____ ____ (.07)
Reported earnings per share $1.01 $.65 $1.66 $.79 $3.01 $1.65
===== ==== ===== ==== ==== =====
During the second quarter of 2001, Allegheny Energy actively pursued a number of opportunities aimed at increasing revenue and improving shareholder value. The following are some of the quarter's milestones: Allegheny Energy Seeks Approval for IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. -- On July July: see month. 23, Allegheny Energy filed a U-1 application with the Securities and Exchange Commission (SEC), seeking approval of an initial public offering (IPO) of up to 18 percent of the common stock in a new holding company, which would own 100 percent of its unregulated generating subsidiary, Allegheny Energy Supply Company, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control . The Company expects, subject to market and other conditions, to distribute to shareholders of Allegheny Energy, Inc., common stock the remaining ownership of the Allegheny Energy Supply holding company during 2002 in a tax-free tax-free adj. Not subject to taxation; tax-exempt. tax-free Adjective not needing to have tax paid on it: a tax-free lump sum Adj. 1. distribution. The purpose of the IPO and equity distribution is to permit the Company's energy delivery company and Allegheny Energy Supply to focus on their respective businesses and market opportunities and, in particular, to allow Allegheny Energy Supply to pursue its growth strategy for the electric power generation business. The filing of a U-1 application marks the Company's first official step in the IPO process. Later in the third quarter, Allegheny Energy expects to file an S-1 Registration Statement with the SEC. Common Stock Offering -- On May 2, Allegheny Energy closed the public offering of its common stock, selling a total of 14.26 million shares. Net proceeds totaled approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $667 million, which were used to fund the Company's acquisition of generating facilities in the Midwest Midwest or Middle West, region of the United States centered on the western Great Lakes and the upper-middle Mississippi valley. It is a somewhat imprecise term that has been applied to the northern section of the land between the Appalachians and for other corporate purposes. The total offering, which was announced in April, was priced at $48.25 per share. Former FERC FERC Federal Energy Regulatory Commission FERC FEMA Emergency Response Capability Chairman Elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. to Allegheny Energy Board -- James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. J. Hoecker, immediate past Chairman of the Federal Energy Regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. Commission (FERC), has been elected to the Allegheny Energy, Inc. Board of Directors. Hoecker, currently a Partner in the law firm of Swidler Berlin Shereff Friedman Fried·man , Milton Born 1912. American economist. He won a 1976 Nobel Prize for his theories of monetary control and governmental nonintervention in the economy. Noun 1. , LLP LLP - Lower Layer Protocol , was appointed ap·point tr.v. ap·point·ed, ap·point·ing, ap·points 1. To select or designate to fill an office or a position: appointed her the chief operating officer of the company. 2. a FERC Commissioner in 1993 and served as its Chairman from 1997 until he departed the agency in 2001. Generating Assets, Marketing, and Trading -- Allegheny Energy Supply has signed a 15-year, natural gas tolling agreement with Las Vegas Cogeneration II for 222 megawatts (MW) of generating capacity. Under the terms of the contract, Allegheny Energy will have control of a 222-MW natural gas-fired, combined-cycle generating facility in Las Vegas, Nev., beginning in the third quarter of 2002. The output will be sold into the Western Systems Coordinating Council by Allegheny Energy Global Markets. -- Allegheny Energy announced a joint venture with CONSOL Energy, Inc. to construct an 88-MW generating facility in Virginia. Each company will own a 50-percent interest in the facility, which is expected to be in operation by mid-2002. Allegheny Energy Supply will operate the facility and the output will be sold into the competitive marketplace. -- Allegheny Energy Supply has received air permits for the construction of two simple-cycle natural gas combustion turbines in Chambersburg, Pa., which will generate 88 MW of electricity. The facility is expected to be in operation by year's end. Other Highlights -- Allegheny Power, the energy delivery business of Allegheny Energy, tied for second place in the nation in the American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Customer Satisfaction Index (ACSI ACSI Association of Christian Schools International ACSI American Customer Satisfaction Index ACSI Association Canadienne des Sciences de l'Information (French) ACSI American Communications Services, Inc. ), an independent study of residential customers produced by the National Quality Research Center at the University of Michigan's Business School. The study ranks the 30 largest investor-owned gas and electric companies in the nation on various attributes of customer satisfaction. Allegheny Energy, Inc. is a diversified diversified (di·verˑ·s energy company headquartered in Hagerstown, Md. It has been named to the Fortune 500 list, the Standard and Poor's Noun 1. Standard and Poor's - a broadly based stock market index Standard and Poor's Index 500 index, and the Forbes Forbes , B(ertie) C(harles) 1880-1954. American publisher and businessman who founded and edited (1916-1954) Forbes magazine. His son Malcolm Stevenson Forbes "Platinum platinum (plăt`ənəm), metallic chemical element; symbol Pt; at. no. 78; at. wt. 195.08; m.p. 1,772°C;; b.p. 3,827±100°C;; sp. gr. 21.45 at 20°C;; valence +2 or +4. 400" list. The Allegheny Energy family includes Allegheny Power, which delivers electric energy and natural gas to about three million people in parts of Maryland Maryland (mâr`ələnd), one of the Middle Atlantic states of the United States. It is bounded by Delaware and the Atlantic Ocean (E), the District of Columbia (S), Virginia and West Virginia (S, W), and Pennsylvania (N). , Ohio, Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York , Virginia Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). , and West Virginia; Allegheny Energy Supply Company, LLC, which develops, owns, and operates electric generating facilities and supplies and trades energy and energy-related commodities in selected domestic retail and wholesale markets; and Allegheny Ventures, which invests in and develops telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. and energy-related projects. For more information, visit our web site at www.alleghenyenergy.com. Allegheny plans to hold its analyst conference call to discuss earnings results at 11:00 a.m. (Eastern Time) on July 27, 2001. Investors, the news media, and others may listen to a live internet broadcast of the call at www.alleghenyenergy.com or www.streetevents.com by clicking on an available audio link. The call will also be archived for replay purposes for 10 business days after the live broadcast on both of these web sites. Supporting financial data will also be available on the Company's web site for review. Certain statements above constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. with respect to Allegheny Energy, Inc. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of Allegheny Energy to be materially different from any future results, performance, or achievements expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements. Such factors may affect Allegheny Energy's operations, markets, products, services, prices, capital expenditure and development activities, and its plans for an IPO and distribution. Such factors include, among others, the following: changes in general and economic and business conditions; changes in the price of electricity and natural gas; industry capacity; changes in technology; changes in financial market conditions; changes in political, social, and economic conditions; deregulation Deregulation The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. Notes: Traditional areas that have been deregulated are the telephone and airline industries. activities and the movement toward competition in the states served by our operations; the effect of regulatory and legislative decisions; the consequences of the separation of the operations of Allegheny Energy; regulatory approvals and conditions applicable to the transaction; the loss of any significant customers; capital market conditions; and changes in business strategy or business plans.
ALLEGHENY ENERGY EARNINGS
SECOND QUARTER 2001
Three months ended June 30 2001 2000
----------------------------------------------------------------------
Sales to regulated electric
customers, gigawatt-hours (Note 1) 10,805 10,813
Revenues ($000) (Note 2)
Regulated Electric Revenues $ 563,930 $ 554,799
Regulated Other Revenues 28,677 15,815
Regulated Gas Revenues 37,890 3,347
Unregulated Generation
and Energy Marketing 2,809,389 286,488
Allegheny Ventures 16,563 4,874
---------- ----------
Total ($000) $3,456,449 $ 865,323
========== ==========
Consolidated income before
extraordinary and
other transactions ($000) $ 121,315 $ 71,456
---------- ----------
Consolidated net income ($000) $ 121,315 $ 71,456
========== ==========
Basic and diluted earnings
per average share (Note 3)
Before extraordinary and
other transactions $ 1.01 $ 0.65
----------- -----------
Consolidated earnings per share $ 1.01 $ 0.65
=========== ===========
Average common shares
outstanding (000) 119,842 110,436
Year to date June 30 2001 2000
----------------------------------------------------------------------
Sales to regulated electric
customers, gigawatt-hours
(Note 1) 22,812 22,197
Revenues ($000) (Note 2)
Regulated Electric Revenues $ 1,204,200 $ 1,151,077
Regulated Other Revenues 56,402 32,301
Regulated Gas Revenues 147,233 13,133
Unregulated Generation
and Energy Marketing 3,838,872 527,554
Allegheny Ventures 24,083 8,048
----------- -----------
Total ($000) $ 5,270,790 $ 1,732,113
=========== ===========
Consolidated income before
extraordinary and
other transactions ($000) $ 221,829 $ 157,851
West Virginia extraordinary
charges (Note 4) -- (70,505)
Cumulative effect of
accounting change (Note 5) (31,147) --
----------- -----------
Consolidated net income ($000) $ 190,682 $ 87,346
================ ================
Basic earnings per average share
Before extraordinary and
other transactions $ 1.93 $ 1.43
West Virginia extraordinary
charges (Note 4) -- (0.64)
Cumulative effect of
accounting change (Note 5) (0.27) --
----------- ------
Basic consolidated
earnings per share $ 1.66 $ 0.79
=========== ======
Diluted consolidated
earnings per share $ 1.65 $ 0.79
=========== ======
Average common shares
outstanding (000) 115,165 110,436
Twelve months ended June 30 2001 2000
----------------------------------------------------------------------
Sales to regulated electric
customers, gigawatt-hours (Note 1) 45,472 43,576
Revenues ($000) (Note 2)
Regulated Electric Revenues $ 2,356,615 $ 2,255,418
Regulated Other Revenues 124,303 74,902
Regulated Gas Revenues 237,680 13,133
Unregulated Generation
and Energy Marketing 4,793,608 835,594
Allegheny Ventures 38,323 28,116
----------- ------
Total ($000) $ 7,550,529 $ 3,207,163
=========== ======
Consolidated income before
extraordinary and
other transactions ($000) $ 377,630 $ 300,912
Reacquired debt
extraordinary charge -- (10,018)
Merger-related costs -- (11,801)
Davis pumped-storage
generation project costs -- (8,160)
Maryland, Ohio, Virginia, and
West Virginia extraordinary
charges (Note 4) (6,518) (87,455)
Cumulative effect of
accounting change (Note 5) (31,147) --
--------- ---------
Consolidated net income ($000) $ 339,965 $ 183,478
========= =========
Basic earnings per average share
Before extraordinary and
other transactions $ 3.35 $ 2.71
Reacquired debt
extraordinary charge -- (0.09)
Merger-related costs -- (0.11)
Davis pumped-storage
generation project costs -- (0.07)
Maryland, Ohio, Virginia,
and West Virginia extraordinary
charges (Note 4) (0.06) (0.79)
Cumulative effect of
accounting change (Note 5) (0.28) --
--------- ---------
Basic consolidated
earnings per share $ 3.01 $ 1.65
=========== ===========
Diluted consolidated
earnings per share $ 3.00 $ 1.65
=========== ===========
Average common shares
outstanding (000) 112,781 111,354
Note 1: Excludes bulk power transaction sales.
Note 2: Excludes intercompany sales between regulated and unregulated.
Note 3: Basic and diluted earnings per share are the same.
Note 4: Costs after taxes determined to be unrecoverable as a result
of deregulation proceedings in Maryland, Ohio, Virginia, and West
Virginia.
Note 5: Adoption of SFAS 133, Accounting for Derivative Instruments
and Hedging Activities.
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